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SAN FRANCISCO — The accounting fraud case against former McKesson HBOC executives has taken on an "Alice in Wonderland" hue, as the government's main cooperator is now officially a defense witness.

In opening statements Tuesday, Theodore Wells Jr., the Paul, Weiss, Rifkind, Wharton & Garrison lawyer representing former CEO Charles McCall, told the jury he will call Albert Bergonzi to the stand. Once the company's president, Bergonzi pleaded guilty and testified for the government in its first attempt to convict McCall and former General Counsel Jay Lapine. That jury acquitted McCall and Lapine in 2006 on one count, and hung on several others.

Assistant U.S. Attorneys David Anderson and Adam Reeves decided against calling Bergonzi during the retrial. But in a move rarely seen, Wells is going to call Bergonzi himself to help further the argument that McCall's underlings cooked the books without telling him.

"They met behind Charles McCall's back," said Wells, who told jurors that Bergonzi was an "originator" of the crime but was vague about what exactly he'd say on the stand.

Anderson said that as HBOC's chief executive, McCall had a choice: go through with the McKesson merger and become a corporate star, or reveal a fraud within his own company.

"He could not do both. So what do you think McCall did?" Anderson asked, letting the question linger while he took a sip of water. McCall covered up the fraud, the lawyer finished.

Since the McKesson HBOC fraud investigation began in 1999, the government's case has consumed a revolving team of federal prosecutors, nine in all—actually 10, if U.S. Attorney Joseph Russoniello is included. As a partner at Cooley Godward Kronish, Russoniello represented Bergonzi but was recused from all things HBOC once he joined the office.

The government alleges 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.

As a cooperator, Bergonzi has created problems for the government. Then-Northern District Judge Martin Jenkins found Bergonzi's testimony not credible in acquitting the company's former chief financial officer. At Bergonzi's sentencing, prosecutors declared he'd provided complete and truthful information and asked that he be sentenced to a 30-month term. But Jenkins gave him 41 months instead.

McCall's legal team, which also includes Michael Shepard of Hogan & Hartson, argues in papers that the government is forcing the defense to call Bergonzi to "insulate" itself from potentially exculpatory testimony. But the defense is attempting a complicated play, hoping to convince the jury that Bergonzi lied about certain events in the past — just not the parts that will help McCall. Specifically, the defense will summon Bergonzi to say he devised the scheme and didn't tell McCall that the side letters weren't being shown to finance, according to filings.

In court, Wells told the jury that Bergonzi has refused to meet with his defense team. However, Bergonzi has met with Lapine's lawyers at Kasowitz, Benson, Torres & Friedman, according to government filings; Bergonzi even lent money to Lapine earlier in the case.

Lapine figured much smaller in each sides' presentations Tuesday. The former GC drafted the side letters, Anderson said, after trying to persuade another lawyer not to put those terms in writing.

Kasowitz partner Marcus Topel countered that even though Lapine might have drafted documents, he had nothing to do with revenue recognition decisions at the company — and was rebuffed when he tried to inquire as to whether they were done properly.

"He was told, that is not your department," Topel said.

The trial, in Judge William Alsup's courtroom, is expected to continue well into November.

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