Sign up for The Media Today, CJR’s daily newsletter.
Last month, we wrote how 60 Minutes and Lesley Stahl had botched a business story by using, of all companies, Biovail Corp. as an example of a supposedly honest firm under attack by, according to the piece, a marauding short-selling hedge fund in cahoots with a supposedly on-the-take independent research firm.
The premise blew up two years after the broadcast when the Securities and Exchange Commission sued not the hedge fund and research firm, but Biovail and two executives, alleging accounting fraud.
What made the mistake particularly grave was that 60 Minutes knew that Biovail was, at the time the piece was aired, under SEC investigation. The CBS news magazine buried word of the investigation in a denial by the hedge fund that it had done anything wrong. It was so artful and sneaky it’s worth repeating, (with my emphasis):
The hedge fund SAC denies all the charges in Biovail’s lawsuit and says that the decline in the company’s stock was due to earnings shortfalls and investigations by authorities, including the Securities and Exchange Commission, “not any conspiracy.”
The March 2006 CBS piece featured Stahl’s interview with Biovail founder, Eugene Melnyk, who expounded on the depredations of irresponsible hedge funds. Melnyk resigned the next year in a deal with securities regulators, and Biovail has been furiously trying to distance itself from his discredited era ever since. (Readers with access to Dow Jones News Wires should read Carol S. Remond’s excellent coverage of the company.)
Now, incredibly, it gets even worse. Last week, Biovail, a Toronto drugmaker, disclosed that it has pleaded guilty—forget SEC civil charges—to federal criminal charges brought by the U.S. attorney in Boston. The company, as Fortune outlines, admitted that a Bridgewater, N.J., unit had paid doctors to prescribe the heart drug Cardizem. Biovail agreed to pay $24.6 million to settle the matter, including a $22 million criminal fine. The Justice Department press release is here.
The charges involve former Biovail managers. There’s no indication that this criminal case is related to the SEC accounting allegations. A U.S. attorney’s office spokeswoman declined to comment. A Biovail spokesman didn’t return a phone call.
When 60 Minutes decided to do a business piece, it went after two of the few market participants—shorts and independent researchers—that actually have an incentive to counter the Wall Street sales machine.
Then to pick a company already under SEC investigation as a purported victim is to ask for trouble. The SEC’s suit blew apart the 60 Minutes piece. This criminal plea is just the cherry on top.
Has America ever needed a media defender more than now? Help us by joining CJR today.
