Risk Management

Feds Drop Criminal Complaint Against Bristol

Federal prosecutors have ended their two-year deferred prosecution agreement since the pharmaceutical company has met their demands following its c...
Stephen TaubJune 15, 2007

Federal prosecutors are dismissing their deferred prosecution agreement with Bristol-Myers Squibb two years after filing a criminal complaint against the company stemming from an accounting scandal.

U.S. Attorney Christopher Christie announced the dismissal would be official on Friday, saying the pharmaceutical company “has made significant and transformational changes in its compliance practices as a result of the DPA.” On June 15, 2005, Bristol-Myers agreed to the Department of Justice’s deferred prosecution terms with the understanding that, if it did so, the complaint would be absolved after 24 months.

In exchange for avoiding a full-fledged prosecution, companies agree to help federal investigators put together their case against alleged corporate criminals. They also admit to the wrongdoing and promise to implement reforms. One of the first test cases for DPAs began in 2004 with Computer Associates (the software giant now known as CA), which last month announced that all charges against it have been dismissed.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

The U.S. Attorney’s Office in New Jersey filed a complaint charging Bristol-Myers with conspiring to commit securities fraud. Prosecutors accused the company of using financial incentives to entice wholesalers to buy and hold greater quantities of prescription drugs than demand warranted. By the end of 2001, they said, this channel stuffing resulted in nearly $2 billion in excess inventory at the wholesalers.

The company agreed to pay restitution to people affected by the fraud, institute internal compliance measures — such as appointing a nonexecutive chairman to its board — and cooperate with the criminal investigation. The dismissal of the complaint means prosecutors are satisfied the company has fully complied with the terms of the DPA, Christie’s office stated.

In a press release, Bristol-Myers said “its business operations are stronger today as a result of having embraced a culture of compliance.”

In the case of CA, the company had agreed to the government’s conditions, including changing its process for recognizing revenue, appointing an independent examiner, and creating a restitution fund for those affected when the company falsified financial records, resulting in a $3.3 billion fraud.