Company: Bristol-Myers Squibb
Bristol-Myers in $300m settlement
|16th Jun 2005
||Questionable Business Practice
|US drugs company Bristol-Myers Squibb has agreed to pay $300m (£165m) into a shareholders' fund, as prosecutors charged two former executives.
The firm and executives were accused of a practice called "channel stuffing" - offering incentives to get wholesalers to buy more of the company's products.
The scheme boosted earnings at the firm, which has now agreed a "deferred prosecution" with Newark lawmakers.
This means it avoids indictment, but must improve governance in two years.
Bristol-Myers Squibb will now set aside $249m in the second quarter towards the $300m for the shareholder restitution fund, after having initially set aside $51m in the first quarter.
"The government will not pursue its filed criminal complaint if it is satisfied after two years that the company has complied with all the terms of the agreement," Bristol-Myers said in a statement.
The firm must also endow a chair at Seton Hall University Law School in Newark specialising in teaching business ethics and corporate governance.
"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, US Attorney for New Jersey.
Meanwhile, the two former executives at the company were charged by federal prosecutors with securities fraud and conspiracy to commit securities fraud.
They are Frederick S Schiff, former chief financial officer, and Richard J Lane, former president of the company's medicines group.
If found guilty, the two face up to 10 years in prison and $1m in fines. Their lawyers said they were innocent and would be cleared at trial.
Separately, the company's chairman Peter R Dolan has agreed to give up that position, but will remain as chief executive.
James D Robinson III, a board member since 1976, has been elected non-executive chairman.
However, not all observers were content with recent developments.
"It seems as if the company got off easy," Michael Krensavage, an analyst at Raymond James & Associates, told the Wall Street Journal.
"It's hard to see how stuffing $2.5bn in the channel is an accident... I still question whether the current management should be in charge."