Cardinal Health, Dublin, Ohio, will pay $600 million to settle a shareholder lawsuit that accused the medical products and services company of misleading investors by inflating earnings.
The agreement, reached May 25 and reported Wednesday to the Securities and Exchange Commission, will make use of a $600 million reserve the company set aside last month in hopes of bringing closure to the case, according to company filings with the SEC.
The class-action litigation was initiated by shareholders in 2004 after an SEC investigation determined the company employed misleading financial reporting and disclosure practices in its pharmaceutical-distribution business between 2000 and 2004. The practices included false timing and misclassification of payments the company received from an overcharge recovery lawsuit against vitamin manufactures. The actions resulted in inflated earnings that misled investors, according to the SECs findings.
While the most costly portion of the litigation has been settled, Cardinal still expects to pay an estimated $35 million in SEC disciplinary fees and an additional $40 million has been set aside to cover a pending lawsuit with Cardinal employees who bought the stock for their retirement portfolios. -- by Shawn Rhea