tyle=”text-align: justify;”>Organizational leadership – BRISTOL-MYERS SQUIBB COMPANY — MANAGING
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On December 10, 2001, Barbara Collins, th e chief accountant at Bristol-Myers’s New York head office, called her husband Jeff Collins to inform him that she would be late again from work today. She poured another cup of coffee and started reading the fourth version of letter she had drafted to Mark Bradley, the chairman of the company’s audit committ ee. It was 6.30 p.m., and Collins was the only member of the accounting staff still in the office. She knew she had been postponing this letter for over a fortnight, and unless she finished it today, the forthcoming year end financial reporting w ould leave her with little time to finish it.
As Collins read the letter, her mind r aced back and forth between her jobless husband, her home mortgage and her daughter’s college plans. However, she was certain that her work issue was much bigger than these personal stakes and could result in significant implications for the company, especially after December 2, 2001, when Enron Corporation filed for bankruptcy protection under Chapter 11.
Collins wondered what would happen at Br istol, where she had invested several years of her life.
In 1887, William McLaren Bristol and John Ripley Myers decided to sink $5,000 into a failing drug manufacturing firm called the Clinton Pharmaceutical Company, located in Clinton, New Yo rk. The company was officially incorporated on December 13, 1887, with William Bristol as president and John Myers as vice-president. From the start, they had two rules: insist on high quality and maintain the firm’s good financial standing at all costs.
In May 1898, the company was renamed Bristol-Myers Company. Not until 1900 did Bristol-Myers break through into the black, where it has remained ever since. In 1924, gross profits topped $1 million for the first time in Bristol-Myers’ history. The company’s products were now sold in 26 countries. In 1929, Bristol-Myers listed on the New York Stock Exchange.
In 1858, Edward Robinson Squibb founded a pharmaceutical company in Brooklyn, New York, dedicated to the production of consistently pure medicines. In 1905, the company was sold to Lowell M. Palmer and Theodore Weicker, and it then became incorporated. In 1921, the company coined its slogan:
“The priceless ingredient in every product is the honor and integrity of its maker.”
BRISTOL-MYERS SQUIBB — The Merger
In 1989, Bristol-Myers merged with Squibb, creating a global leader in the health-care industry. The merger created what was then the world’s second-largest pharmaceutical enterprise. In 1990, the Bristol-Myers Squibb Pharmaceutical Research Institute (BMS) was established with headquarters in Princeton, New Jersey, and research facilities in Walli ngford, Connecticut, and other sites around the world.
By end of 1995, the company had over 60 product lines with $50 million or more in annual sales worldwide. The compa ny also received the National Medal of Technology — America’s highest honor for technological innovation — “for extending and enhancing human life through innovative pharmaceutical research and development and for redefining the science of clinical study through groundbreaking and hugely complex clinical trials that are recognized models in the industry.”
In 1999, Bristol-Myers Squibb announced SECURE THE FUTURE™, a $100 million commitment to advance HIV/AIDS research and community outreach programs in five southern African count ries: South Africa, Botswana, Namibia, Lesotho and Swaziland. SECURE THE FUTURE grants were funding a laboratory for local HIV monitoring and research; an HIV nursing curriculum; physicians’ exchange programs between Africa and the United States; large-scale studies of the feasibility and effectiveness of antiretroviral therapy in Africa for both prevention and treatment; a children’s clinical centre of excellence in Botswana; and many community-driven initiatives such as orphan care, home care, counselling and other services.
In 2000, Bristol-Myers Squibb, together w ith four other pharmaceutical companies and international agencies, joined the UNAIDS Drug ACCESS Initiative. The ACCESS program aimed to make antiretroviral medicines and therapies to treat opportunistic infections more widely available in African countries that have developed a coherent national AIDS strategy. As part of the program, the company offered to lower the prices of HIV/AIDS medicines in those countries by 90 per cent.
In February 2001, Bristol-Myers Squibb wa s chosen as “America’s Most Admired Pharmaceutical Company” by Fortune Magazine. In May 2001, Peter R. Dolan, a 13-year veteran of the company, succeeded Charles A. Heimbol d, Jr., as chief executive officer. Under Dolan’s leadership, the company announced in June 2001 that it had entered into a definitive agreement to acquire the DuPont Pharmaceuticals Company for $7.8 billion; this acquisition intended to further strengthen Bristol-Myers Squibb’s medicines business. The transaction officially closed as of October 1, 2001.
