Ex-chairman of major drug distributor convicted of fraud; company’s former top lawyer cleared

Ex-drug distributor chairman convicted of fraud

SAN FRANCISCO — A federal jury on Thursday found the former head of the country’s largest drug distributor guilty of fraud, nearly 10 years after he played a central role in one of the costliest corporate accounting scandals of the time.

The jury convicted former McKesson Corp. chairman Charles McCall of four counts of securities fraud, plus a charge of evading corporate accounting controls. He was acquitted of a sixth charge accusing him of doctoring financial documents.

The jury also acquitted another top executive, former general counsel Jay Lapine, of any criminal wrongdoing for his involvement in McKesson’s $12 billion acquisition of Atlanta-based HBO & Co. in January 1999.

A federal judge acquitted former McKesson finance chief Richard Hawkins after a trial in 2005. Four others, including former HBO president and later a McKesson executive vice president, pleaded guilty to charges of engineering a scheme to inflate HBO’s revenues by $300 million to hide sales shortfalls and covering up the wrongdoing after the software maker was sold to McKesson, the country’s largest drug distributor.

McCall and Lapine first faced trial in 2006 when a jury deadlocked on most of the same charges.

McCall had been HBO chairman until the company was sold to McKesson in January 1999 for $12 billion. He briefly became chairman of the combined entity, which retained the McKesson name, before getting fired in June 1999 after the accounting scheme was uncovered.

Lapine briefly kept his job as general counsel after the merger, but was later fired.

After detecting the conspiracy, the San Francisco-based McKesson restated its financial results for 1998 and the first three months of 1999. When the restatement was announced in April 1999, McKesson’s stock price plummeted 47 percent, costing investors $8.6 billion.