DOJ Meets Setbacks in Case Against Former Bristol Exec
There’s some interesting white-collar news out of Newark this week.
The prosecution of Frederick Schiff, the former chief financial officer at Bristol-Myers Squibb Co., who was indicted with another former executive on securities fraud charges, is flailing.
First the government agreed to sever Schiff’s case from the other defendant’s case (the two were charged jointly), an unusual move that generally favors the defense. Then came a harshly-worded ruling last week in which a federal judge precluded prosecutors from introducing evidence and making certain legal arguments because their legal theories had continued to “morph” until the eve of the trial. Earlier this week the government filed a notice of appeal on the ruling, which will further delay a trial that was initially slated for 2006.
In 2005 the office of New Jersey U.S. Attorney Christopher Christie (pictured) charged Schiff and Richard Lane, former president of the pharmaceutical company’s world-wide medicines group, with two counts for their role in the company’s use of incentives to get wholesalers to buy more products than needed. The practice, known as “channel stuffing,” inflated sales by $2.5 billion and earnings by $900 million from 1999 to 2001.
In a news conference announcing the indictments, U.S. Attorney Christopher Christie called Schiff, who’s represented by David Zornow of Skadden, “the chief concealment officer.”
Last week U.S. District Judge Faith S. Hochberg ruled that prosecutors couldn’t tell jurors about Bristol’s stock drop on April 3, 2002, the day the company made a disclosure about the inventory issue. In other words, the government couldn’t say that the alleged omissions by Schiff about the channel stuffing resulted in massive losses by investors. In explaining the 40-page ruling, the judge said prosecutors waited too long to decide on that legal theory, which was presented to the court for the first time earlier this month. (Click here for the ruling and here and here for recent stories on the case.)
Judge Hochberg also ruled that prosecutors’ argument that Schiff made material “omissions” in filings with the Securities and Exchange Commission “defies logic” because the government had previously told the court that it wasn’t pursuing charges against him based on “misstatements” in SEC filings. Christie’s office declined to comment on the ruling.
As it stands now, the wittled-down case largely rests on alleged omissions Mr. Schiff, 60 years old, made seven years ago during analyst calls, which allegedly misled investors.
The indictments of Schiff and his co-defendant, Richard Lane, coincided with a major settlement by Bristol-Myers in which the company agreed to admit wrongdoing — on a charge of conspiring to commit securities fraud related to the channel stuffing — as part of a deferred-prosecution agreement with prosecutors, and pay $300 million to shareholders, for a total of $839 million in restitution over the matter.
first
First create a crime, “channel stuffing.” Then use Spitzer-like tactics to get BMS to accept a plea bargain that incidentally gets a friend of yours a high paying job as an “independent advisor” to monitor the company’s business practices.
Finally, force the postponement of the criminal case against BMS executives for a non-existent crime by waiting until the last minute to file a description of the alleged criminal acts which is at sharp variance with previous statements made by the prosecution. As it stands now, the next U.S. Attorney will settle this case by reducing the charges to the equivalent of a conditional discharge on disorderly conduct. But those big monitoring fees will continue to roll in for U.S. Attorney Christie’s friend. Now you know why drug companies have to charge so much for drugs, to cover the cost of paying off the legal piranhas in the government who target the drug companies.
I was in BMS’s corporate HQ on the day of the announcement, when it was released as well as during days prior. It was interesting that only half of mgmt thought the incident was a big deal.
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And, to the previous poster, FYI, intentionally misleading investors about inventory, when your product is pricy and time-sensitive, is called accounting fraud. It’s not a made-up crime. It’s real. You’re a troll for thinking that misleading investors isn’t shady and that the SEC shouldn’t enforce such things in post-SOX filings.
“Wittled down”? Get a dictionary, Danny.
So if the SEC is lame, lazy, or corrupt, then the DOJ is not allowed to prosecute the crime? The SEC can’t prosecute crimes, only civil stuff. How the heck does the judge use SEC inaction to decide a criminal matter? Yeah, misleading investors is a crime. But the SEC suffers from some of the same type of corruption that is rampant in Law Enforcement and the Judiciary. Like this judge Faith Hochberg, ho fo the suited fraud mongers. And the SEC has had their friends and former officials feed at the trough of extortion, or what do they call it, “hire this private watchdog”. How about Judge Richard C. Breeden? He was apparantly just wacking h is carrot while KPMG assisted another company in fraud, New Century. Remember what our own U.S. Attorney General John D. Ashcroft say: “We can only detect, investigate and prosecute a small percentage of those officials who are corrupt. The challenge for us within the law enforcement and justice sectors to keep our own houses clean.”
why is Paul Young still listed as “of counsel” on the Milberg Weiss website. Doesn’t Milberg Weiss know that El Mirage is tied to organized crime? See the new details at http://bitterqueen.typepad.com/history_of_gay_bars_in_ne/2007/12/current-gay-bar.html
US Attorney Chris Christie: WHAT A JOKE HE IS, A MICHAEL CHERTOFF PROTEGEE, A SPITZER CRONY, IN OTHER WORDS, A REAL CHIP OFF THE BLOCK OF PROSECUTORS WHO PROSECUTE CRIMES FABRICATED FROM BAD BUSINESS DECISIONS, DONE SOLELY FOR POLITICAL EXPEDIENCY PURPOSES, TO POSITION THEMSELVES FOR SOMETHING GREATER IN THE POLITICAL POWER ARENA.