Key financial indicators for the financial year 2000 are summarized in Exhibit 1.
Key Values of the Company
Key elements of the company’s pledge are as follows:
Pledge to Customers
We pledge excellence in everything we make and market, providing the safest,
most effective and highest-quality medicines and health-care products. We promise to continually improve our products through innovation, diligent research
and development, and an unyielding commitment to be the very best.
We pledge personal respect, fair compensation and honest and equitable treatment.
To all who qualify for advancement, we will make every effort to provide
opportunity. We affirm our commitment to foster a globally diverse workforce and
a companywide culture that encourages excellence, leadership, innovation and a
balance between our personal and professional lives. We acknowledge our
obligation to provide able and humane leadership and a clean and safe work
To Suppliers and Partners
We pledge courteous, efficient and ethical behavior and practices, respect for your
interests, and an open door. We pledge to build and uphold the trust and goodwill
that are the foundation of successful business relationships.
Pledge to Shareholders
We pledge our dedication to responsibly increasing the shareholder value of your
company based upon continued growth, strong finances, productive collaborations
and innovation in research and development.
Pledge to Communities, Countries and the World
We pledge conscientious citizenship, a helping hand for worthwhile causes and
constructive action that supports a clean and healthy environment. We pledge
Bristol-Myers Squibb to the highest standard of moral and ethical behavior and to
policies and practices that fully embody the responsibility, integrity and decency
required of free enterprise if it is to me rit and maintain the confidence of our
SHAREHOLDERS’ EXPECTATIONS — PERFORMANCE PRESSURES
The “Double Double”
In 1993, BMS publicly announced a plan to double the sales, earnings and
earnings per share that the company reported for its fiscal year 1993 by the end of
its fiscal year 2000. BMS called this pl an the “Double-Double.” The investors
were assured of the company’s commitment to the Double-Double, and BMS
emphasized that the company was on track to achieve the plan’s goals. Each year,
from 1994 through 2001, BMS officers prepared a budget for the company that
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included targets for each of its business units to meet in order to achieve the
Double-Double and a subsequent growth plan called the Mega-Double.
However, by fourth quarter of 1997, BMS began confronting millions of dollars in
gaps between the targets it had set for its business units and their actual operating
results. Certain BMS officers encouraged the U.S. Medicines Group (one of the
divisions) to help make up the shortfalls that would be caused by these gaps by,
among other things, raising the targets for the company’s pharmaceutical business
units above those originally set forth in the company’s annual budget. The U.S.
Medicines Group responded to this pressu re primarily by inducing the company’s
wholesalers to purchase $40 million to $50 million of inventory of BMS’s
This initial tactic did not go without any opposition. In February 1998, the vice-president of finance in the U.S. Medicines Group objected to this practice. This
executive raised her concerns with certain BMS officers, hoping such inventory
transfer would be evaluated objectively fo r appropriateness. However, it was not.
Failing to make any change to the accounting practice, this individual finally took
another position within the company. By September 1998, inventory transferred to
BMS’s wholesalers was estimated at about $125 million.
In July 1999, BMS entered into an agreement to pay its second largest wholesaler
two per cent of the value of any inventory it agreed to take, per month, until this
wholesaler sold the products (anything over two weeks was considered excess
inventory). This was agreed to be paid to the wholesaler through sales incentives
on future purchases, primarily in the form of price discounts. BMS knew that
these payments covered this wholesaler’s costs of carrying such inventory, and
guaranteed this wholesaler would earn its ta rget return on investment of about 24
per cent per year on any inventory this wholesaler agreed to take for BMS.
From July 1999 through December 2001, BMS recorded revenue from all
shipments to this wholesaler pursuant to the return on investment (ROI) agreement
upon shipment. At the end of the third quarter of 1999, inventory transferred had
risen to about $180 million. The U.S. Me dicines Group was the driver of this
group’s growth, and there was a rumor that anyone challenging the targets sought
by BMS’s officers would be removed or reassigned.
As in the past, the 2000 budget was extremely aggressive. Consequently, from the
first quarter of 2000 through the fourth quarter of 2001, BMS’s U.S. Medicines
Group recognized revenues on inventory transf erred to wholesalers near the end of
each quarter. This led to buildup in excess wholesaler inventory and rising costs to
BMS in terms of sales incentives and extended payment terms to wholesalers.
