Former McKessonHBOC Chairman Sentenced to 10 Years in Prison

SAN FRANCISCO—On March 5, 2010, Charles W. McCall was sentenced to 10 years in prison following his convictions for four counts of securities fraud and one count of circumventing internal accounting controls at a public company, First Assistant United States Attorney David L. Anderson announced.

On Nov. 19, 2009, a jury found that McCall, 65, of Delray Beach, Fla., had engaged in an accounting fraud between December 1997 and April 1999 that falsely inflated the publicly reported revenues of HBO & Company of Alpharetta, Ga. (HBOC), and McKessonHBOC of San Francisco.

At the sentencing hearing, U.S. District Court Judge William H. Alsup sentenced McCall to 120 months on each securities fraud count and 60 months on the circumventing internal accounting controls count, sentences to run concurrently. Judge Alsup also imposed a $1 million fine. The United States introduced expert testimony to establish that the loss to investors from the fraud exceeded $8.6 billion. Judge Alsup denied McCall bail pending appeal and ordered that he surrender to the United States Marshal on March 31, 2010, at noon.

In 1997, when the fraud began, McCall was Chief Executive Officer of HBOC. On Jan. 12, 1999, when McKesson Corporation acquired HBOC, the corporation’s name changed to McKessonHBOC, and McCall became Chairman of the Board of Directors of the newly-combined company. On April 28, 1999, MckessonHBOC announced that it would restate its financial performance for the quarter ending March 31, 1999 after detecting aspects of the fraud. The price of McKessonHBOC’s stock, which traded on the New York Stock Exchange, dropped by approximately 47 percent with the news of the restatement wiping out approximately $8 billion in shareholder value in one day.

Evidence at trial showed that McCall participated in a scheme to defraud that falsely inflated, by an amount in excess of $100 million, the software revenues reported by HBOC and McKessonHBOC. McCall knew that sales persons within the companies entered into contingent software sales that, if known, would have required the revenue to be deferred but were concealed in so-called side letters and withheld from the companies’ outside independent auditors. The jury found that McCall had falsified HBOC’s financial statements for the quarter ending June 30, 1998, the quarter ending September 30, 1998 and in a registration statement filed on November 13, 1998 in conjunction with the announced merger with McKesson. The jury further found that McCall engaged in a similar scheme that continued into the quarter ending March 1999 and involved the financial statements of the newly-merged company, McKessonHBOC.

McCall was indicted on June 3, 2003. The first trial of this indictment resulted in a mistrial in November 2006.

First Assistant U.S. Attorney David L. Anderson and Assistant U.S. Attorney Adam A. Reeves prosecuted the case with the assistance of Paralegal Specialist Lakisha Holliman and Legal Assistant Jennifer Hiwa. The prosecution is the result of a multi-year investigation by the Federal Bureau of Investigation and the United States Securities and Exchange Commission.

Further Information:

Case #: CR 00-0505 WHA

A copy of this press release may be found on the U.S. Attorney’s Office’s website at www.usdoj.gov/usao/can.

Electronic court filings and further procedural and docket information are available at https://ecf.cand.uscourts.gov/cgi-bin/login.pl.

Judges’ calendars with schedules for upcoming court hearings can be viewed on the court’s website at www.cand.uscourts.gov.

All press inquiries to the U.S. Attorney’s Office should be directed to Jack Gillund at (415) 436-6599 or by e-mail at Jack.Gillund@usdoj.gov.

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6:37 p.m. | Updated A former Justice Department official who led the Bush administration’s courtroom defense against lawsuits filed by Guantanamo detainees is denouncing attacks on Obama administration appointees who previously helped such prisoners challenge their indefinite detention without trial.

Peter D. Keisler, who was assistant attorney general for the civil division in the Bush administration, said in an interview that it was “wrong” to attack lawyers who volunteered to help such lawsuits before joining the Justice Department.

“There is a longstanding and very honorable tradition of lawyers representing unpopular or controversial clients,” Mr. Keisler said. “The fact that someone has acted within that tradition, as many lawyers, civilian and military, have done with respect to people who are accused of terrorism – that should never be a basis for suggesting that they are unfit in any way to serve in the Department of Justice.”

Mr. Keisler spoke out one day after the Justice Department confirmed a Fox News report naming nine political appointees who had worked on detainee litigation before to joining the government. The department had declined to identify seven of those officials in response to a request by congressional Republicans.

This week, the conservative group Keep American Safe, which is led in part by Liz Cheney, the daughter of former Vice President Dick Cheney, and by Bill Kristol of the Weekly Standard, had released a political video attacking the Obama administration for concealing the identity of those it called the “Al Qaeda Seven.”

