The scheme, which was exposed in 1999 and prompted McCall's firing, bilked shareholders out of $9 billion.
Each of McCall's seven counts carries a penalty of 5 to 10 years, as well as fines of up to $1 million. According to the AP, prosecutors will likely target some of McCall's past gains as reparation for his misdeeds.
In 1997 and 1999, the then-CEO exercised McKesson stock options worth $53.7 million. Published reports confirm that McCall left the country on Tuesday—the day the grand jury handed up the charges—on a long-planned vacation. He is expected to return immediately to enter a not guilty plea.
Yesterday former finance chief Gilbertson agreed to forfeit McKesson shares worth $5.3 million, and pay a $1 million SEC fine. He faces a possible 15 years in prison for his part in the scam.
Two other former executives pleaded guilty and agreed to cooperate with prosecutors. Dominick DeRosa, once HBOC's senior vice president for sales, pleaded guilty to aiding and abetting securities fraud. Meanwhile, Timothy Heyerdahl, the company's former senior vice president for finance, pleaded guilty to insider trading.
However, Jay Lapine, HBOC's former general counsel, who was indicted on securities fraud charges, pleaded not guilty.
Ciminal charges were also lodged against Albert Bergonzi, HBOC's former president and a onetime executive vice president at McKesson. He is accused of accounting improprieties. He maintains his innocence. Bergonzi allegedly participated in the accounting misdeeds from December 1997 through late April 1999.
In all, 11 former McKesson HBOC executives have been charged in relation to the scandal.
If She Drowns, She's Innocent
Here's something to mull over when you catch the next episode of "From Martha's Kitchen." The prosecution techniques used by the SEC to indict domestic doyenne Martha Stewart are positively medieval. No, really.
The New York Times reports that the SEC is using an updated version of Morton's Fork to pursue celebrity executives who run afoul of securities laws. Named after King Henry VII's chancellor John Morton, the "fork" was a tax-assessment system that never failed to deliver a rate increase.
It worked like this: Morton would join noblemen for a home-cooked meal. If the meal was inexpensive, Morton reasoned that the host was saving money and could afford a tax increase. If it was extravagant, the taxpayer could obviously afford an increase.
Similarly, the SEC indictments focus not only on evidence of a crime but also on evidence that a suspect is covering up the crime.
For instance, says the report, Martha Stewart was not indicted for insider trading, but rather for obstructing an investigation into whether she sold stock based on inside information. Likewise, former technology investment banker Frank Quattrone was accused only of forwarding an E-mail message to subordinates about deleting potential damaging E-mail evidence. And, as you recall, managers at now-defunct Arthur Andersen were charged with destroying Enron documents—not with partaking in a scheme to hide the company's liabilities from investors.
Short Takes
- Call it cash management for high rollers. A group of eight J.P. Morgan Chase insiders have netted the company $100 million this year by using corporate funds to place some risky currency and interest rate bets. According to the Wall Street Journal, which cited an unnamed J.P. Morgan executive, the group created an internal hedge fund for the bank. That fund accounted for about 7 percent of the bank's total profits for the first quarter. J.P. Morgan CFO Dina Dublon told the Journal that the high returns were not a result of greater risk-taking, but rather of "better market conditions."
- Wayne Pace, CFO of AOL Time Warner Inc., told investors this week that the media conglomerate was on track to meet 2003 financial targets—but company executives may reassess that outlook. What's wrong now? Strangely, nothing. Pace said that recent positive developments, like the release of box-office hit Matrix Reloaded, may bring a positive rejiggering, reports Reuters. Pace still expects single-digit revenue growth in 2003 (the company reported turnover of $41 billion last year), with EBITDA growth in the low— to mid—single digits for 2003.
- The Federal Communications Commission lifted ownership restrictions for media companies earlier this week. Now the New York Times reports that Senate Democrats and Republicans are bucking to overturn the three-day-old deregulation effort (apparently House members are more sympathetic to the FCC's free-market view).
Certainly lawmakers in the Senate have the public support to nix the FCC's vote to deregulate. The commission's decision has touched off a veritable firestorm of protest, and from some strange political bedfellows. Both the National Organization for Women and the National Rifle Association, for instance, oppose the FCC's decision. Washington watchers say public outrage over the decision could have Congress rethinking the FCC's move. Incidentally, FCC chairman Michael Powell is the son of Secretary of State Colin Powell.
Reader Comments» Post a comment