During this period, the company’s officers employed an external consultant to
determine the value of excess inventory with the wholesalers and the implications
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to the company. These findings indicated that wholesalers were carrying inventory
higher than that required for their operations. However, recommendations to
reduce these inventory levels were ignored by the company’s officers. Instead, in
2000, BMS entered into an agreement with its largest wholesaler to transfer excess
inventory. This agreement was substan tially similar to th e ROI agreement the
company had entered into with its second largest wholesaler about a year earlier.
Specifically, the company agreed to guarantee this wholesaler an annualized ROI
of at least 25 per cent on any excess inventory this wholesaler agreed to take (over
three weeks). BMS further agreed that, any shortfall in ROI would be
compensated through sales incentives on future purchases, primarily in the form of
From July 2000 through to least December 2001, BMS recognized revenue from
sales to this wholesaler upon shipment, pursuant to the ROI agreement.
The “Mega Double”
In September 2000, BMS publicly announced an even more aggressive growth
goal than the Double-Double, called the “Mega-Double.” The Mega-Double
significantly increased the pressure on the U.S. Medicines Group to find ways to
generate incremental sales and earnings.
On January 24, 2001, BMS issued a press release announcing its results for the
fourth quarter of 2000 and for the full y ear 2000. In the release, the company
stated that it had accomplished the Doubl e-Double. Specifically, the company
stated, “We have moved from single-digit growth rates seven years ago to an
accelerated rate of 15 per cent, helping us to meet the goal we set back then of
doubling earnings and earnings per share by the end of 2000, essentially doubling
the size of the company over that period.”
By first quarter of 2001, wholesaler inventory had risen to about $650 million, and
by October 2001, to about $1.284 billion (in other words, about a $1.2 billion of
products that BMS’s wholesalers would not need to purchase in 2002).
A brief review of accounting standard on Revenue Recognition as per U.S. GAAP
(specifically SAB 101) is outlined in Exhibit 2.
FALL OF ENRON
Formed in 1985, Enron was the single largest operator of gas pipelines in the
United States. Ken Lay, the chief executive officer (CEO) and the chief operating
officer (COO) Rich Kinder undertook a rapid growth strategy for the company. In
the first half of the 1990s, when Enron’s business results were still primarily from
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gas pipeline operations, earnings and cash flows were largely aligned. When
earnings were recognized (recorded as occurring), they were realized (showing up
as cash flow).
McKinsey Consulting was hired to evaluate the company’s strategy. One of the
partners of the consulting firm recommended that Enron should apply principles of
market making, commonly used in the financial sector, to natural gas.
Jeff Skilling, an ex-McKinsey consultant now working for Enron, created a gas
bank, a natural gas trading business. By using the gas producer and buyer
information, Skilling saw the opportunity for a potential market maker for trading
purposes. However, with the growth of gas bank and associated businesses, net
business cash flows moved radically into deficit. Mark-to-market accounting was
employed to a larger extent to reflect all the earnings associated with a trade or
deal upfront. As Enron’s business grew into power trading, broadband and other
market-making activities, the gap between reported earnings and cash flows grew.
When, in December 1996, Skilling was made both president and chief operating
officer of Enron Corporation, his ECT (Enron Capital and Trade Resources, a
merger of Enron Finance and Enron Gas Marketing) subculture moved to the
driver’s seat within Enron’s complex web of business units and corporate cultures.
And although business units had increasi ngly shared accounting practices, there
were still fundamental differences in how business was done. In 2000, Enron
broke the $100 billion mark in revenues for the first time, and its market
capitalization was $70 billion.
A particularly troublesome feature of Enron’s emerging business model was that
revenues were growing much faster th an earnings. The growing deficit in
corporate cash flows also led to a fundamental financial management problem —
the growing need for external capital. SPE (“Special Purpose Entities”) were one
of the financing instruments used to mana ge this financing problem. These served
two purposes. First, by the sale of troubl ed assets to SPE’s, Enron removed such
assets from its balance sheet, taking pressure off the firm’s total indebtedness and
simultaneously hiding underperforming invest ments. This also freed up additional
room on the balance sheet to fund new investment opportunities. Second, the sale
of the troubled investments to the partnerships generated income that Enron could
then use to make its quarterly earnings commitments to Wall Street. The problem
with this solution was that it was only temporary.
Collins realized that similar markets’ pressures also led to the questionable
accounting practices she was concerned about.
There were two specific incidents that Collins was aware of that inspired her to
take the current initiative.
