Pharmacy chain CVS Corp. has agreed to pay $110 million to settle a shareholder lawsuit related to alleged accounting abuses, according to the Boston Globe.
In a statement, the company maintained that it ”continues to deny liability and entered into the settlement agreement solely to avoid the risk and diversion of resources associated with trial,” according to the newspaper. The proposed settlement must still be approved by the U.S. District Court in Boston.
”We believe this is a significant recovery for class members and have asked the court to grant preliminary approval of the settlement,” said Deborah Weintraub, an attorney representing the lead plaintiff in the CVS case, the Plumbers & Pipefitters National Pension Fund, according to the paper.
Filed in 2001, the lawsuit alleged that Woonsocket, Rhode Island-based CVS — the largest pharmacy chain measured by the number of stores — ”misled the investing public” by making a series of false and misleading statements and omissions in public documents, according to the Globe.
Specifically, shareholders asserted that CVS removed from its shelves merchandise that it had planned to mark down, then delayed accounting for the expense for several months, according to the paper; as a result, the company was able to count the merchandise’s full value in its earnings report.
They also asserted that CVS and chief executive officer Thomas M. Ryan waited several months in 2001 to reveal plans to close 200 underperforming stores and to disclose that a pharmacist shortage would adversely affect the company, according to the Globe.
In addition, shareholders accused Ryan of insider trading, asserting that he earned $5 million on shares he sold before the company disclosed that its second-quarter and full-year earnings would come in below expectations for 2001, according to the report.