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Bristol-Myers also reportedly faces a deferred prosecution by the Justice Department.
Stephen Taub, CFO.com | US
May 11, 2005
Bristol-Myers Squibb Co. announced that it will reduce its first-quarter pre-tax earnings by $110 million to reflect litigation reserves for previously disclosed wholesaler-inventory issues, as well as other accounting issues. The company had already taken a $30 million reserve for these matters, of which $14 million was reflected in its previously announced first-quarter results, bringing total litigation reserves to $140 million.
The Wall Street Journal reported that in the past week, the drug maker's board was told by the Department of Justice that the agency would seek a deferred prosecution of the company. Provided that Bristol-Myers lives up to certain settlement terms over a period of time, the paper elaborated, the DoJ would dismiss criminal charges.
The litigation stemmed from Bristol's March 2003 announcement in that it overstated revenue by $2.5 billion from 1999 to 2001 because of wholesaler incentives.
In March 2004, the company revised its fourth-quarter 2003 earnings upward, from $429 million to $506 million, and raised revenues, from $5.6 billion to $5.7 billion, to correct accounting errors. It also restated earnings for the four years ended 2002.
Last August, Bristol-Myers agreed to pay the Securities and Exchange Commission $150 million to settle civil charges of accounting fraud related to the wholesaler issue.
Veritas Software Corp., meanwhile, said it expects to pay $30 million as part of a settlement with the SEC stemming from certain transactions in 2000 with AOL Time Warner and other parties, and certain accounting matters applicable to the company's 2001 through 2003 financial statements.
The payment will require the company to restate its results for the three months ended March 31, 2005. "Other specific terms and conditions of settlement will be disclosed once a final agreement is concluded," the company stated.
Veritas added that it does not expect that a settlement would have any effect on its pending merger with Symantec Corp.