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The Securities and Exchange Commission
Margaret Ceconi was an employee at Enron who wrote an e-mail to the Securities
and Exchange Commission in July 2001 in which she posed the following
A public company owns an ice cream business and a popcorn business. The
popcorn business is losing money, but the ice cream business is very profitable. If
you move the popcorn business into the ice cream division, under accounting rules,
can you avoid reporting the popcorn business’s losses?
Two days later, an SEC staff member called her to tell her that full disclosure of
the individual businesses would be requi red. She let it drop, and the SEC never
followed up. Collins wondered whether her initiative would meet similar fate.
Resignation of Skilling
Skilling tendered his resignation in Augus t 2001. This news obviously made
people inside and outside Enron feel sceptical about the future of the company.
Two days following Skilling’s resignation, an anonymous memo was sent to Ken
Dear Mr. Lay,
Has Enron become a risky place to work? For those of us who
didn’t get rich over the last few years, can we afford to stay?
Skilling’s abrupt departure will raise suspicions of accounting
improprieties and valuation issues . . . . I am incredibly nervous that
we will implode in a wave of accounting scandals.
Sherron Watkins, an Enron employee si nce 1993, quickly took credit for the memo
and met with Ken Lay to explain her concerns. Lay responded by launching a
brief investigation into Watkins’ accusations. While the investigation was under
way, Lay had his corporate lawyers examine the company’s options with respect to
firing Sherron Watkins. (In the end, they chose not to fire her, and Watkins
remained with Enron until the spring of 2002.)
Collins was inspired by the fact that both the above whistleblowers were women.
However, the results were short of exp ectations and she was still struggling with
the decision: Is it worth it?
As more and more questions arose in the financial press about Enron’s financing
structures and accounting methods, its share price fell. The SPE structure resulted
in the company having a debt of $13 billion on its balance sheet, whereas the
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actual obligation was $38 billion. Upon restatement of financials, Enron’s
earnings for the period 1997 to 2000 were wr itten down, and more debt obligations
were instantly triggered. Finally on December 2, 2001, Enron filed for bankruptcy
protection under Chapter 11.
Collins wondered what had happened at Enron? Could timely action by some
responsible employee have actually allowed time to reduce the damage? Or would
the employee have been fired while top management continued with its financing
Soon after qualifying as a certified public accountant, Collins joined Bristol as an
accounts assistant. Having grown up in a low-income family and working
multiple jobs to support her education, she wanted to join a big company and have
a stable job. Within years, she was promoted to deputy accountant, then to
regional accounts officer and finally chief accountant. Her colleagues admired her
hard work, determination and strong ethics.
However, as Collins progressed in her career, one incident in her family
overwhelmed her success. Her husband, a civil engineer, was injured on a
construction site and was unable to walk. Having lost one income and possessing
significant medical bills, the family suddenly faced unprecedented financial and
emotional stress. Collins’s income therefore assumed higher importance as she
was now the only earner in the family. Her income supported her daughter’s
college plans and the monthly mortgage payments. These pressures weighed
heavily on Collins’s decision about whether or not to sound the alarm about what
was going on in the company.
LETTER TO THE AUDIT COMMITTEE
Collins wondered whether Mark Bradley knew about the practice of transferring
inventory to wholesalers; and if he did, how involved was he? Another question
that she continuously struggled with was whether something inappropriate was
actually occurring, or she was misunde rstanding the business practices of
transferring inventory to wholesalers to meet shareholder’s expectations?
Collins had to think through the following questions before she actually contacted
1. Is Bradley the right person to tell or should she try to identify alternatives?
2. Should she sign the letter with her name or send an anonymous letter and first
get some assurance before disclosing her identity?
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3. Should she actually describe in the letter what happened or should she mention
that there is a potential issue that she would like to discuss in person?
4. How much of this process should be documented for future reference, in case
required for legal purposes?
5. Was it her duty as a chief accountant to evaluate potential questionable
practices earlier, and could she be implicated for dereliction of duty?
6. Should she deliver the letter personally to Bradley’s office or mail it?
Collins finally decided to e-mail the letter from a personal account to avoid
disclosing her identity, while keeping communication open. She did not sign the
letter and mentioned the issue briefly, while seeking assurance from Bradley
regarding any unfair action against her. She thought she would judge based on his
response and then decide either to meet him or first have a phone conversation.
While she was determined to bring the matter to Bradley’s attention, she wanted to
be careful about protecting herself. Refer to Exhibit 3 for the letter.
