Ex-HBOC execs indicted
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September 28, 2000: 3:48 p.m. ET
Two former executives at software firm indicted on accounting fraud charges
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NEW YORK (CNNfn) - U.S. officials said Thursday that a federal grand jury has indicted two former executives of health care software maker HBO & Co. on charges of accounting fraud prior to the company's merger with medical products distributor McKesson in 1998.
The U.S. Attorney for the Northern District of California said Jay P. Gilbertson and Albert J. Bergonzi, former co-presidents and co-chief operating officers at Atlanta-based HBO & Co., were charged on 17 counts of securities fraud, conspiracy, mail fraud and wire fraud.
For more than a year prior to the McKesson merger, the two men masterminded a scheme that "systematically defrauded HBOC shareholders and the investing public by fraudulently inflating HBOC's financial results," the indictment alleges.
Gilbertson, who also served as HBO & Co.'s chief financial officer, and Bergonzi awarded themselves lucrative bonuses tied to the company's inflated financial performance, as well as sales of HBO & Co. stock at prices inflated by their fraud, according to the indictment.
The McKesson/HBOC deal closed in January 1999. On April 28, 1999, stock in the combined company plunged more than 40 percent to about $34 per share, after the company's auditors announced an internal investigation of accounting irregularities stemming from improperly recorded software sales.
The stock has yet to recover. San Francisco-based McKesson HBOC Inc. was twice forced to revise its 1999 earnings downward due to the accounting irregularities. The company shook up its management in the wake of the scandal.
Attorneys for Gilbertson and Bergonzi told CNNfn.com Thursday afternoon that they had not yet seen the indictment and could not comment on it.
Gilbertson's lawyer, Robert Plotkin, said his client "maintains his innocence and intends to defend himself." Bergonzi's attorney declined comment on the matter.
A court date has not yet been set.
A third former HBOC executive, Dominick A. DeRosa, settled fraud allegations with the U.S. Securities and Exchange. He did not admit or deny the allegations. The SEC said he agreed to pay more than $360,000 in ill-gotten gains plus a $50,000 civil penalty.
A McKesson spokesman declined comment on the indictments, saying that the firm continues to cooperate with federal officials about the fraud investigation since the company's accountants brought the scandal to light last year. Company spokesman Larry Kurtz said the company's information technology unit, the division acquired through the HBOC merger, has become an integral part of McKesson's business.
"You cannot characterize the company that we purchased by the actions of a small group of people," he said. "Our information technology business is a crucial part of our corporate strategy. You have to set aside what happened in the past from where we are taking the company in the future."
McKesson HBOC (MCK: Research, Estimates) shares gained 38 cents to $30.50 in Thursday trading.
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