Walgreen Boots Alliance said Friday it will pay a $34.5 million penalty to settle the Securities and Exchange Commission (SEC) allegations that executives misled investors during the company’s merger with Alliance Boots.
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The agency charged the company, along with two former executives, including the group’s former CEO, Gregory Wasson, with failing to provide adequate warnings about the risks associated with its planned merger during earning calls in 2013 and 2014.
In the settlement, Walgreens neither admits nor denies the allegations.
Stephanie Avakian, co-director of the SEC’s Division of Enforcement said, “Over multiple reporting periods, senior Walgreens executives misled investors about the company’s public financial goal,” and the penalty assessed against Walgreens is intended to “punish and deter such conduct.”
The SEC alleged that when Walgreens announced a two-step merger with Alliance Boots in June 2012, it also projected during the same time that the combined entity would generate $9 billion to $9.5 billion in combined adjusted operating income in the 2016 fiscal year.
“After completing the first step of the merger, Walgreens’ internal forecasts indicated that the risk of missing its 2016 projection had increased significantly. But Walgreens, Wasson and Miquelon repeatedly and publicly reaffirmed the projections without adequately disclosing the increased risk,” the SEC said in a statement.
Then in August 2014, Walgreens announced a new earnings per share goal that translated to an adjusted operating income of $7.2 billion for fiscal year 2016, a 20 percent decline from its initial estimate. That news caused shares to drop 14.3 percent, according to the SEC.
“As this case shows, we are committed to holding corporate executives accountable when they are in the best position to ensure that disclosures are accurate and not misleading,” Melissa Hodgman, associate director of the SEC’s enforcement division, said in a statement.
Shares were down about 0.5 percent Friday on the news.