CHAIRMAN OF THE AUDIT COMMITTEE
Mark Bradley had been in the audit co mmittee for over a year now, and he was
aware of a report by external consultants about the channel stuffing and the
resulting implications for the company. Though Bradley was concerned about it,
he had considered it a low priority and was focusing on other matters. However,
now that he received Collins’s e-mail, he knew he had to deal with it. Specifically,
he had to address the following:
1. How should he react to the letter? Should he mention that he already was
aware of the problem and wanted to deal with the issue, or should he show
total surprise and concern? How does he assure Collins that her job would be
protected during this process?
2. What does Bradley think Collins will do now? Will she wait until he starts
looking into the matter based on his priori ties, or does he have to start the
investigation now, in case Collins contacts external authorities?
3. How does he talk to the CEO, CFO a nd the COO of the company? Should he
address them together or try and talk to them individually to learn more about
4. What are his liabilities as the chairman of the audit committee?
5. In case there has been misstatement, how and when should he inform the SEC
of the misstatements, and what would be the SEC’s reaction?
6. Would the restatement of financial statements affect the company’s credibility
in the financial markets?
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(for years ending December 31)
EARNINGS 2000 1999 1998
Net Sales 18,216 $ 16,878 $ 15,061 $
Cost of products sold 4,759 4,542 3,896
Marketing, selling and administrative 3,860 3,789 3,685
Advertising and product promotion 1,672 1,549 1,518
Research and development 1,939 1,759 1,506
Special charge – – 800
Provision for restructuring 508 – 157
Gain on sale of business (160) – (201)
Other 160 81 62
12,738 11,720 11,423
Earnings from Continuing Operations Before 5,478 5,158 3,638
Provision for income taxes 1,382 1,369 888
Earnings from Continuing Operations 4,096 3,789 2,750
Net earnings 375 378 391
Net gain on disposal 240 – –
615 378 391
Net Earnings 4,711 $ 4,167 $ 3,141 $
Earnings Per Common Share
Earnings from Continuing Operations 2.08 $ 1.91 $ 1.38 $
Net earnings 0.19 0.19 0.20
Net gain on disposal 0.13 – –
0.32 19 0.20
Net Earnings 2.40 $ 2.10 $ 1.58 $
Earnings from Continuing Operations 2.05 $ 1.87 $ 1.36 $
Net earnings 0.19 0.19 0.19
Net gain on disposal 0.12 – –
0.31 0.19 0.19
Net Earnings 2.36 $ 2.06 $ 1.55 $
Average Common Shares Outstanding
Basic 1,965 1,984 1,987
Diluted 1,997 2,027 2,031
Dividends Per Common Share 0.98 $ 0.86 $ 0.78 $
BRISTOL-MYERS SQUIBB COMPANY
CONSOLIDATED STATEMENT OF EARNINGS
(in millions except per share amounts)
Year Ended December 31,
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Exhibit 1 (continued)
(dollars in millions)
ASSETS 2000 1999 1998
Cash and cash equivalents 3,182 $ 2,720 $ 2,244 $
Time deposits and marketable securities 203 237 285
Receivables, net of allowances 3,662 3,272 3,190
Inventories 1,831 2,126 1,873
Prepaid expenses 946 912 1,190
Total Current Assets 9,824 9,267 8,782
Property, Plant and Equipment, net 4,548 4,621 4,429
Insurance Recoverable 262 468 523
Excess of cost over net tangible assets arising 1,436 1,502 1,587
from business acquisitions
Other Assets 1,508 1,256 951
Total Assets 17,578 $ 17,114 $ 16,272 $
Short-term borrowings 162 $ 432 $ 482 $
Accounts payable 1,702 1,657 1,380
Accrued expenses 2,881 2,367 2,302
Product liability 186 287 877
US and foreign income taxes payable 701 794 750
Total Current Liabilities 5,632 5,537 5,791
Other Liabilities 1,430 1,590 1,541
Long-Term Debt 1,336 1,342 1,364
Total Liabilities 8,398 8,469 8,696
Preferred stock, $2 convertible series:
Authorized 10 million shares; issued and
outstanding 9,864 in 2000, 10,977 in 1999 – – –
and 11,684 in 1998, liquidation value of $50
Common stock, par value of $.10 per share:
Authorized 4.5 billion shares; issued
2,197,900,835 in 2000, 2,192,970,504 in 1999
and 2,188,316,808 in 1998 220 219 219
Capital in excess of par value of stock 2,002 1,533 1,075
Other Comprehensive Income (1,103) (816) (622)
Retained earnings 17,781 15,000 12,540
18,900 15,936 13,212
Less cost of treasury stock – 244,365,726 9,720 7,291 5,636
common shares in 2000, 212,164,851 in 1999 and
199,550,532 in 1998
Total Stockholders’ Equity 9,180 8,645 7,576
Total Liabilities and Stockholders’ Equity 17,578 $ 17,114 $ 16,272 $
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SEC Staff Accounting Bulletin: No. 101 — Revenue Recognition in Financial Statements
This staff accounting bulletin summarizes certain of the staff’s views in applying generally accepted accounting
principles to revenue recognition in financial statements. The staff is providing this guidance due, in part, to the large
number of revenue recognition issues that registrants encounter. For example, a March 1999 report entitled
Fraudulent Financial Reporting: 1987-1997 An Analysis of U. S. Public Companies, sponsored by the Committee of
Sponsoring Organizations (COSO) of the Treadway Commission, indicated that over half of financial reporting frauds
in the study involved overstating revenue.
