McKesson Settles Class Action Suit

January 13, 2005 ( - McKesson Corp., which merged with HBO in 1999 before revealing accounting irregularities, has settled a class action lawsuit for $960 million.

Multiple institutional investors had filed suit five years ago in federal court over the irregularities, which, when announced, caused the health care giant’s stock to plummet $9 billion in one day of trading. The lead plaintiff in the case was the New York State Common Retirement Fund, the nation’s second largest public pension fund.

The settlement, which was overseen by US Magistrate Judge Edward Infante, must still be approved by US District Judge Ronald Whyte.

“Today’s agreement represents a significant step toward fully resolving the uncertainty related to this unfortunate chapter in the company’s history and allows us to focus once again only on the future,” John Hammergren, McKesson’s chairman and chief executive officer, said in a statement, according to The Recorder.

The settlement would clear the way for other suits to be brought against the company, since they needed to wait until the class action suit was over. Investors now in San Francisco Superior Court and other venues are planning on filing suit, according to The Recorder.

The health care company has said that it has set aside $240 million to resolve other litigation.

In 2002, Whyte ruled that 401(k) plan fiduciaries for McKesson didn’t breach their ERISA-imposed duties by not divesting their plan of employer stock before a public revelation that a company with which they had merged had accounting irregularities (See Judge Clears Fiduciaries of Co. Stock Wrongdoing ).