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Federal prosecutors Thursday bagged a fourth former employee of a Georgia software company involved in a scandal-ridden merger with McKesson Corp. Albert Bergonzi, 53, pleaded guilty to two counts of an 11-count indictment, admitting that he wrote side deals and backdated contracts which, he said, “had the effect of inflating software revenue” in order to meet Wall Street’s expectations. HBO & Co., where Bergonzi served as president, was forced to restate its earnings shortly after merging with McKesson, and the combined company lost approximately $9 billion in market value. The plea deal narrows the noose around the two defendants left in the case — former McKesson Chairman Charles McCall and Jay Lapine, the former general counsel of HBO & Co. Three others are already cooperating with the government. So far, the prosecution has been a textbook example of the government’s tactics in white-collar crime prosecutions. Prosecutors first negotiated plea deals with lower-level executives then started moving up the corporate ladder. Prosecutors did not say whether a plea deal would be considered for either of the two remaining defendants. Nor would the defense attorneys. “Our current plan is to go to trial,” said William Goodman, a lawyer for Lapine. Michael Shepard at Heller Ehrman White & McAuliffe represents McCall. Shepard said his client has every intention of going to trial. “Sounds to me like the people responsible for the wrongdoing have now pled guilty,” Shepard said. “[McCall] is not interested in pleading guilty. He didn’t do anything wrong.” Lapine is one of only a handful of general counsels prosecuted by the government for financial fraud. In the wake of Enron and other scandals, Attorney General John Ashcroft and the Securities and Exchange Commission made it a priority to hold accountants and lawyers who assist in frauds accountable. Jay Gilbertson, HBOC’s former chief financial officer, and Dominick DeRosa and Timothy Heyerdahl, both former vice presidents, have already pleaded guilty and are cooperating. None has been sentenced. McCall and Lapine were not charged in the original indictment. Charges against them were added in June. At the same time, prosecutors announced a superseding indictment against Bergonzi. U.S. District Judge Martin Jenkins set a Feb. 5 sentencing date but it will likely be pushed back since Bergonzi has agreed to cooperate through the duration of the government’s case. Based on his admissions, Bergonzi faces a prison term under federal sentencing guidelines from 87 to 108 months. His lawyer, Joseph Russoniello, declined to make a statement after the hearing. Assistant U.S. Attorney John Hemann said in court that the case involves scores of side deals that were never shown to HBOC auditors. In some cases they allowed customers to return unsold software, even though HBOC recorded them as sales on the books. Any trial would likely focus on a handful of contracts. Hemann highlighted one struck with Data General Inc., which allegedly resulted in $20 million in fraudulent revenue recognition. Hemann said the goal was to “insure that the company’s reported earnings satisfied Wall Street forecasts regarding software sales.” An appeal on whether defendants can access McKesson Corp.’s internal investigation into the scandal is pending at the Ninth Circuit U.S. Court of Appeals. Resolution of the appeal will likely delay any trial for at least a year. The appeal should decide one of the more contentious issues in criminal law today. Once the government began looking into the merger, McKesson cooperated with the SEC and Justice Department by turning over the results of an internal investigation. McKesson intervened in the criminal case to oppose the release of that investigation to the defense — some say out of fear that it would fall into the hands of the private securities fraud bar. Jenkins ruled against McKesson, which appealed to the Ninth Circuit. Goodman said his client needs the material. “It’s a matter of fairness and a matter of full disclosure,” he said.

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