|
 The SEC, which announced the settlement on Tuesday, said CVS failed
to disclose while marketing $1.5 billion of bonds in September 2009
having recently lost significant Medicare and contract revenue
streams in its pharmacy benefits manager (PBM) business, including
from the former Caremark Rx Inc that it bought in March 2007.
After CVS disclosed the problems on November 5, 2009, which resulted
in a 20-percent plunge in its share price, the company further
misled investors by manipulating its "retention rate," thereby
inflating its ability to retain business, the SEC said.
CVS was also accused of having in November 2009 manipulated
accounting for its October 2008 purchase of Longs Drug Stores Corp.
The SEC said the changes improperly boosted profit by as much as
11.7 cents per share for the third quarter of 2009, enabling CVS to
exceed rather than miss analyst forecasts.
"CVS broke faith with investors," Andrew Ceresney, director of the
SEC enforcement division, said in a statement. "The intentional
misconduct by CVS breached the core principle of fair and accurate
reporting of financial performance."
The Woonsocket, Rhode Island-based company did not admit or deny
wrongdoing in agreeing to settle, and on Tuesday said it is not
restating any financial results.
Separately, the SEC said Laird Daniels, CVS' senior vice president
for international operations and business development, agreed to pay
$75,000 and accept a one-year accounting ban to settle related
charges over the Longs accounting. He also did not admit or deny
wrongdoing.
[to top of second column] |
In court papers, the SEC said Daniels, who in 2009 was a CVS retail
controller, characterized the accounting changes as turning the
Longs purchase into a "good guy" rather than a "bad guy" for CVS,
referring to its impact on profitability.
Daniels, 44, lives in North Attleboro, Massachusetts, the SEC said.
His lawyer Robert Cleary, a partner at Proskauer Rose specializing
in white collar defense, declined to comment.
A shareholder lawsuit against CVS over the PBM disclosures remains
pending in a federal court in Providence, Rhode Island.
The SEC's evidence "confirms our allegations about the PBM business
and that the wrongful conduct was occurring at least since year-end
2008," Joseph Fonti, a partner at Labaton Sucharow representing the
shareholders, said in an interview.
The cases are SEC v CVS Caremark Corp, U.S. District Court, District
of Rhode Island, No. 14-00177; and In re: Daniels, SEC
Administrative Proceeding No. 3-15825.
(Reporting by Jonathan Stempel in New York;
additional reporting by
Alison Frankel; editing by Alden Bentley)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
