Tuesday, May 10, 2005

Bristol-Myers Bumps Up Its Litigation Reserve for the Government Investigation of Channel Stuffing

Bristol-Myers Squibb Co. announced yesterday that it had increased the reserves related to the government's investigation of the company's accounting by $110 million, indicating that the matter may be coming to a head soon.  The company's press release (here) states rather cryptically: ""In today‚Äôs Form 10-Q, pre-tax earnings were reduced by $110 million, reflecting litigation reserves for previously disclosed matters recorded after the issuance of the earnings release. The previously disclosed matters are wholesaler inventory issues and certain other accounting matters. Together with the $30 million reserve previously recorded for such matters, of which $14 million had been reflected in the previously announced first quarter results, total reserves for these matters reported in the Form 10-Q are currently $140 million."  The "previously disclosed matters" involve civil and criminal investigations of alleged channel stuffing by the company, a method to prop up revenue when a corporation's sales begin to slide unexpectedly (see earlier post here about Coke's settlement of similar charges).  A New York Times article (here) notes that the company is represented by former Southern District U.S. Attorney Mary Jo White, so it certainly has brought in the first team.  Whether Bristol-Myers is able to achieve a global settlement that will not cost it more money is still up in the air, and look for the government to seek a substantial penalty. (ph)

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Civil Enforcement, Investigations, Securities | Permalink

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