6 Former HBOC Execs Face SEC Fraud Charges

Securities regulators Thursday filed fraud charges against six executives accused of fabricating sales in a scheme that saddled shareholders of health- services giant McKesson Corp. with more than $9 billion in paper losses when the accounting scandal rocked Wall Street in 1999.

The individuals named in the civil complaint filed by the Securities and Exchange Commission include the former general counsel and chief financial officer at Atlanta-based HBO & Co., a provider of health-care software purchased by San Francisco-based McKesson in 1999 for $12 billion.

McKesson based the HBOC purchase price on financial statements that included bogus sales dating back to 1997, according to the SEC.

A few months after the merger closed, the newly named McKesson HBOC discovered the ruse. The revelation, which forced McKesson to restate its earnings, caused the company’s stock to plunge from $65 a share to $34 a share, wiping out more than $9 billion in shareholder wealth.

The stock hasn’t recovered from the debacle. The shares haven’t traded above $41.50 since the news hit nearly 2 1/2 years ago. McKesson’s stock closed Thursday at $37.37, up 87 cents on the New York Stock Exchange.

Thursday’s civil complaint comes a year after the U.S. attorney’s office filed criminal fraud charges against HBOC’s former co-presidents, Jay Gilbertson and Albert Bergonzi. That case still is pending.

Although all the allegations so far have named former HBOC officials, the scandal has been mortifying for McKesson, a conservatively run company formed in 1833. As of April 30, the company faced 85 lawsuits concerning the accounting scandal.