Selected Revenue Recognition Issues
Revenue Recognition — General
Based on these guidelines, revenue should not be recognized un til it is realized or real izable and earned.2 SFAC No.
5, paragraph 83(b) states that “an entity’s revenue-earning activities involve delivering or producing goods, rendering
services, or other activities that constitute its ongoing majo r or central operations, and revenues are considered to
have been earned when the entity has subst antially accomplished what it must do to be entitled to the benefits
represented by the revenues”.
Paragraph 84(a) continues “the two conditions (being real ized or realizable and being earned) are usually met by the
time product or merchandise is delivered or services ar e rendered to customers, and revenues from manufacturing
and selling activities and gains and losses from sales of ot her assets are commonly recognized at time of sale
(usually meaning delivery)”.
The staff believes that revenue generally is realized or realizable and earned when all of the following criteria are met:
1. Persuasive evidence of an arrangement exists,
2. Delivery has occurred or services have been rendered,
3. The seller’s price to the buyer is fixed or determinable,
4. Collectibility is reasonably assured.
The staff believes that the presence of o ne or more of the following characteristics in a transaction precludes revenue
recognition even if title to the product has passed to the buyer:
• has the right to return the product and:
• the buyer does not pay the seller at the time of sale, and the buyer is not obli gated to pay the sell er at a specified
date or dates
• the buyer does not pay the selle r at the time of sale but rather is obli gated to pay at a specified date or dates,
and the buyer’s obligation to pay is contractually or implicitly excused until the buyer resells the product or
subsequently consumes or uses the product
• the buyer’s obligation to the seller would be changed (e.g. the seller would forgive the obligation or grant a
refund) in the event of theft or physical destruction or damage of the product
• the buyer acquiring the product for resale does not have economic substance apart fr om that provided by the
seller, 11 or
• the seller has significant obligations for future performance to directly bring about resale of the product by the
• provides interest-free or significantly below market financing to the buyer beyond the seller’s customary sales
terms and until the products are resold,
• pays interest costs on behalf of the buyer un der a third-party financing arrangement, or
• has a practice of refunding (or intends to refund) a portio n of the original sales pric e representative of interest
expense for the period from when the buyer paid the seller until the buyer resells the product.
This is not an exhaustive list and judgment is requir ed based on individual cases under consideration.
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LETTER TO MARK BRADLEY
December 11, 2001
Mr. Mark Bradley
Chairman, Audit Committee
Bristol Myers Squibb Company
Regarding: Intimation of malpractices in the company
Dear Mr. Bradley,
I am an employee in the company’s head office and wa nt to inform you of certain business practices
which have led to significant misstatement in the company’s financials. For the past two years, certain
key officers have been responsible for transferring in ventory through a few wholesalers in order to meet
the company’s quarterly performance projections. I believe this is serious violation of business ethics and
a misrepresentation to not only our shareholders, but also to our customers, suppliers, employees and
the financial market. I am really concerned about the implications of this practice on the future of the
I am sure you would appreciate the anxiety I have with respect to my job and the implications of raising
this concern. I would like to further discuss this issue with you only on your assurance that the concerned
officers will not be allowed to take any biased actions against me. I realize that several key officers may
be involved and that I could easily be sidelined in this issue. I would therefore await your reply and then
take this forward from there.