Reserve Manipulation

Additional Reading Material

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Copyright 2012 Deloitte Development LLC. All rights reserved.
Reserve Manipulation - Bristol-Myers Squibb
Bristol-Myers Squibb is a global pharmaceutical company.
SEC complaint alleged:
Reversal of reserves to inflate earnings:
o Phony divesture reserves
o Corporate contingency reserves
o Transformed one-time gains into operating income
This resulted in an overstatement of income in 2000 and 2001 of
$66 million and $157 million, respectively

SOURCE: SEC v. Bristol-Myers Squibb Company, August 4, 2004 (Paras. 56-64)
Copyright 2011 Deloitte Development LLC. All rights reserved. 3 Footer
Copyright 2012 Deloitte Development LLC. All rights reserved.
Reserve Manipulation - Bristol-Myers Squibb
Results
Settlements
Bristol-Myers paid $839 million to affected shareholders,
including:
o $300 million in a deal with the Justice Department
o $100 million civil penalty and $50 million Shareholder Fund payment
in an agreement with the SEC
Agreed to a deal with the Justice Department, whereby there
would be a deferment of criminal prosecution for 24 months and
prosecution would be dismissed if the company is compliant with
all obligations of the agreement at that time.
Indictments
Two executives were indicted, including the CFO

SOURCES: Bristol-Myers Squibb press release, June 15, 2005
Copyright 2011 Deloitte Development LLC. All rights reserved. 4 Footer
Copyright 2012 Deloitte Development LLC. All rights reserved.
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