In the Courts

In United States v. Schiff, 2010 WL 1338141 (3d Cir. Apr. 7, 2010), the Third Circuit upheld the district court's dismissal of the government's Rule 10b-5 claim, which resulted from the defendants' alleged misstatements in quarterly conference calls.

Defendants Frederick Schiff and Richard Lane were both executives at Bristol-Myers Squibb: Schiff was the Chief Financial Officer (“CFO”) and Lane was the President of the Worldwide Medicines Group. Both participated in quarterly conference calls with Wall Street analysts. The government alleged that both approved millions of dollars in incentives to wholesalers as a part of a deceptive scheme to increase short-term sales and earnings. It also claimed that both made false statements and omissions in calls and meetings with investors. In quarterly calls in 2001, Schiff discussed the wholesaler inventories and repeatedly noted that there was nothing unusual about them. But Bristol's 10-K for 2001, released in early 2002, identified significant excess inventory levels at wholesalers. Immediately after that announcement, the stock dropped 5%. The next day, Bristol announced the departure of Lane and reduced expectations for 2002. The following day the stock dropped another 14.7%.