“Whose values do they share?” a voice asks over images of seven silhouettes superimposed on Al Qaeda leader Osama Bin Laden. “Americans have a right to know the identities of the Al Qaeda Seven.”

The Keep America Safe video led to widespread discussion in the blogosphere, with some critics likening it to McCarthyism. Mr. Keisler did not use that term. But he strongly defended the lawyers who were once his opponents in litigation.

As volunteer lawyers for the detainees, he said, “they were asserting the position that there should be more judicial review of the circumstances of that detention – a position the Supreme Court ultimately agreed with. And it’s wrong to suggest that people who took that position are somehow sympathetic to Al Qaeda.”

There have been periodic political attacks on lawyers representing detainees. Although the lawyers tend to be espousing civil libertarian views, their critics have tried to impute to them sympathy for the terrorist causes.

In 2007, the Bush administration’s top detainee affairs official, Charles “Cully” Stimson, resigned over remarks he made on a radio show suggesting that corporations should stop hiring law firms that provided pro bono legal assistance to detainees. According to the Justice Department, at least 34 of the nation’s 50 largest firms have either represented detainees or filed amicus briefs on their behalf.

The current dispute traces back several months to an oversight hearing at which Senator Charles Grassley, Republican of Iowa, asked Attorney General Eric H. Holder Jr. to disclose which lawyers in the department had previously worked on lawsuits by detainees challenging their detention without trial at Guantanamo.

Last month, the department sent a letter to the Senate saying that there were nine political appointees who had been involved in detainee-related litigation before joining the department. It added that they were obeying ethics rules preventing conflicts of interest concerning specific cases they or their former firms have worked on.

Two of the officials were known to Senator Grassley already: Principal Deputy Solicitor General Neal Katyal, who as a Georgetown University law professor had represented a detainee in a landmark Supreme Court decision striking down the Bush administration’s military commissions, and Jennifer Daskal, a national security division lawyer who previously worked for Human Rights Watch, which has advocated for detainees.

But the department didn’t identify the other seven.

Mr. Grassley called that response inadequate, saying people “want to know who is advising the president and the Attorney General, especially after it’s become very clear to Americans across the country that misguided decisions on terrorism policy are being made. An answer like I received today doesn’t live up to the transparency in government President Obama promised and doesn’t sit well with me or Iowans.”

But the dispute attracted little attention until Keep America Safe put out its political video this week. Then, on Wednesday, Fox News released a report identifying the seven, whose names appear on various court briefs that are in the public record.

The seven were Jonathan Cedarbaum, Eric Columbus, Karl Thompson, Joseph Guerra, Tali Farhadian, Beth Brinkmann, and Tony West. Their names were confirmed by Justice Department spokesman Matt Miller, who said it was “offensive that their patriotism is being questioned.”

Mr. Miller added that “politics has overtaken facts and reality” in the controversy, saying the names have been readily available to anyone who could use a search engine, but that the department had not produced it for the senators because, “We will not participate in an attempt to drag people’s names through the mud for political purposes.”

Keep America Safe posted links to the Fox News report on its Web site, under the headline “Meet the Al Qaeda Nine.”

The Fox News report also noted that the Bush administration had hired at least three lawyers who had previously helped represent detainees: Pratik Shah, Trisha Anderson and Varda Hussein.

Keep America Safe shows no sign that it intends to stop putting a spotlight on the Justice Department attorneys who formerly worked on detainee-related litigation, even though their names are now public.

The Justice Department has declined to disclose the specific issues each attorney has worked on, but Aaron Harison, the executive director of Keep America Safe, said the group wants to know that, too.

“We’re asking for transparency from the Obama Administration,” Mr. Harison said in a statement. “The American people have a right to know whether lawyers who used to represent terrorists, including advocating for their immediate release, are now working on detainee issues inside the Department of Justice.”

Mr. Harison also defended his group’s attacks against charges of McCarthyism, saying that it is asking legitimate questions about whether attorneys who “chose to spend their pro bono hours defending terrorists, many of whom killed Americans,” are appropriate for their positions.

In an interview, Debra Burlingame, another board member of the group, also called into question the judgment of lawyers who worked to help free detainees. Her brother was the pilot of American Airlines flight 77, which Al Qaeda hijackers crashed into the Pentagon on Sept. 11, 2001.

“I’m not saying that what they’ve been doing is criminal, not saying what they are doing is outside the law, or that they should be sanctioned or disbarred – none of that,” she said. “What we’re saying is who are they, what have they done, and are they in policy positions in the Department of Justice?”