Names In the News

HealthSouth Goes South

Nine HealthSouth Corporation executives pled guilty in April to criminal charges related to systematic financial wrongdoing at the company.

Among those entering plea agreements were Michael Martin, William Owens and Weston Smith, all one-time chief financial officer at the company.

Federal officials alleged that top executives at the company met regularly to artificially inflate HealthSouth's publicly reported earnings and falsify reports of HealthSouth's financial condition.

After reviewing reports from top financial officers, according to federal allegations, the company CEO would direct the officers to find ways to ensure that HealthSouth's "earnings per share" number met or exceeded Wall Street analyst expectations.

These instructions were passed on to members of HealthSouth's accounting staff, who would meet to discuss ways to artificially inflate HealthSouth's earnings to meet the CEO's desired earnings numbers.

These meetings were known as "family" meetings, and the attendees were known as the "family."

At the meetings, the accounting staff would discuss ways by which they would falsify HealthSouth's books to fill the "gap" or "hole" and meet desired earnings. The fraudulent postings used to fill the "hole" were referred to as the "dirt."

Wal-Mart Toys with Guns

Responding to a lawsuit filed by New York Attorney General Eliot Spitzer in April, Wal-Mart pulled from its shelves in New York toy guns that lack safety markings required by state law.

"In our continued efforts to be a responsible retailer, we have made the decision to suspend sales of all toy cap guns in New York," Wal-Mart said in a statement.

The lawsuit against Wal-Mart Stores followed months of effort by Spitzer's office to convince the Arkansas-based company to comply fully with the state requirement that all toy guns bear several orange markings clearly distinguishing them from real weapons.

Wal-Mart has acknowledged that its toy guns do not have all of the state-required markings. The company had maintained, however, that it need only comply with federal law, requiring an orange cap on the end of the barrel.

Wal-Mart's toy guns have an orange cap at the end of the barrel, but otherwise look real in that they are the color of real guns. New York law bans realistic colors, such as black or aluminum, and requires that the toy guns have non-removable orange stripes along the barrel.

Safety experts say that barrel caps and barrel stripes are important in helping law enforcement officers distinguish a toy gun from a real gun. Brightly colored barrels and non-removable barrel stripes are especially important because plastic barrel caps can fall off or be removed, making the toy virtually indistinguishable from a deadly weapon.

Wal-Mart sold more than 42,000 toy guns in New York during the last two and a half years.

"Without clear markings, it is extremely difficult to tell the difference between a toy gun and a real weapon," says Matthew Tynan, president of the State Police Investigators Union and a 22-year state police veteran. "Strict enforcement of the state toy gun law is imperative."

Calming Anxiety on Prices

Bristol-Myers Squibb has agreed to settle a lawsuit alleging improper efforts to monopolize the market for BuSpar, its popular anti-anxiety drug.

The suit, filed by the consumer coalition Prescription Access Litigation (PAL) project, charged that the company illegally manipulated patent law to keep a generic, cheaper version of BuSpar off the market, at great cost to consumers.

Following the Federal Trade Commission's lead, in its proposed consent order issued in March, the settlement also imposes significant restrictions on Bristol-Myers Squibb to prevent any future misconduct.

The BuSpar settlement agreement was negotiated in conjunction with attorneys general from 35 states, Puerto Rico and the District of Columbia who had also sued the company.

The settlement will also result in the creation of a $42 million consumer fund through which individuals may seek reimbursement for BuSpar overcharges.

"This settlement agreement is a tremendous victory for consumers throughout this country who struggle each day with the enormous cost of prescription drugs," says PAL Project Director Ahaviah Glaser. "And the relief it provides is truly unprecedented. The scope and length of the restrictions on [Bristol-Myers Squibb's] future conduct are much greater than in other similar cases."

The PAL lawsuit alleged that Bristol-Myers Squibb acted illegally to lock generic competitors out of the BuSpar market. It specifically charged that the company filed false secondary patents to prevent other drug manufacturers from bringing a generic -- and far more affordable -- version of BuSpar to the market.

The lawsuit also charged that Bristol-Myers Squibb entered into an unlawful agreement with a generic drug manufacturer in 1994 through which it paid the company $72.5 million to refrain from producing a generic version of BuSpar.

The settlement contains a stringent set of restrictions to prevent the company from establishing an illegal monopoly over any of its drugs in the future.

-- Russell Mokhiber