Former Bristol Execs Strike Deal On Financial Fraud

Rick Lane and Frederick Schiff struck a deal in which they will avoid criminal prosecution for an alleged scheme to artificially inflate financial results reported by Bristol-Myers Squibb

The former execs will pay a combined $400,000 to a shareholder settlement fund and, in return, criminal charges will be dropped under a deferred prosecution agreement with federal prosecutors in New Jersey. The charges actually get tossed in 12 months if they stick to the deal, which was approved today by US District Court Judge Faith Hochburg, and stay out of trouble. Under the agreements, the men are barred from serving as a ceo or cfo of a public company for two years (read theSchiff deal and the Lane deal).

The government alleged the execs failed to tell investors that Bristol in 2000 and 2001 gave wholesalers tens of millions of dollars of incentives each quarter to spur them to buy more products than needed. The practice allowed the drugmaker to exaggerate revenue by $2 billion and meet its earnings targets, helping to inflate its stock price, according to the charges.

Bristol’s market value dropped several billion dollars after the practice came to light. In 2005, the drugmaker paid $300 million and accepted a two-year probation from the Justice Department in a so-called deferred prosecution agreement, to avoid a possible trial. Lane, who was formerly Bristol worldwide medicines president, has had his case separated from Schiff, whose charges were narrowed down recently (see here). Bristol’s 2005 DPA was arranged by then-U.S. Attorney Christopher Christie, who is now New Jersey’s governor.

“After seven years of investigation and litigation, this resolution contemplates the dismissal of all criminal charges,” Schiff’s lawyer, David Zornow of Skadden Arps, tells us. “This misguided prosecution should never have been brought in the first place.” “The tragic fact is that this case should never have been brought against Mr. Lane as he is, and always was, innocent,” Richard Strassberg and Robert Braceras, Lane’s lawyers, say in a statement.