Washington D.C., USA : Walgreens Boots Alliance Inc (Nasdaq: WBA) said Friday it will pay $34.5 million to settle charges by the U.S. Securities and Exchange Commission that it misled investors about revenue forecasts after a merger in 2014
The Securities and Exchange Commission today charged Walgreens Boots Alliance Inc., former CEO Gregory Wasson, and former CFO Wade Miquelon with misleading investors about increased risk that the company would miss a key financial goal announced when Walgreen Co. entered into a merger with Alliance Boots GmbH in 2012.
Walgreens agreed to pay a $34.5 million penalty to settle the SEC’s enforcement action.
According to the SEC’s order, Walgreens announced a two-step merger with Alliance Boots in June 2012, and at the same time projected that the combined entity would generate $9 billion to $9.5 billion in combined adjusted operating income in the 2016 fiscal year. After completing the first step of the merger, Walgreens’ internal forecasts indicated that the risk of missing its 2016 projection had increasing significantly. But Walgreens, Wasson, and Miquelon repeatedly publicly reaffirmed the projections without adequately disclosing the increased risk. When Walgreens subsequently announced that it was moving forward with the second step of the merger in August 2014, it announced a new earnings per share goal that translated to an adjusted operating income projection of $7.2 billion for fiscal 2016, a 20 percent decline over its initial projection. Walgreens’ stock price dropped 14.3% on the day of the announcement.
“Over multiple reporting periods, senior Walgreens executives misled investors about the company’s public financial goal,” said Stephanie Avakian, Co-Director of the SEC’s Division of Enforcement. “The penalty assessed against Walgreens is intended to punish and deter such conduct, which deprived investors of information necessary to make fully informed investment decisions.”
Melissa Hodgman, Associate Director of the SEC’s Enforcement Division, added, “As this case shows, we are committed to holding corporate executives accountable when they are in the best position to ensure that disclosures are accurate and not misleading.”
Without admitting or denying the findings, Walgreens, Wasson, and Miquelon consented to the entry of an SEC order finding that they violated the antifraud provision contained in Section 17(a)(2) of the Securities Act of 1933, which prohibits the use of untrue statements or omissions in the offer or sale of securities. The SEC’s order requires each of the respondents to cease and desist from further violations of that provision, and also requires Walgreens Boots Alliance to pay a $34.5 million penalty, and Wasson and Miquelon to each pay a $160,000 penalty.
The SEC’s investigation was conducted by W. Bradley Ney and D. Ashley Dolan and supervised by Melissa Robertson in the Washington, D.C. headquarters.
Below is the Walgreens announcement
Walgreens Boots Alliance Announces Agreement with Securities and Exchange Commission
Walgreens Boots Alliance, Inc. (Nasdaq: WBA) announced today that the company has reached an agreement with the Securities and Exchange Commission (SEC) to fully resolve an investigation into forward-looking financial goals and related disclosures by Walgreen Co. (Walgreens). The disclosures at issue were made prior to the merger with Alliance Boots and the establishment of Walgreens Boots Alliance on December 31, 2014.
The settlement does not involve any of Walgreens Boots Alliance’s current officers or executives, nor does it allege that anyone acted intentionally or recklessly at any time.
In agreeing to the settlement, Walgreens Boots Alliance neither admits nor denies the SEC’s allegations that Walgreens and its then Chief Executive Officer (CEO) and then Chief Financial Officer (CFO) acted negligently in connection with statements made in the June 2013, October 2013, December 2013 and March 2014 earnings calls, by failing to adequately disclose the increased risk to achieving certain of Walgreens previously stated fiscal 2016 financial goals. Following warnings in December 2013 and March 2014, Walgreens withdrew those fiscal 2016 goals in June 2014.
Pursuant to the agreement with the SEC, Walgreens Boots Alliance consented to the SEC’s issuance of an administrative order, and the company will pay a $34.5 million penalty, which has been fully reserved for, while the Walgreens then CEO and then CFO separately resolved the matter with the SEC.
Walgreens Boots Alliance cooperated fully with the SEC’s investigation and believes the agreement is in the best interest of the company.