Biovail and Execs Slapped with Fraud Charges
The U.S. Securities and Exchange Commission charged Canada's Biovail, two current senior executives and former Chief Executive Eugene Melnyk with engaging in a number of fraudulent accounting schemes, the agency said.
The pharmaceutical company will pay $10 million to settle the SEC probe. Still facing charges are Melnyk, former Chief Financial Officer Brian Crombie, current Controller John Miszuk and current CFO Kenneth Howling.
Biovail said on Monday that Howling and Miszuk are being reassigned to different non-officer positions within the company.
According to the complaint, the SEC said the current and former senior Biovail executives were obsessed with meeting quarterly and annual earnings guidance, and repeatedly overstated earnings and hid losses to deceive investors. (See more in the CNBC video at left.)
"When it ultimately became impossible to continue concealing the company's inability to meet its own earnings guidance, Biovail actively misled investors and analysts about the reasons for the company's poor performance," the SEC said.
The complaint alleges that in October 2003, Biovail and some of its executives schemed to deceive investors and analysts by falsely attributing nearly half of Biovail's failure to meet its third quarter forecast to a truck accident involving a shipment of one of Biovail's products.
"The accident, in fact, had no effect on third quarter earnings," the SEC said.
Shares of Biovail were down more than 4 percent Monday. In Toronto, Biovail was off 4 percent at C$11.30.
Former CEO Defiant
Biovail founder and former chief executive Melnyk said Monday that he would "vigorously contest'' the allegations against him, which were raised in both the U.S. and by Canadian regulators.
"I intend to vigorously contest the absolutely false allegations of the SEC and OSC and am confident that I will prevail once all the facts are heard,'' Melnyk said in a statement.