U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21650 / September 15, 2010
Accounting and Auditing Enforcement Release No. 3186 / September 15, 2010
SEC v. Biovail Corporation, Eugene Melnyk, Brian Crombie, John Miszuk, and Kenneth G. Howling, 08 Civ. 02979 (LAK) (S.D.N.Y. filed March 24, 2008)
SEC SETTLES ACCOUNTING FRAUD CASE AGAINST FORMER BIOVAIL SENIOR EXECUTIVE
On September 8, 2010, the Hon. Lewis A. Kaplan of the United States District Court for the Southern District of New York entered a final consent judgment against defendant John Miszuk, Biovail Corporation's former vice president, controller and assistant secretary, with respect to violations of the federal securities laws alleged by the Commission in a civil enforcement action filed in March 2008. Miszuk consented to a final judgment that (i) permanently enjoins him from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rules 10b-5 and 13b2-1 and from aiding and abetting violations of Exchange Act Sections 13(a), 13(b)(2)(A) and 13(b)(2)(B) and Rules 12b-20, 13a-1 and 13a-16; (ii) requires him to pay a civil penalty in the amount of $75,000; and (ii) bars him from serving as an officer or director of a public company for five years. This settlement resolves all of the Commission's pending charges against Miszuk.
The Commission's complaint alleges, among other things, that, in the second quarter 2003, Biovail and some of its executives, including Miszuk, engaged in two separate accounting fraud schemes that resulted in Biovail materially misstating its financial statements by overstating its revenue and understating its loss for that quarter. The Commission's complaint also alleges that other senior Biovail executives and Biovail violated the antifraud and other provisions of the securities laws in connection with misstatements concerning a third quarter 2003 truck accident as well as a fraudulent scheme concerning an off-balance-sheet, research-and-development vehicle.
Last year, the Commission settled its claims against Biovail former vice president of corporate affairs Kenneth G. Howling by entry on December 21, 2009, of a consent judgment that permanently enjoined Howling from future violations of Section 10(b) of the Securities Exchange Act of 1934 and Exchange Act Rule 10b-5 and imposed a civil penalty in the amount of $50,000. Biovail previously settled with the Commission by consenting to a judgment that, among other things, permanently enjoined it from violating antifraud and other provisions of the federal securities laws, imposed a $10 million civil penalty, and ordered it to pay disgorgement of $1. The Commission's case against former Biovail chairman and chief executive officer Eugene N. Melnyk and former chief financial officer Brian Crombie remains pending.
For further information, see Litigation Releases No. 20506 (March 24, 2008), No. 20880 (February 4, 2009) and No. 20903 (February 17, 2009).