Cardinal Coup de Grâce

Faking its operating results is costing Cardinal Health Inc., a drug delivery services company, $35 million to settle federal securities violation charges.

The Dublin, Ohio, company settled Thursday with the Securities and Exchange Commission over civil charges that for nearly four years it had offered up fraudulent revenue and earnings information.

Cardinal was accused of overstating its financial information between September 2000 and March 2004.

Among its financial missteps, the S.E.C. said, was that the company, which distributes pharmaceuticals to the health care industry, inflated its operating revenue by misclassifying more than $5 billion of bulk sales as operating revenue.

It also improperly classified $22 million of expected litigation settlement proceeds to increase operating earnings, government investigators found.

In a statement, Cardinal said it already has beefed up its financial staff by hiring a new chief financial officer, chief accounting officer and controller -- as well as a chief ethics and compliance officer.

The company did not admit or deny the allegations. It had already announced a $600 million reserve to settle a shareholders class action suit.

The company also agreed to hire an independent consultant to review its disclosure practices and controls. It also announced that a related investigation by the U.S. Attorney's Office for the Southern District of New York has been closed.

The $35 million will be placed in a fund to compensate shareholders.

Last month, Cardinal agreed to settle shareholder derivative suits against some current and former executives and directors that alleged the company issued misleading statements inflating its financial performance.

by Elizabeth Olson