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Guilty Verdict for McKesson Chairman, but GC Acquitted
The Recorder
November 20, 2009
The government made the right call.
In retrying former McKesson HBOC Chairman Charles McCall, prosecutors decided not to put one-time cooperator and former CEO Albert Bergonzi on the stand.
That forced McCall's lawyers to summon Bergonzi instead, and the jury didn't think much of his testimony.
"We just thought he was a thug in a suit," juror Brenda Hughes said outside the courtroom.
Hughes and other jurors convicted McCall on Thursday on four securities fraud counts and one charge of circumventing accounting controls. They acquitted him on a falsifying books and records count. At the same time, they acquitted the company's former general counsel, Jay Lapine, on each of the three counts he faced .
During the first trial, prosecutors called Bergonzi, who had cut a deal with the government. That jury wound up acquitting McCall and Lapine on a conspiracy charge, while hanging on the rest. This time, though, Assistant U.S. Attorneys David Anderson and Adam Reeves decided they could make their case without Bergonzi, which forced the defense to call him in an effort to elicit exculpatory testimony.
The defense, led by Theodore Wells Jr. of Paul, Weiss, Rifkind, Wharton & Garrison, immediately tore into Bergonzi with hostile questioning. Since Bergonzi was now the defense's own witness, the lawyers' approach didn't go over well, said foreperson Christine Griffith, a land use attorney at Ellman Burke Hoffman & Johnson in San Francisco.
"It leaves the jury thinking, well, what are we supposed to do with this information?" Griffith said.
In this case, Griffith said, jurors ignored anything Bergonzi said that wasn't backed up by a document. Bergonzi had previously been found not credible by then-Northern District Judge Martin Jenkins in another trial.
The government alleged that top HBOC executives made up sales shortfalls by ginning up side letters that allowed customers to pull out of sales contracts, and then hiding those letters from company auditors. McCall allegedly learned of the scam during merger talks with McKesson. The problems didn't come to light until after the two companies merged in 1999.
Wells and his co-counsel, Michael Shepard of Hogan & Hartson, called Bergonzi to further their argument that McCall's underlings cooked the books without telling him.
Lapine, meanwhile, drafted some of the controversial documents. But while it was "possible" Lapine knew about the accounting shenanigans, Griffith said, there just wasn't enough evidence to prove it beyond a reasonable doubt.
Juror Hughes, who once worked as an assistant to the chief operating officer of eSilicon Corp., said Lapine's record keeping was much sloppier than the in-house attorneys she knew. But that didn't mean he was a criminal, she said.
"He was just doing what he was told," said another juror, Raymond Leong.
Overall, jurors had a very positive impression of the federal prosecutors, calling them thorough, professional and courteous. "They're what I'd want my associates to learn from," Griffith said.
They also liked Lapine's lawyer, Marcus Topel of Kasowitz, Benson, Torres & Friedman. Several said the longtime San Francisco practitioner came off as a "country lawyer" who was approachable.
That contrasts with their impressions of McCall's defense team, who Leong called "New York acting."
"They were a little more theatrical. Not that it didn't kind of break up the boredom," Hughes said.
"They were overall less effective than both Mr. Topel and the government," Griffith said. "It goes to show spending millions of dollars on your defense is not necessarily effective."
McCall's team was not available for comment, and a government spokesperson declined to discuss the verdict until after sentencing. Topel said he felt "terrific," saying he was grateful the jury was able to separate Lapine's conduct from McCall's.
During voir dire, Topel said, the defense team debated about whether to allow an attorney on the jury.
"I thought this case needed the perspective of a lawyer, that lawyers behave ethically, honestly and morally," Topel said. Just because someone is a lawyer doesn't mean they're "a sleazebag or a criminal," he said.
Judge William Alsup scheduled sentencing for March 2.
