Accounting at Biovail
Operating within a complex and highly competitive pharmaceutical industry, the
challenges confronting Biovail are intensifying as regulatory agencies release formal
allegations of misconduct against four corporate executives and as outstanding lawsuits,
widespread scrutiny, and a history of questionable accounting practices are unavoidably
coming to a head.
Responsible for overcoming its damaged reputation and for moving
the company forward, it is imperative that management at Biovail resolve three
Establishing a worst-case scenario, what is the known liability that Biovail has
incurred for deceiving its investors?
What does a comparative financial analysis of Biovail, Abbot Labs, and Cephalon
reveal about Biovail's strategic weaknesses?
What principles of governance can be employed to assure investors that Biovail's
past misconduct will not recur in the future?
Liability for Fraudulent Reporting and Communications to Investors
In all likelihood, a class action lawsuit against the company for aggressive and
misleading accounting practices (which have had a material impact on shareholder
returns) is forthcoming.
Biovail must be prepared to accept responsibility for the damage
experienced by investors as a result of its former actions and misrepresentations.
though (as of February 2008) Melnyk no longer holds any affiliated role with Biovail,
and although he alone is responsible for his personal actions, he held a fiduciary duty to
stakeholders at Biovail at the time that the deceptive reports were released to the public.
As a result, the company will be, at least in part, responsible for the consequences of his
Melnyk's suspicious trading activity, failure to issue insider trading reports,
inaccurate disclosure of holdings to the public, and understatement of personal ownership
stake in the company are all acts contrary to public interest.
These events, which are
documented from December 2001 to October 2004, occurred during his tenure as CEO of
Although he personally settled against suspicious trade allegations, stepped
down as executive chairman of the board, agreed to forego all other director/officer roles
relating to Biovail subsidiaries, and has finally retired from the board altogether, Melnyk
has once again been targeted by the SEC, along with 3 other Biovail executives, in
connection with their investigations of fraudulent conduct, intentional concealment of
missed earnings targets, and active steps to mislead investors and analysts.
help Biovail's case that in 2007 Melnyk's net worth put him in the top 70 wealthiest
people in Canada.]
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