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Two former executives of Bristol-Myers Squibb Co., previously indicted on criminal conspiracy and securities fraud charges, were sued Monday by federal regulators who accused them of civil fraud in orchestrating a $1.5 billion scheme to deceive investors about the company’s performance. The Securities and Exchange Commission announced the lawsuit against Frederick Schiff, Bristol-Myers’ former chief financial officer, and Richard Lane, former executive vice president and president of the pharmaceutical company’s worldwide medicines group. The SEC is seeking unspecified civil penalties against the two former executives. The suit accuses them of instructing staff in 2000 and 2001 to create incentive packages for the company’s biggest wholesalers to inflate sales and profit figures, while misleading Wall Street analysts and investors. Lane’s attorney, Richard Strassberg, disputed the charges and said his client will contest them. Schiff’s lawyer, Lawrence Spiegel, didn’t immediately return a telephone call seeking comment. Schiff and Lane pleaded not guilty in June to the criminal charges, for which they could face up to 10 years in prison and $1 million in fines if convicted. They remain free on bond. Also in June, Bristol-Myers agreed to pay $300 million in a deal with the Justice Department to avoid prosecution on a criminal conspiracy charge stemming from its accounting scandal. The company has doled out about $800 million to settle lawsuits and investigations tied to the incentives it paid its wholesalers to stockpile inventory, inflating sales and earnings. In March 2003, the maker of Excedrin, Plavix and Pravachol restated $900 million in profits and $2.5 billion in revenue reported from 1999 through the first half of 2002. Bristol-Myers also agreed, in August 2004, to pay $150 million to settle the SEC’s related civil charges of manipulating its inventory of drugs to inflate earnings and meet Wall Street targets. It was one of the largest SEC penalties in recent years for alleged accounting violations against a company that continues to operate. The inventory manipulation is known as “channel-stuffing” — packing distribution channels with excess inventory, which Bristol-Myers is alleged to have done near the end of quarters. The practice is not illegal, but some industry observers have called the level at Bristol-Myers excessive. It occurred during a period when the company was trying to keep pace with rivals posting double-digit growth in profits. “For two years, Schiff and Lane led the market to believe that Bristol-Myers was meeting its financial projections and market expectations, when, in fact, the company was making its numbers primarily through channel-stuffing and manipulative accounting devices,” Merri Jo Gillette, an SEC regional director, said in a statement. In its suit filed in federal court in Newark, N.J., the SEC also accused Schiff of lying to Bristol-Myers’ auditors at PricewaterhouseCoopers LLP. Bristol-Myers employees who questioned the company’s aggressive profit targets were transferred or demoted, the agency said. Bristol-Myers is based in New York but its largest division, the U.S. Medicines Group, is headquartered in Plainsboro, N.J. In a statement, Lane attorney Strassberg said his client “did nothing wrong, he intends to fight these charges vigorously, and he will be fully vindicated at trial.” “At base, the SEC is attempting to use this action to scape-goat Rick Lane for innocuous, cautious statements made during routine telephone conference calls with professional Wall Street analysts about matters that were well known throughout Bristol-Myers Squibb and the pharmaceutical industry,” Strassberg said. Bristol-Myers shares rose 6 cents to close at $24.74 Monday on the New York Stock Exchange. They have traded in a 52-week range of $22.60 to $26.60. Copyright 2005 Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.

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