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BMS pays to move on

Bristol-Myers Squibb could free itself from the possibility of criminal charges this week by paying a $300m settlement on a federal investigation into accounting irregularities

Bristol-Myers Squibb (BMS) could free itself from the possibility of criminal charges this week by paying a $300m settlement on a federal investigation into accounting irregularities, according to US reports.

Three years ago, the New York-based company admitted to artificially inflating its revenue by $2.5bn and its profit by nearly $1bn between 1999-2002 by giving incentives to wholesalers to overstock their inventories.

Sources close to the company said that under the terms of an impending outlined agreement between BMS and New Jersey US attorney Christopher Christie which could be announced later this week, the company would not be criminally indicted if it agreed to certain terms.

It is thought prosecutors will require BMS to establish certain programmes to monitor its ethics and corporate disclosure policies. Charges will be deferred for two years while BMS complies with these terms.

As part of the settlement, long time board member James Robinson, 69, would replace current chief executive Peter Dolan as chairman. Dolan would retain his CEO title.

Retired federal judge Frederick Lacey will continue to act as an independent monitor of the company's accounting practices, internal controls and financial reporting.

While no current executives will be indicted, it remains unclear whether any former employees, including the chief financial officer and other senior executives who left shortly after the scandal broke, will face charges from the New Jersey prosecutors.

While the settlement would `wipe the slate clean' for BMS on this issue, analysts said other potential stumbling blocks to any future takeover remain. The company still faces a court battle over the patent on its top-selling blood thinner, Plavix, which if lost could signify the start of generic competition to the drug from as early as this year.

BMS, which declined to comment on the expected announcement, has already agreed to pay over $500m to settle lawsuits and investigations stemming from the accounting scandal.

The company's share price has plunged more than 60 per cent since the end of 2000, as it struggled to replace important drugs losing their patents. However in the last 10 months, it has picked up around 12 per cent and fell by just 28 cents to $25.22 on the news.

ìAnything that gets rid of the overhang is good,î said Steven Sean Hill, money manager at First Investors. ìBased on the stock-price reaction, I don't think people view it as a particularly high price to pay.î

30th September 2008

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