Advertisement

McKesson Settles Shareholder Suit for $960 Million

Share via
From Associated Press

San Francisco-based health-services company McKesson Corp. said Wednesday that it had agreed to repay shareholders $960 million to settle a class-action lawsuit related to an accounting scandal that has resulted in criminal convictions of several former executives.

The settlement is the fifth-largest in U.S. history. The agreement and a $240-million increase in reserves for possible future liabilities will result in an $810 million, or $2.70-a-share, reduction in net income for the third quarter ended Dec. 31, McKesson said in a statement.

McKesson shares rose 1 cent to $31.24 on the New York Stock Exchange.

The case consolidated several class-action lawsuits brought on behalf of McKesson’s shareholders burned by the financial shenanigans that occurred when the company bought software maker HBO & Co. in 1999.

Advertisement

The company said Wednesday that it would establish a $1.2-billion reserve for the payout and future claims stemming from 16 unresolved shareholder lawsuits.

McKesson has been fighting dozens of lawsuits since an internal investigation concluded that HBOC had been fabricating revenue in the years leading up to its $12-billion sale.

After detecting the fraud, McKesson restated its financial results for 1998 and the first three months of 1999. The revised accounting revealed gross exaggerations -- in late 1998, for instance, HBOC reported a profit that was seven times as high as the true result. The revelations caused McKesson’s stock to lose nearly half its value in one day, wiping out $9 billion in shareholder wealth.

Advertisement

McKesson had sought to close parts of the trial to keep confidential an internal report and memos of interviews with McKesson executives about the matter. A federal judge denied the request.

Bloomberg News was used in compiling this report.

Advertisement