Canadian drug maker Biovail Corp. has agreed to pay a $10 million fine to resolve federal regulators’ charges of civil accounting fraud and deceiving investors and analysts. The Securities and Exchange Commission announced the settlement with Biovail. A civil lawsuit had been filed in a New York federal court. The company must also refrain from future violations of federal securities laws. Toronto-based Biovail also agreed to hire an independent consultant to oversee its accounting. The SEC’s charges remain pending against current and former officers of Biovail.
The Ontario Securities Commission filed related allegations against the four executives and scheduled a public hearing for April 22nd. It was alleged in the SEC’s lawsuit that Biovail and senior executives “engaged in a pattern of systemic, chronic fraud” that distorted its quarterly and annual reports filed over four years. To conceal the fraud, the executives “intentionally misled the company’s auditors and the investing public, showing their complete disregard for their responsibilities to shareholders,” according to the SEC.
In October 2003, according to the SEC, Biovail and several executives deceived investors and analysts by falsely attributing nearly half of the company’s failure to meet its third-quarter earnings target to a truck accident involving a shipment of Biovail’s antidepressant Wellbutrin XL. The accident in fact had no effect on earnings for the quarter, the SEC said. The agency also accused the company of three fraudulent accounting schemes between 2001 and 2003: shifting around $47 million in expenses for drug research and development onto the books of a “special purpose entity,” concocting a phony transaction to record $8 million in revenue, and intentionally misstating losses from foreign currency transactions to understate a quarterly loss by some $3.9 million.
Source: Associated Press
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