Bristol-Myers Hikes Reserves by $400 Million Due to Falsely Inflated Revenues
The Bristol-Myers Squibb Co. announced on Monday that it would increase its liability reserves by $400 million — the result of a scandal in which the company falsely inflated its revenues by $2.5 billion between 1999 and the first half of 2002.
The drugmaker said in a release that $300 million of the reserves are for lawsuits and government investigations related to "wholesaler inventory issues and other accounting matters." The other $100 million is set aside for unrelated product liability and other matters. Bristol-Myers said it will record the increases as pre-tax charges in the second quarter.
The company boosted its earnings through a scheme that involved persuading wholesalers to buy more drugs than they could sell, creating a huge inventory glut, Reuters reported. Last year, Bristol-Myers restated its earnings for the three-year period, acknowledging that the inventory manipulation inflated earnings by $900 million.
The restatement led to investigations by the Securities and Exchange Commission and the Justice Department. Earlier this year, a grand jury in New Jersey began investigating the company’s accounting practices.
The company may have to restate its results again, the company said in January, to further correct the accounting problems. Also, the company may have to take additional charges related to the government probe on the wholesaler issue and shareholder lawsuits that were filed after the accounting scam was disclosed.