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Company: Bristol-Myers Squibb

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Drugs firm settles fraud charges

Date Class
4th Aug 2004 Fraud Investigation
 
Details
US drugs firm Bristol-Myers Squibb will pay $150m (82m) to settle civil fraud charges in one of the biggest settlements in US corporate history.

The Securities and Exchange Commission (SEC) has charged the firm with improperly booking $1.5m in revenue. A "fraudulent earnings management scheme" distorted the true performance of the firm, the SEC said.

The fine cames days after it agreed to pay $300m to settle a shareholder lawsuit over related allegations.

Bristol said it will use legal reserves of $470m to pay for the settlement with the SEC and the class-action lawsuit settlement.

The SEC said Bristol-Myers had deceived the stock market and investors as to the company's financial performance from first quarter 2000 through fourth quarter 2001.

"Drug companies had gotten into the habit of manipulating wholesaler inventories, but the magnitude at Bristol-Myers was unprecedented," said Sena Lund, an analyst with brokerage Cathay Financial LLC.

The SEC began its probe in July 2002 after Bristol disclosed it had artificially boosted sales by persuading wholesalers to buy more of its drugs than they could quickly sell.

This practice is known in the trade as channel stuffing. Channel-stuffing practices are a violation of generally accepted accounting principles, the SEC's statement said.

New York-based Bristol-Myers Squibb will now bring on board an independent adviser to review and monitor its accounting practices, financial reporting and internal controls.

Shares in the company rose on news of the latest settlement.

 

 

 


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