DiNapoli Announces Distribution of More Than $550 Million From McKesson HBOC Class Action Settlement
New York State Comptroller Thomas P. DiNapoli today announced the distribution of more than $550 million in settlement funds to members of a 1999 class action lawsuit filed against McKesson HBOC, Inc. The motion allowing for the distribution of 55 percent of the settlement funds was granted by U.S. District Judge Ronald M. Whyte of the U.S. District Court for the Northern District of California and the United States Court of Appeals for the Ninth Circuit.
“Judge Whyte’s decision allows investors to finally begin recouping their losses stemming from McKesson’s merger with HBOC,” said DiNapoli, who as sole trustee of the $154.5 billion Common Retirement Fund was named lead plaintiff in the lawsuit. “Companies must be held accountable when they mislead investors. This settlement is a reminder that accounting fraud has serious long-term consequences for companies and investors.”
The suit alleged that HBOC’s and McKesson HBOC’s accounting statements were materially false and misleading. It also alleged that HBOC’s and McKesson HBOC’s revenue recognition procedures did not conform to Generally Accepted Accounting Principles because the companies were improperly recording software sales before the consumer had actually purchased the product. HBOC and McKesson HBOC were also believed to have hidden side letters to contracts and even back dated some contracts. The suit also named Arthur Andersen, LLP, which acted as HBOC’s auditors prior to the merger, and Bear Stearns & Co. Inc., which served as McKesson’s financial advisor.
The case settled for more than $1.04 billion with the class receiving $960 million in the settlement with McKesson HBOC, Inc., $72.5 million in the settlement with Arthur Andersen and $10 million in the settlement with Bear Stearns. In his January 18, 2008 ruling, Judge Whyte authorized the distribution of 55 percent (more than $550 million) of the settlement funds to members of the class. The remaining 45 percent will be held in reserve to cover certain additional claims, contingencies and expenses, and the balance will then be distributed to the class in accordance with the court's orders.
The claims administrator has received 42,215 valid claims in the McKesson HBOC, Inc., and Arthur Andersen settlements. The New York State Common Retirement Fund received $3.6 million as part of the distribution.
Bernstein Litowitz Berger & Grossmann and Barrack Rodos & Bacine served as co-lead counsel to the class.