Biovail Fined; Melnyk Charges Remain
Updated: Wednesday, March 26, 2008 2:29 PM
Posted: Tuesday, March 25, 2008 4:25 PM
Photo: Barbara Livingston
Canadian drug maker Biovail Corp., which was formerly headed by prominent Thoroughbred owner-breeder Eugene Melnyk, agreed March 24 to pay a $10-million fine to resolve federal regulators' charges of civil accounting fraud and deceiving investors and analysts.
The Securities and Exchange Commission announced the settlement with Biovail, which neither admitted nor denied the allegations in a civil lawsuit filed in federal court in Manhattan, but did agree to refrain from future violations of federal securities laws. Toronto-based Biovail also agreed to hire an independent consultant to oversee its accounting.
The SEC's charges remain pending against Melnyk, Biovail's founder and former chairman and CEO, and three others -- former chief financial officer Brian Crombie; and two current executives: chief financial officer Kenneth Howling and controller John Miszuk.
In Canada, meanwhile, the Ontario Securities Commission filed related allegations against the four executives and scheduled a public hearing for April 22.
In October 2003, the SEC alleged, Biovail and several executives deceived investors and analysts by falsely attributing nearly half of the company's failure to meet its third-quarter earnings target to a truck accident involving a shipment of Biovail's antidepressant Wellbutrin XL. The accident in fact had no effect on earnings for the quarter, the SEC said.
Melnyk and Crombie disputed the allegations and said they will contest them in court.
In a statement, Melnyk said: "The vast majority of the allegations made by the SEC and the (Ontario Securities Commission) do not pertain to me. ... I intend to vigorously contest the absolutely false allegations of the SEC and OSC, and am confident that I will prevail once all the facts are heard."
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