Bristol Agrees To Continue Improving Financial Controls In Settling Shareholder Lawsuit
This article was originally published in The Pink Sheet Daily
Executive Summary
As part of proposed settlement of a derivative lawsuit, the company will continue to develop and implement oversight and disclosure policies that resulted from a 2004 settlement with SEC.
|
Bristol-Myers Squibb has committed to continue its ongoing improvements to corporate governance as part of a shareholder lawsuit settlement. The proposed settlement of a derivative lawsuit, announced April 27, would end litigation that began October 2002 against Bristol board members and execs, including CEO Peter Dolan, former CEO Charles Heimbold, former Worldwide Medicines Group President Richard Lane and former CFO Fred Schiff for "violations of federal securities laws and breaches of fiduciary duty." A derivative lawsuit is filed on behalf of the company by shareholders seeking damages against a third party - usually directors and officers of that company - to be paid back to the company. Bristol said that it would agree to continue to implement programs to improve corporate governance as part of the settlement agreement. The lawsuit alleged that management "disseminated materially false and misleading statements and/or failed to disclose material information concerning the safety, efficacy and commercial viability of its product Vanlev during the period Nov. 8, 1999 through April 19, 2000." The much-touted antihypertensive was plagued by late-stage safety concerns. The NDA was pulled in April 2000 and resubmitted in December 2001. It remains "approvable" at FDA. The lawsuit also alleges management misconduct for its investment in and its relations with ImClone relating to the commercialization of Erbitux . The oncologic was ultimately approved in February 2004, but the first BLA application resulted in a "refuse to file" decision in 2001. The lawsuit also claimed misconduct "for the company's alleged anticompetitive behavior in connection with Buspar and Taxol ." Bristol paid about $700 mil. to settle claims relating to its patent defense of these products. The shareholder suit also alleges misconduct with respect to "sales incentives to certain wholesalers and the inventory levels of those wholesalers." Bristol settled with the Securities & Exchange Commission in August 2004 for improperly accounting for revenue obtained from sales to wholesalers due to the generous incentive programs that would have required consignment accounting and for other accounting matters. As part of the settlement, Bristol agreed to pay SEC $100 mil. in civil penalties and $50 mil. into a fund for distribution to shareholders (1 (Also see "Bristol Agrees To One-Month Inventory Limit Under SEC Settlement" - Pink Sheet, 4 Aug, 2004.)). Bristol paid an addition $300 mil. to settle a securities class action lawsuit relating to its wholesale inventory and other accounting matters and the resulting revenue and earnings restatement in 2003 (2 (Also see "Bristol's $300 Mil. Settlement Leaves $170 Mil. In Reserve For Wholesaler Litigation" - Pink Sheet, 30 Jul, 2004.)). As part of the SEC settlement, Bristol also agreed to strengthen its corporate governance, including continuing to retain former New Jersey U.S. Attorney and former New Jersey federal judge Frederick Lacey, who has been working with Bristol since June 2003, to oversee Bristol's implementation of the new policies. Bristol also agreed to hire an assistant controller and "experienced securities regulation and disclosure lawyer" who would both have a role in the implementation and management of financial controls and disclosure responsibilities. The proposed derivative settlement has been approved; a final settlement hearing is scheduled for May 13, 2005 in New York federal court. - Lee Kalowski |