The US Securities and Exchange Commission has filed civil fraud charges against two former Bristol-Myers Squibb executives, for “orchestrating a fraudulent earnings management scheme that deceived investors about the true performance, profitability and growth trends of the company and its US medicines business.”
The suit has been filed against both Fred Schiff, formerly chief financial officer at B-MS, and Richard Lane, formerly president of the company’s worldwide medicine group. It charges that Schiff and Lane co-ordinated a scheme whereby excessive amounts of pharmaceuticals were sold to wholesalers ahead of demand, and that $1.5 billion in revenue was improperly recognized. Moreover, when earnings still fell short of B-MS’ internal targets and consensus analyst estimates, the company used "cookie jar" reserves at Schiff's direction to further inflate its earnings, the Commission alleges.
The SEC is seeking financial penalties against Schiff and Lane and, what it terms, “return of their ill-gotten gains.” Merri Jo Gillette, Regional Director of the SEC's Midwest Regional Office, noted: "For two years Schiff and Lane led the market to believe that Bristol-Myers was meeting its financial projections and market expectations, when, in fact, the company was making its numbers primarily through channel-stuffing and manipulative accounting devices. The Commission will seek tough sanctions against Schiff and Lane for their misconduct."
In August last year, B-MS settled the Commission's action against it by agreeing to pay $150 million dollars [[05/08/04a]].