Saturday, May 12, 2007

Bristol-Myers Will Plead Guilty to Two False Statement Counts

Bristol-Myers Squibb Co. announced that it has reached an agreement in principle with the Antitrust Division of the Department of Justice to plead guilty to two false statement charges for violating Sec. 1001.  The case arose from the company's negotiations over settling patent litigation involving the drug Plavix and the attempt to prevent a generic version from being manufactured and sold by Apotex Corp.  According to Bristol-Myers' 10-Q (here):

Under the agreement in principle, the Company or a subsidiary of the Company will plead guilty to criminal charges consisting of two violations of Section 1001 of U.S. Code Title 18 (relating to false statements to a government agency) carrying an aggregate statutory maximum fine of $1 million. The charges relate to representations made by a former senior executive of the Company during the renegotiation of the proposed settlement agreement with Apotex in May 2006 that were not disclosed to the FTC. The agreement in principle is contingent on the parties’ agreement to the terms of a final agreement and acceptance of the plea by the court in which it is entered. There can be no assurance that the agreement in principle will be finalized or that the plea will be accepted. If the agreement in principle is not finalized or the plea is not accepted, it is not possible to assess the ultimate resolution of this investigation or its impact on the Company. Although there can be no assurance, the Company does not believe that resolution of this investigation in accordance with the agreement in principle should have a material impact on its ability to participate in federal procurement or health care programs.

The former senior executive is not identified, but if Bristol-Myers is acknowledging that false statements were made, then a prosecution of the individual officer may be on the horizon.

This is not the company's first brush with the law, and it is still operating under a two-year deferred prosecution agreement entered into with the U.S. Attorney's Office for the District of New Jersey in June 2005 for accounting fraud related to channel-stuffing.  Bristol-Myers avoided having a determination that the agreement was breached, according to the 10-Q:

The U.S. Attorney for the District of New Jersey has advised the Company, although the guilty plea that is contemplated by the agreement in principle constitutes a violation of the DPA, the Company has cured that breach by terminating the employment of certain former officers of the Company as well as other actions taken to prevent the recurrence of the issues and events that led to this matter. The U.S. Attorney also has advised the Company that, assuming resolution of this investigation in accordance with the agreement in principle, and assuming the Company’s compliance with the DPA between May 10, 2007, and June 15, 2007, it is the USAO’s intention to terminate the DPA on June 15, 2007, and to seek dismissal with prejudice of the deferred charges pursuant to the DPA on a timely basis.

Unlike the settlement of that investigation, the Antitrust Division investigation will result in the company pleading guilty to two criminal charges, although the penalties are fairly modest and it may be only a subsidiary that enters the plea, avoiding any consequences to the parent.  Can Bristol-Myers go to the well a third time if the government were to uncover wrongdoing in another case in the near future?  One has to wonder whether the government will continue to give Bristol-Myers a break with these nice settlements. (ph)

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