See Biovail drop. The Canadian drug maker's shares fell to an eight-year low yesterday as more details emerged in the SEC case against the company, its founder and three other executives present and past. According to the U.S. securities agency, the four executives were so obsessed with making earnings goals that they hid losses to deceive investors. And when they couldn't hide their financial problems, they made up excuses.
For instance, in 2003, they blamed an earnings shortfall on a truck that overturned when it was carrying a load of Wellbutrin XR. Wrong answer: the SEC says that truck accident didn't materially affect earnings. The men also allegedly moved $47 million of R&D costs onto an off-balance-sheet entity, recorded a fake transaction that added $8 million in revenues, and misstated foreign-exchange losses by about $3.9 million.
As we reported yesterday, Biovail paid $10 million to settle the charges without admitting wrongdoing. Founder Eugene Melnyk (photo) issued a statement saying most of the allegations "do not pertain to me" and denying that he misled investors about the truck accident. Last year, Melnyk announced his retirement on the same day he disclosed that he was under SEC scrutiny.
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