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While some bench trials are derided as “slow guilty pleas,” the securities fraud trial of former McKesson Corp. executive Richard Hawkins, which kicked off Wednesday, promises to be anything but. The case, in front of U.S. District Judge Martin Jenkins, features stars of San Francisco’s white-collar bar. Prosecuting is Assistant U.S. Attorney Timothy Crudo, who left a lucrative position as co-chair of Latham & Watkins’ Bay Area litigation department. Defending Hawkins is a team from Orrick, Herrington & Sutcliffe that includes Melinda Haag and Walter Brown Jr., both former federal prosecutors. If the force of those personalities isn’t enough to keep everyone awake, there’s also the backdrop to the case — executives pointing fingers at each other, billions of dollars in investor losses and hundreds of millions in pending plaintiff claims, not to mention precedent-setting arguments over the role of attorney-client privilege in corporate investigations. On Wednesday Crudo gave a straightforward opener using computer graphics and calendars to illustrate timelines for allegedly shady business transactions. He laid out the evidence behind the government’s contention that Hawkins, who was McKesson’s chief financial officer, conspired to backdate a $20 million deal in April 1999 so that it appeared McKesson had reached its earnings goals. “The defendant faced a choice: whether or not to record that revenue in the prior quarter,” Crudo said. “He chose to be part of that scheme to inflate McKesson’s earnings.” Haag likewise boiled it down for Judge Jenkins, who eventually will decide Hawkins’ guilt, as well as fines or prison time. “Richard Hawkins is an innocent man,” she said, adding later: “There is no crime here, your honor.” Crudo took about 20 minutes; Haag about an hour. It’s the first trial of an executive in connection with one of the most spectacular crashes in investor history. In spring 1999, allegations of corporate wrongdoing soured the otherwise happy merger of San Francisco-based McKesson, touted as the world’s largest health care management company, and Atlanta-based software maker HBO & Co. The resulting scandal prompted a one-day stock drop that cost investors $9 billion and inspired a flurry of shareholder suits. Last week, McKesson agreed to pay $960 million to settle a federal class action, but numerous other suits remain. The government has also gone after several executives. A grand jury indicted Hawkins on conspiracy and securities fraud last spring. Chief among the government’s witnesses will be former HBOC Co-President and Chief Financial Officer Albert Bergonzi, who pleaded guilty to conspiracy and securities fraud in October 2003 and is cooperating with the government. Crudo told Jenkins that Bergonzi and Hawkins worked over Easter weekend in 1999 to backdate a deal with Data General Corp. so that it would appear McKesson had met revenue expectations. “[Hawkins] knew McKesson would be short. He knew there was no way for McKesson to make up the numbers,” Crudo said. Haag painted a different picture of Bergonzi and Hawkins’ relationship. She blamed Bergonzi for HBOC’s numerous accounting irregularities and told the judge that Hawkins, whom she said had a reputation for being smart and ethical, had no motive to inflate his company’s numbers or to cooperate with Bergonzi. “It just doesn’t make any sense, your honor,” she said. “He has been falsely accused.” During her opening, Haag hammered away at the government for using Bergonzi as a witness. As she displayed a large photograph of a casually dressed Bergonzi holding his arms outstretched, she called him deceitful and named him as the “ringleader of massive securities fraud at HBOC.” She also pointed out that the government issued 34 subpoenas in the case because, she said, Bergonzi kept changing his story. Crudo objected to Haag a couple of times, calling her opening “argumentative.” Jenkins responded by telling her to “stick to the facts” and hurry up with her presentation. After openings, testimony began with Crudo presenting a health care stock analyst. Lawyers expect the trial in U.S. v. Hawkins, 04-0106, to last about five weeks.

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