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Former McKesson Corp. executive and convicted felon Albert Bergonzi took the witness stand Wednesday and described how he helped pull off a scam that led to a $9 billion investor loss — one of the biggest in history. Bergonzi is the star witness in the government’s case against another McKesson executive, Richard Hawkins, who is on trial for alleged conspiracy and securities fraud. Bergonzi, formerly a McKesson vice president, described how he, Hawkins and others worked over Easter weekend in 1999 to backdate a contract to make it appear that McKesson had met Wall Street revenue expectations for the previous quarter. At one point during the weekend, Bergonzi said he called Hawkins to share details of his progress on the illegal contract. “Congratulations,” Hawkins said, according to Bergonzi. “I probably said, ‘Don’t congratulate me until Monday,’” Bergonzi added. His testimony came during the second week of a bench trial before U.S. District Judge Martin Jenkins that is expected to last about five weeks. Hawkins is the first McKesson executive to go to trial in connection with a series of alleged frauds that led to a one-day stock loss of $9 billion in April 1999. Bergonzi was indicted, but he pleaded guilty in October 2003 and agreed to cooperate with the government. In an opening statement last week, one of Hawkins’ lawyers, Orrick, Herrington & Sutcliffe partner Melinda Haag, characterized Bergonzi as a liar who is trying to help himself by dragging an innocent man down with him. Assistant U.S. Attorney Timothy Crudo spent more than three hours questioning Bergonzi about events leading up to the illegal contract. The former executive, a portly, gray-haired man with a mustache, started off tentatively, but spoke carefully and calmly. He occasionally gestured with his hands and kept his attention focused on Crudo, who several times asked him to speak up. Crudo seemed excited about eliciting Bergonzi’s testimony, which, if true, is about as close to a slam-dunk conviction as one can get. Crudo jumped ahead of himself in his questioning, and Walter Brown Jr., another member of Hawkins’ defense team, repeatedly objected for “leading” questions and “lack of foundation.” Jenkins sustained a few objections, but gave Crudo a lot of leeway, as long as he rephrased his questions. It was the first time Bergonzi detailed his wrongdoing in public. Although Bergonzi pleaded guilty to fraud stretching back to 1998, most of his testimony Wednesday focused on spring 1999. McKesson, touted as the world’s largest health care services company, had just merged with Atlanta-based software maker HBO & Co., where Bergonzi was president. The new entity, McKessonHBOC, struggled to meet analyst revenue forecasts. At the end of March 1999, a deal with Oracle Corp. fell through, putting McKesson’s stock price at risk. So, Bergonzi said, he and others cooked up a new deal, worth $20 million, with Data General Corp. They negotiated with the Massachusetts company and agreed to backdate the revenue so it appeared McKesson had met its numbers. Although Bergonzi recited his crimes in detail, he made certain to blame other managers whom he said pressured him to meet impossible financial expectations. “You knew backdating was wrong?” Crudo said. “Yes,” Bergonzi replied. Bergonzi’s testimony continues today, when he will be cross-examined by defense lawyer Brown, of Orrick Herrington. Judge Jenkins is scheduled to sentence Bergonzi in his own case next week, but sources said that will likely be delayed. He faces up to 15 years in prison. The case is U.S. v. Hawkins, 04-0106.

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