By Karen Gullo March 6 (Bloomberg) — Former McKesson Corp. Chairman Charles McCall was sentenced to 10 years in prison for participating in a fraud to inflate sales revenue a decade ago that cost investors $8.6 billion, one of the largest white- collar crimes at the time. U.S. District Judge William H. Alsup , at yesterday’s sentencing hearing in San Francisco, also ordered McCall, 65, to pay a $1 million fine. He didn’t require McCall to pay restitution to San Francisco-based McKesson, the largest U.S. drug distributor, saying the company could pursue that in a civil lawsuit against its ex-chairman. The prison term was the minimum sentence allowed for McCall’s crimes and five years less the government sought, Alsup said. The scheme to inflate revenue was created by others, yet McCall let it continue, the judge said. “He knew what was going on even if he wasn’t a co- conspirator,” Alsup said. “He had the duty if not the power to say ‘Stop.’” McCall was convicted in November of five of six counts of securities fraud and circumventing accounting rules for conduct that included hiding backdated sales contracts from auditors. Prosecutors said McCall and others used the contracts to recognize revenue before accounting rules allowed it so the company could meet financial projections. Inflated Revenue The practice improperly inflated revenue figures at San Francisco-based McKesson, the biggest U.S. drug distributor, and HBO & Co., a software maker led by McCall that was acquired by McKesson in 1999. When McKesson disclosed in April 1999 that sales had been prematurely booked, leading to a restatement, the shares lost 47 percent of their value. McCall was indicted in 2003 and was acquitted of conspiracy in 2006 by a federal jury. Jurors in the first trial failed to reach an agreement on accusations of securities fraud, falsifying books and circumventing accounting rules. Prosecutors retried him last year. “He continues to maintain that he didn’t commit a crime” and will appeal his conviction, Ted Wells , McCall’s attorney, said at the hearing yesterday. Five former McKesson executives pleaded guilty in the investigation. The company, which wasn’t named in the criminal cases, agreed to pay $960 million in 2005 to settle investor lawsuits . Jim Lyons , an attorney for McKesson, said the company agreed with a court report prepared to assist Alsup in sentencing that recommended McCall pay $10 million in restitution. The company hasn’t filed a lawsuit against McCall in federal court in Delaware, Lyons said at the hearing. The case is U.S. v. McCall, 3:00-cr-00505, U.S. District Court, Northern District of California (San Francisco). To contact the reporter on this story: Karen Gullo in San Francisco at kgullo@bloomberg.net .

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Ex-McKesson Chairman McCall Gets 10-Year Prison Term for Securities Fraud