Two Ex-Bristol-Myers Officers Sued by SEC for Fraud

By Demian McLean
Bloomberg
August 22, 2005

Two former Bristol-Myers Squibb Co. executives defrauded investors by improperly accounting for $1.5 billion in revenue in 2000 and 2001, according to the U.S. Securities and Exchange Commission.

Frederick Schiff, 56, of New York, former chief financial officer, and Richard Lane, 53, of Doylestown, Pennsylvania, former president of the Worldwide Medicine group, sold excessive amounts of pharmaceutical products to the company's two largest wholesalers to inflate revenue and earnings, according to a complaint filed with the U.S. District Court for the District of New Jersey.

``For two years, Schiff and Lane led the market to believe that Bristol-Myers was meeting its financial projections and market expectations, when in fact the company was making its numbers primarily through channel-stuffing and manipulative accounting devices,'' said Merri Jo Gillette, head of the SEC's Midwest Regional Office in Chicago.

Bristol-Myers, under Schiff and Lane, inflated its results by stuffing its distribution channels with excess inventory to meet targets by providing financial incentives to its wholesalers, the SEC said. When earnings still fell short of internal expectations and Wall Street consensus, the company used ``cookie jar'' reserves at Schiff's direction to further inflate earnings, the complaint said. The former officials also lied to the company's auditor, PricewaterhouseCoopers LLC, the SEC said.

Bristol-Myers agreed to pay $150 million in 2004 to settle with the SEC. The company appointed an independent adviser to review and monitor its accounting practices, financial reporting and internal controls. Neither Lawrence Spiegel, representing Schiff, or Richard Strassberg, the attorney for Lane, returned calls.