CVS settles SEC accounting complaint |
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Fri, 29 Jun 2007 22:31
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PROVIDENCE, R.I. (AP) - The Securities and Exchange Commission agreed Friday to settle a complaint against CVS/Caremark Corp. and two former employees that said they misstated the company's earnings in 2000 by overstating the value of millions of dollars worth of plush toys.The nation's largest drugstore chain did not admit or deny the SEC's findings, which said the company overstated its third quarter pre-tax earnings in 2000 by approximately $18.1 million.The SEC investigation began after a shareholder lawsuit claimed the Woonsocket-based company made misleading statements to artificially raise its stock price. CVS settled the lawsuit in 2005 for $110 million.In an order released Friday, the SEC found that CVS's former treasurer, Philip Galbo, and its former controller, Larry Solberg, tried to hide losses related to CVS's stuffed animal inventory. While CVS had paid $32 million for the toys, sales in 2000 were only projected at $13.9 million.The SEC found the two devised a plan to pay a barter company $12.5 million in exchange for credits worth a total $42.5 million. CVS transferred the title of the toys to the barter company, but kept possession of the toys.'At least in its books, CVS no longer owned a plush toy inventory that had a market value that was less than its book value,' the SEC order said. The SEC also found that a CVS vice president told the two she thought the deal was 'a little screwy' because it allowed the company to avoid taking a markdown to its inventory.Galbo and Solberg resigned from CVS last year. They each agreed to pay a civil penalty of $30,000. The SEC did not fine CVS, but ordered the company to cease and desist from violating similar laws in the future.Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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