McKesson Settles Employee Suit Over Investments

McKesson Corp., the biggest U.S. drug wholesaler, will pay $18.5 million to settle a lawsuit brought by employees who participated in its profit-sharing investment plan.

U.S. District Judge Ronald Whyte in San Jose gave preliminary approval of the settlement Friday, said Ronald Kravitz, a lawyer for the employees.

The case stems from McKesson’s 1999 restatement of earnings after it said that HBO & Co., the software company it acquired that year, had prematurely booked $40 million in sales. The announcement led to a one-day drop in the company’s stock that wiped out $8.6 billion in market value.

Whyte had previously dismissed claims that San Francisco-based McKesson failed to diversify the investment plan’s holdings before the acquisition, Kravitz said.

The issue Whyte permitted to go forward was employees’ claim that executives contributed McKesson stock rather than cash to the plan after learning about fraud at the merged company.

“We only had one count that was going to make it to trial,” Kravitz said. The executives “should’ve known the McKesson stock was impaired.”

The employees’ profit-sharing plan also will receive about $80 million from McKesson’s separate $960-million settlement with shareholders that was approved by Whyte in February, Kravitz said.

Larry Kurtz, a spokesman for McKesson, didn’t immediately return a call seeking comment.

Shares of McKesson fell 2 cents to $48.61.