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Defense attorney Walter Brown Jr. launched his cross-examination of prosecutors’ star witness in the Richard Hawkins trial with the one fact he wants U.S. District Judge Martin Jenkins to keep in mind. “Mr. Bergonzi, when did you first start committing fraud?” Brown asked Thursday of witness Albert Bergonzi, a former McKesson Corp. executive who is now testifying against Hawkins, who is Brown’s client and the former chief financial officer at McKesson. Bergonzi didn’t respond immediately, instead chewing over his answer a bit before quietly saying, “In the first quarter of 1998.” For the next few hours, Brown, a partner at Orrick, Herrington & Sutcliffe, pushed Bergonzi to testify in detail about his illegal activities. Bergonzi admitted to regularly committing fraud while he was an officer at HBO & Co., which merged with McKesson in January 1999. By March of that year, Bergonzi, who became a McKesson vice president, realized his unit in the combined company wasn’t going to meet revenue expectations. So, according to Bergonzi, he and others, including Hawkins, hatched a scheme to illegally add $20 million to McKesson’s bottom line by making it appear that a contract negotiated in April really went on the books in March. McKesson’s accounting team eventually discovered the fraud. The scandal forced the giant health care services company, which is based in San Francisco, to restate its earnings. McKesson’s stock price crashed, resulting in $9 billion in investor losses. Federal prosecutors have since indicted several executives, but all were with HBOC. Hawkins is the only defendant who worked for McKesson before the merger. Brown and the rest of the defense team say Hawkins is innocent and that Bergonzi is making up lies in order to lessen his own punishment. Bergonzi has pleaded guilty and faces up to about 10 years in prison. He has not yet been sentenced. Under direct examination by Assistant U.S. Attorney Timothy Crudo on Wednesday, Bergonzi described how he worked over Easter weekend in 1999 to negotiate the contract that would create the backdated revenue. He said he communicated with Hawkins and others by phone, fax and e-mail. But Hawkins disputes that account, and Brown worked hard Thursday to impeach Bergonzi on the stand. He pointed out that there aren’t any phone records to back up Bergonzi’s story. He also accused Bergonzi of changing earlier accounts he gave to the FBI and to attorneys from Skadden, Arps, Slate, Meagher & Flom who were hired by McKesson to investigate the fraud. Throughout his questioning Thursday, Brown pointed out inconsistencies and said Bergonzi added details to his previous stories — some as recently as Wednesday, when he was questioned by Crudo. For example, Bergonzi had testified Wednesday that another executive told him that backdating the $20 million in revenue was “over the line” and not an acceptable accounting practice. Brown said that was the first time Bergonzi had mentioned that detail. Bergonzi insisted Thursday he had told that to the FBI in an earlier interview. But Brown said it was not in any of the FBI’s reports of Bergonzi’s earlier statements. If it was Brown’s goal to rattle Bergonzi, he failed. The executive seemed well-prepared and gave most of his answers in the same steady monotone. He repeatedly replied so tersely that Brown was forced to ask additional questions to elicit more information. Brown spoke forcefully but politely. And even if Bergonzi didn’t crack on the stand, Brown elicited testimony that will require Judge Jenkins — who will decide Hawkins’ guilt — to seriously wonder if and why Bergonzi changed his story over time. The case is U.S. v. Hawkins, 04-0106.

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