CVS 2013 Annual Report Download - page 86

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84
CVS Caremark
Notes to Consolidated Financial Statements
• In November 2009, a securities class action lawsuit was filed in the United States District Court for the District of
Rhode Island purportedly on behalf of purchasers of CVS Caremark Corporation stock between May 5, 2009 and
November 4, 2009. Plaintiffs subsequently amended the lawsuit to allege a class period beginning October 30,
2008. The lawsuit names the Company and certain officers as defendants and includes allegations of securities
fraud relating to public disclosures made by the Company concerning the PBM business and allegations of insider
trading. In addition, a shareholder derivative lawsuit was filed in December 2009 in the same court against the
directors and certain officers of the Company. This lawsuit, which was stayed pending developments in the related
securities class action, includes allegations of, among other things, securities fraud, insider trading and breach of
fiduciary duties and further alleges that the Company was damaged by the purchase of stock at allegedly inflated
prices under its share repurchase program. In January 2011, both lawsuits were transferred to the United States
District Court for the District of New Hampshire. In June 2012, the court granted the Company’s motion to dismiss
the securities class action. The plaintiffs subsequently appealed the court’s ruling on the motion to dismiss. In
May 2013, the First Circuit Court of Appeals vacated the prior ruling and remanded the case to the district court
for further proceedings. In December 2013, the district court denied the Company’s renewed motion to dismiss the
lawsuit. The derivative lawsuit will remain stayed until the Company answers the securities class action complaint.
• In March 2010, the Company learned that various State Attorneys General offices and certain other government
agencies were conducting a multi-state investigation of certain of the Company’s business practices similar to
those being investigated at that time by the U.S. Federal Trade Commission (“FTC”). Twenty-eight states, the
District of Columbia and the County of Los Angeles are known to be participating in this investigation. The prior
FTC investigation, which commenced in August 2009, was officially concluded in May 2012 when the consent
order entered into between the FTC and the Company became final. The Company has cooperated in the multi-
state investigation.
• In March 2010, the Company received a subpoena from the OIG requesting information about programs under
which the Company has offered customers remuneration conditioned upon the transfer of prescriptions for drugs
or medications to the Company’s pharmacies in the form of gift cards, cash, non-prescription merchandise or
discounts or coupons for non-prescription merchandise. The subpoena relates to an investigation of possible false
or otherwise improper claims for payment under the Medicare and Medicaid programs. The Company has provided
documents and other information in response to this request for information.
• The Company received a subpoena from the U.S. Securities and Exchange Commission (“SEC”) in February 2011
and subsequently received additional subpoenas and other requests for information. The SEC’s requests related
to, among other things, public disclosures made by the Company during 2009, transactions in the Company’s
securities by certain officers and employees of the Company during 2009 and the purchase accounting for the
Longs Drug Stores acquisition. The Company has provided the documents and other information requested by
the SEC and has been cooperating with the SEC in this investigation. The Company has reached an agreement
in principle with the staff of the Boston Regional Office of the SEC to settle certain allegations that, during the
third and fourth quarters of 2009, the Company violated certain provisions of the Securities Act of 1933 and the
Securities Exchange Act of 1934, including certain anti-fraud provisions of those statutes. The agreement in
principle will be entered into by the Company on a “no admit or deny” basis, and the Company will not be restating
its financial statements for any reporting period. The Company has agreed to pay a $20 million civil penalty when
the settlement is finalized, and this amount has been fully reserved in the Company’s financial statements. The
Company will continue to cooperate with the SEC to document the settlement terms, and the settlement remains
subject to approval by the Commission and federal court as required.