Accounting & Tax

CVS Finance Execs Resign amid SEC Probe

The drugstore chain's treasurer and controller quit after an internal inquiry into a six-year-old accounting transaction.
Stephen TaubMarch 15, 2006

The Securities and Exchange Commission has launched an informal inquiry into how CVS Corp. it accounted for a transaction in 2000, the company announced yesterday evening.

The drug store chain also reported that both the treasurer and the controller and principal accounting officer have resigned. David B. Rickard, the company’s CFO, will act as principal accounting officer on an interim basis.

According to the company’s regulatory filing, the accounting entries reflect the conveyance of certain excess plush toy collectible inventory to a third party. The company received a total of $42.5 million in barter credits and made a cash payment of $12.5 million to the same third party.

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According to the filing, CVS’s audit committee hired independent outside counsel to review the transaction last December. Earlier this month, the committee concluded that various aspects of the company’s accounting for the transaction were “incorrect,” although the review did not result in any adjustments to CVS’s financial statements. The two finance execs resigned after the audit committee reached its conclusions.

CVS’s filing noted that the company cannot predict the outcome or timing of the SEC inquiry, but added that company officials do not expect the accounting issue to have any material effect on the company’s results of operations or financial condition.

CVS did not identify the departing finance executives by name, but the Associated Press reported that Larry D. Solberg was the controller and principal accounting officer and Philip Galbo, the treasurer.