Thursday, August 5, 2004

SEC complaint costs Bristol-Myers $150M

Staff and wire reports

Bristol-Myers Squibb Co. agreed to pay $150 million to settle U.S. Securities and Exchange Commission allegations that it improperly recognized revenue by selling excessive amounts of drugs to wholesalers.

The fine is the second biggest obtained by the SEC in an accounting case against a large publicly traded company, said Dan Gregus of the agency's Chicago office.

The SEC's lead attorney in this case was Alex Moore, a White Oak native and 1977 graduate of St. Xavier High School. Moore joined the SEC in 2000 from private practice in Chicago. Moore said he could not comment on the case.

The New York-based drug maker also agreed to have an independent adviser review its accounting.

The settlement comes days after Bristol-Myers agreed to pay $300 million to settle shareholder lawsuits related to the same issue. The SEC said Bristol-Myers improperly recognized $1.5 billion in revenue through "channel stuffing" and also used reserves to create income in later quarters and meet profit forecasts.

"Part of what makes the conduct in this case so egregious, beyond the fact of the sheer size of the channel stuffing, is that even with the channel-stuffing, when they couldn't make their internal targets and numbers, they then engaged in using cookie-jar reserves," Gregus said.

The $150 million fine includes a civil penalty of $100 million and $50 million to a fund to benefit shareholders. In June, Bristol-Myers added $455 million to its legal reserves after setting aside $250 million last year.

Bristol-Myers last week said second-quarter profit dropped 42 percent to $527 million, or 27 cents a share, because of the money it set aside to cover the potential fines.

The largest settlement ever won by the SEC for accounting fraud was against WorldCom Inc., which agreed to pay $750 million to resolve its case.

Staff writer John Byczkowski contributed.

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