Biovail settles with SEC for $10 million

WASHINGTON Biovail has agreed to pay the Securities and Exchange Commission $10 million to settle accounting fraud issues, according to the Wall Street Journal.

The SEC claimed that the company overstated earnings and hid losses to deceive investors and meet quarterly and annual earning targets. And when that failed, the SEC said, “Biovail actively misled investors and analysts about the reasons for the company’s poor performance.”

Involved in the matter were Biovail’s founder, former chairman and former chief executive officer, Eugen Melnyk, former chief financial officer Brian Crombie, current finance chief Kenneth Howling and controller John Miszuk; who were allegedly using the information to receive big financial gains.

According to the SEC’s complaint, Biovail engaged in three different schemes between 2001-03. In one, the SEC said Biovail improperly shifted $47 million of research-and-development expenses from its books. It also claims the company used a phony transaction to record $8 million of revenue in 2003, and that Crombie and Miszuk deceived the firm’s outside auditors about the arrangement. In the third, the SEC said Biovail understated foreign-exchange losses in the second quarter of that year, inflating net income by 18 percent. It said Miszuk knew of the mistake or “recklessly disregarded” it when signing off on the company’s quarterly results.