Re BMS

[Guest guest]

>Why a Lawman

>Wields Authority

>Over Drug Maker

>

>By BARBARA MARTINEZ and JOANN S. LUBLIN

>Staff Reporters of THE WALL STREET JOURNAL

>June 20, 2005; Page B1

>

>NEWARK, N.J. -- Executives at Bristol-Myers Squibb Co. will report

to

>an unusual overseer over the next two years: Christie,

the

>federal lawman who last week announced the sweeping settlement of an

>investigation into a $2.5 billion fraud at the giant drug company,

>giving him unprecedented say in its operations.

>

>Mr. Christie is the U.S. attorney who led the three-year

investigation

>at Bristol-Myers into " channel stuffing " -- the practice of

inflating

>sales by getting wholesalers to buy more product than they need.

>Sitting on a leather couch in his Newark office, Mr. Christie

explains

>why he didn't impose a huge fine. " I didn't want to hurt the

company, "

>he says.

>

>Instead, Mr. Christie, 42 years old, hammered out a deferred

>prosecution agreement ensuring he personally will have a hand in

>keeping the company viable and clean. He can veto the board's

proposed

>selection of an additional independent director, which Bristol-Myers

>agreed to do within 60 days.

>

>Under the agreement, Chief Executive Dolan lost his

chairmanship

>and will be closely supervised by new Chairman D. , a

>veteran Bristol-Myers director and the former head of American

Express

>Co. The responsibilities Mr. Christie has assigned to Mr.

go

>beyond those of a conventional nonexecutive chairman. Mr. Christie

says

>the chairman will serve as the prosecutor's " extra set of eyes. " Mr.

> will get regular briefings from three Bristol-Myers

executives

>-- the finance chief, the general counsel and the chief compliance

>officer -- but they will continue to report directly to Mr. Dolan.

>

> " It's very unusual for a U.S. attorney to dictate the conduct of a

>nonexecutive chairman or have the power to veto a board member, "

says

> Elson, a director of three publicly traded companies and

head

>of the Weinberg Center for Corporate Governance at the University of

>Delaware's business school. " I have not heard of that before in a

large

>public company. "

>

>Deferred prosecution enables a company to avoid criminal indictment

--

>in the case of Bristol-Myers, on a charge of conspiring to commit

>securities fraud -- if it meets terms agreed to with the government

for

>two years. If the company adheres to the terms, it isn't pursued

>further. Former and current employees may still be prosecuted,

though.

>

>Bristol-Myers agreed to unusually far-reaching terms compared with

>other recent deferred prosecutions, experts say. Still, the

financial

>side of the agreement is mild in comparison with recent cases in

which

>the Justice Department has taken steps to extract big financial

>penalties from corporations.

>

> " This company does tremendous work and we want it as a vital,

ongoing

>concern, " Mr. Christie says. A huge fine could have hurt

>Bristol-Myers's shareholders and employees, Mr. Christie says, while

>the company probably wouldn't have felt the effects of a small fine.

>Instead, Mr. Christie demanded Bristol-Myers pay $300 million into a

>shareholders' restitution fund.

>

>An independent monitor, Frederick B. Lacey, a former federal judge,

>will present quarterly reports on Bristol-Myers's compliance to Mr.

>Christie and also confer with the company's senior leaders. Mr.

>Christie gave Mr. Lacey a blank check: The monitor can require

>Bristol-Myers " to take any steps he believes are necessary to comply

>with the terms of this agreement, " according to the agreement.

>

>An attorney who has negotiated and studied other deferred

prosecution

>agreements says that in the Bristol-Myers pact, the U.S. attorney

and

>the independent monitor gained " an awful lot of power to run a large

>company. "

>

>Mr. Christie and Mr. will hold a briefing with senior

>executives and other staffers at Bristol-Myers within the next few

>weeks. " I want them to know that [Mr. ] and I are partners

in

>this, " Mr. Christie says.

>

>Mr. Christie also persuaded Bristol-Myers to endow a chair at the

>School of Law at Seton Hall University, where he got his law degree,

a

>few blocks from his office here. The new professor will teach

business

>ethics and corporate governance.

>

>Mr. Christie says his experience with the trial of Walter A. Forbes,

>the former chairman of Cendant Corp., " informed " his decisions on

>Bristol-Myers, although he declines to go into specifics.

>

>Although the Cendant charges were brought before Mr. Christie took

>office in 2001, he says he " learned a lot " from the investigation of

>top executives at that company. " It was tried on my watch, " he says.

In

>January 2005, Mr. Christie's prosecution of Mr. Forbes for his

alleged

>role in a $500 million fraud at CUC International, one of Cendant's

>predecessor companies, ended in a hung jury. A retrial is expected.

>

>At Bristol-Myers, Mr. Christie says he has brought charges against

two

>former executives where there are " facts sufficient to convict. " If

>more information is developed in the ongoing investigation, he says,

> " We'll take the necessary action. "

>

>Mr. Christie says initially he wanted Bristol-Myers's chief

financial

>officer and general counsel to report to Mr. and Mr. Dolan,

>rather than to Mr. Dolan alone. But, he says, " I became convinced

with

>conversations with Mr. that we could get to the same place

>without having dual reporting. "

>

>Mr. in essence gets his marching orders from Mr. Christie,

but

>the new Bristol-Myers chairman doesn't see himself as the U.S.

>attorney's puppet, an informed person says. A Bristol-Myers

spokesman

>said Mr. wasn't available to comment yesterday. The board

>hasn't decided whether to permanently split the chairman and CEO

posts,

>the informed person added.

>

>In April, Mr. Christie traveled to Delaware to meet with the board

>directly. After the two sides had substantially agreed to settlement

>points, including a $275 million payment, Mr. Christie heard on June

5

>that three newspapers, including this one, were about to report that

a

>settlement was close. Mr. Christie was angry, a person familiar with

>the talks says, and he demanded that Mr. and

Bristol-Myers's

>negotiator come to his office. They arrived by 4 p.m. Ten days

later, a

>settlement for $300 million -- not $275 million -- was announced.

>

>Write to Barbara ez at barbara.martinez@... and Joann S.

>Lublin at joann.lublin@...