General Crime

* Charles McCall former chairman of McKesson Corp. Was Convicted By A Federal Jury In San Francisco,Securities Fraud Cost Shareholders $8.6 Billion

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A former chairman of McKesson Corp. was convicted by a federal jury in San Francisco today of securities fraud in connection with an accounting scheme that cost shareholders $8.6 billion in 1999.Charles McCall, 65, of Delray Beach, Fla., was convicted of four counts of securities fraud and one count of circumventing internal accounting controls.He was acquitted of a sixth count of falsifying company documents.U.S. District Judge William Alsup will sentence McCall on March 2. San Francisco-based McKesson is the nation’s largest distributor of prescription drugs.McCall was chairman of the board of the company, then called McKesson HBOC, from January to June 1999, when he was fired after the accounting discrepancies were discovered. At the time, McKesson had recently acquired Atlanta-based HBO & Co., a medical software company. McCall was previously chief executive officer of HBO & Co.Prosecutors said that in the accounting fraud, HBO & Co. and McKesson HBOC inflated revenues by backdating software sales and concealing side letters that would allow proposed sales to be cancelled.When McKesson HBOC discovered the scheme and announced in April 1999 that it would restate its first-quarter revenue, the value of the company’s stock plunged by 47 percent, costing shareholders $8.6 billion in stock value.U.S. Attorney Joseph Russoniello said evidence at the three-week trial showed that McCall participated in a scheme to inflate the two companies’ reported revenue by $100 million in 1998 and 1999. Former McKesson HBOC in-house counsel Jay Lapine, 58, of Duluth, Ga., was acquitted of three charges at the trial. Lapine was formerly HBO & Co. general counsel and was also fired from McKesson-HBOC in June 1999. The trial was the second for the two men. The first trial ended in acquittals on a conspiracy count and a mistrial with a deadlocked jury on the other counts.McCall and Lapine were among seven people indicted in connection with the accounting scheme. Four other men who were former executives of HBO & Co. pleaded guilty to various charges.The seventh defendant, former McKesson HBOC Chief Financial Officer Richard Hawkins, 58,of Atherton, was acquitted of conspiracy and securities fraud charges by a judge in a non-jury trial in 2005. Hawkins was the only one of the seven defendants who worked for McKesson rather than HBO & Co. before the merger.

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