Drug wholesaler Cardinal Health Inc. agreed to pay $35 million to settle charges that it engaged in nearly a four-year fraudulent revenue and earnings scheme, the U.S. Securities and Exchange Commission said on Thursday.
The company, one of the US's three top drug wholesalers, did not admit to or deny the SEC's allegations.
The SEC complaint alleges that from September 2000 to March 2004 the Ohio-based company presented a false picture of its operating results.
Cardinal materially overstated its operating revenue, earnings and growth trends in earnings releases and filings with the agency, the SEC alleged.
According to the complaint, Cardinal managed its reported revenue and earnings through a variety of undisclosed and improper actions.
It inflated reported operating revenue by misclassifying more than $5 billion of bulk sales as operating revenue, the SEC alleged.
The complaint also alleged that Cardinal began intentionally holding some bulk shipments for longer than 24 hours in order to shift revenue from the bulk revenue line to the operating revenue line.
Cardinal decided when to start and stop this practice based on the strength or weakness of quarterly sales and earnings, the complaint alleged.
"Cardinal's fraudulent mischaracterization of its operating revenues, as alleged, deprived investors of material information," Antonia Chion, associate director of the SEC's enforcement division, said in a statement.
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