Bristol-Myers pays $150 million fraud fine

WASHINGTON — Bristol-Myers Squibb Co. is paying $150 million to settle a major alleged accounting fraud as federal regulators accused the company Wednesday of manipulating its inventory of drugs to inflate earnings and meet Wall Street targets.

The pharmaceutical giant, which also recently settled a lawsuit by shareholders for $300 million, still faces a criminal investigation by the Justice Department.

In its settlement of the civil case with the Securities and Exchange Commission, Bristol-Myers agreed to pay a $100 million civil fine and an additional $50 million, both of which will go into a fund for shareholders. Bristol-Myers neither admitted nor denied wrongdoing in the accord but did agree to abide by a permanent injunction against future violations.

It is one of the largest SEC penalties in recent years for alleged accounting violations against a company that continues to operate. The $150 million Bristol-Myers is paying dwarfs the $10 million fine levied on Xerox Corp. in 2002, which was the largest ever at the time, to resolve allegations of accounting fraud.

“It does get the issues behind the company,” said David Moskowitz, an analyst at investment firm Friedman Billings Ramsey in Arlington, Va. He noted the market’s muted reaction to news of the SEC sanctions.

The criminal probe is “a remaining risk,” Moskowitz acknowledged, but he said that if there is a penalty, “many investors feel it will be a manageable amount of fines.”

The maker of Excedrin, Plavix and Pravachol disclosed in March 2003 that it had overstated revenue for 1999-2001 by $2.5 billion as a result of its having given wholesalers deep discounts to buy more prescription medicines than they could sell. Ranked No. 92 on the Fortune 500 list, Bristol-Myers had revenue of $20.7 billion last year.

Bristol-Myers is based in New York but its largest division, the U.S. Medicines Group, is headquartered in New Jersey.

The SEC sued Bristol-Myers in federal court in Newark, N.J., alleging that the company sold excessive quantities of drugs to wholesalers and improperly booked revenue from $1.5 billion of those sales to its two biggest wholesalers.

Bristol-Myers covered the wholesalers’ carrying costs and guaranteed them a return on investment until they sold the products, the SEC said in the suit.

Bristol-Myers also agreed in the settlement to appoint an independent adviser to monitor its accounting practices, financial reporting and internal controls.

Bristol-Myers shares rose 16 cents to close at $23.30 on the New York Stock Exchange.