U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 20175 / June 29, 2007
SEC v. Philip C. Galbo and Larry Solberg, Civ. Action No. 07-245-S District of Rhode Island
SEC Files Settled Action Against Two Former Officers of CVS
The Securities and Exchange Commission announced today that it had filed a settled civil action against two former officers of CVS Caremark Corporation, former controller and principal accounting officer Larry Solberg ("Solberg") and former treasurer Philip C. Galbo ("Galbo"). The Commission's Complaint alleges that CVS/Caremark Corporation ("CVS") incorrectly accounted for a transaction that Galbo negotiated and the accounting for which Solberg approved. As accounted for, the book value of certain excess plush toy inventory, such as seasonal stuffed animals, was not reduced in connection with the transaction. As a result of recording the transaction in this manner, CVS materially overstated its pretax earnings for the third quarter of 2000 by approximately $18.1 million (approximately $10.8 million after tax), or approximately 7% of net income for the third quarter of 2000. The Complaint alleges that this conduct violated Section 17(a)(2) of the Securities Act of 1933. Without admitting or denying the allegations of the Complaint, Solberg and Galbo each agreed to pay a $30,000 civil penalty.
The Commission today also instituted settled cease and desist and administrative proceedings against Galbo, Solberg, and CVS concerning the same conduct. In connection with these proceedings, CVS agreed to an order requiring the Company to cease and desist from committing or causing any future violations of certain books and records provisions of the federal securities laws. Galbo agreed to an order requiring him to cease-and-desist from committing or causing any future violations of Section 17(a)(2) of the Securities Act of 1933 as well as any future violations of the same books and records provisions. The order also requires Galbo to pay $22,000 in disgorgement plus prejudgment interest of $8,727.62. Solberg agreed to an order that also requires him to cease-and-desist from committing or causing any future violations of Section 17(a)(2) as well as the same books and records provisions. The order also requires Solberg to pay $16,000 in disgorgement plus prejudgment interest of $6,476.21. The order further bars Solberg from practicing accounting before the Commission with the right to reapply after one year. The respondents neither admitted nor denied the Order's findings.
For further information, please see Securities Act Release Number 33-8815 (June 29, 2007).