Wednesday, June 15, 2005
Bristol Meyers Squibb: Had to settle for $300M because They Were Up To Their No Good which is THE NORM OVER THERE!
Bristol-Myers Reaches $300M Settlement
By JEFFREY GOLD, AP Business Writer 1 hour, 17 minutes ago
NEWARK, N.J. - Bristol-Myers Squibb Co. agreed to pay $300 million in a deal to defer federal prosecution of a conspiracy charge stemming from an accounting scandal, the U.S. Attorney's Office in New Jersey said Wednesday. Two of its former executives also were indicted for their alleged roles in the same scandal.
Frederick Schiff, Bristol-Myers former chief financial officer, and Richard Lane, former executive vice president and president of the company's worldwide medicines group, were indicted on charges of conspiracy and securities fraud.
The company said that it would record an additional reserve of $249 million in the second quarter related to the settlement. Its shares fell 26 cents to close at $25.20 in trading on the
New York Stock Exchange near the high end of the 52-week range of $22.22 to $26.60.
With Wednesday's payment, Bristol-Myers has doled out about $800 million to settle lawsuits and investigations tied to the incentives it paid wholesalers to stockpile inventory, inflating sales and earnings. In March 2003, Bristol-Myers restated $900 million in profits and $2.5 billion in revenue reported from 1999 through the first half of 2002.
"This is a case where Bristol-Myers Squibb failed to disclose relevant information to its shareholders that would have affected its stock price," said Christopher J. Christie, U.S. Attorney for New Jersey.
Christie declined to answer reporters' questions about why more executives, including Bristol-Myers Chief Executive Officer Peter Dolan, were not indicted. He said the investigation is continuing and more charges are possible.
As part of the agreement, Dolan will relinquish the title of chairman but will remain CEO. Longtime board member and former American Express Co. Chairman James D. Robinson III will become chairman of Bristol-Myers. The company also agreed to have former federal judge Frederick B. Lacey act as an independent monitor of its accounting practices and financial controls. He is already working with the company under a previous agreement with the U.S.
Securities and Exchange Commission.
Bristol-Myers reached the deal under what is called a deferred prosecution. Under such arrangements, prosecution is delayed and will be dropped if certain terms are met. Bristol-Myers' prosecution will be dropped after two years if it meets standards such as retaining Lacey, appointing an additional director, introducing more financial controls, and cooperating with the investigation.
The company must also endow a chair at Seton Hall University Law School in Newark dedicated to teaching business ethics and corporate governance. The person holding that position will conduct an annual seminar for Bristol-Myers executives.
As part of the agreement, the company "accepts and acknowledges responsibility" for the scheme, called "channel stuffing," in which drug wholesalers are given incentives to purchase large amounts of product to make it appear that demand is high.
"BMS promoted a corporate culture in which meeting or exceeding company budget targets and the consensus (Wall Street) estimates was considered mandatory. Achieving these goals was known as `making the numbers' or `hitting the numbers,'" according to a statement of facts in the deferred prosecution agreement.
In a statement, Dolan said he was "very pleased" to have an agreement with the U.S. attorney.
"We are determined that the mistakes of the past not be repeated and that the company's reputation for adhering to the highest standards for ethical business practices be fully restored," he said.
Christie called Schiff the company's "chief concealment officer" and said that Lane was "a cheat." If found guilty, the two face up to 10 years in prison and $1 million in fines.
The former executives were charged with instructing staff to create the incentive packages to inflate sales and profit figures, while misleading Wall Street analysts and investors about those measures.
They "brushed aside and ignored concerns expressed by BMS employees about the use of financial incentives to the wholesalers, the costs BMS was incurring from the sales incentives to the wholesalers, and the build-up in excess inventory at the wholesalers," according to the indictment.
It cited, among others, an e-mail Lane wrote May 19, 2000, to worldwide medicines personnel: "Sales continue to be concerningly weak. We need to make our May target! (W)hen will this start to happen??"
Schiff lawyer David Zornow, in a statement, said his client denies any wrongdoing and expects to be cleared. "Mr. Schiff did not operate in a vacuum; his conduct was appropriate at all times and known to many others both inside and outside the company," he said.
Lane's lawyer, Richard Strassberg, said his client is innocent and will be "fully vindicated" at trial.
"The government is attempting to prosecute Rick Lane for innocuous, cautious statements made during routine telephone conference calls with professional Wall Street analysts. Indeed, a federal judge rejected nearly identical claims in a civil case in New York just one year ago," Strassberg said in a statement.
"Anyone closely examining these charges will see a frightening example of government overreaching that sends the clear message that executives should not speak to the public. This is the wrong message to send to corporate America, and it is fundamentally unjust for Mr. Lane," his lawyer said.