McKesson 2008 Annual Report Download - page 101

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
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services performed by our subsidiary, Per-Se, for certain healthcare operations associated with the University of
Texas from 2004 to the present.
On May 2, 2008, we entered into two agreements which resolved previously disclosed claims by the Drug
Enforcement Administration (“DEA”) and six USAOs that between 2005 and 2007, certain of our pharmaceutical
distribution centers fulfilled customer orders for select controlled substances, which orders were not adequately
reported to the DEA. The settlements were achieved consistent with the previously disclosed $13 million reserve
established for these matters. These settlements resolve all administrative and civil claims arising out of the
investigations.
As previously reported, on January 26, 2007, we acquired Per-Se, which became a wholly owned subsidiary of
McKesson. Prior to its acquisition, Per-Se had publicly disclosed two pending Securities and Exchange
Commission (“SEC”) investigations. Those investigations are the following: (1) In March 2005, the SEC issued a
subpoena to Per-Se pursuant to a formal order of investigation which we believe relates to allegations of wrongdoing
made in 2003 by a former Per-Se employee. Those allegations were the subject of a prior investigation by the Per-
Se Audit Committee and an outside accounting firm. Per-Se has produced documents and provided testimony to the
SEC. By letter dated June 26, 2007, the SEC informed the Company that its investigation of Per-Se was closed, and
that it did not intend to recommend any enforcement action against Per-Se as a result of that investigation. (2) In
December 2004, the SEC issued a formal order of investigation relating to accounting matters at NDCHealth
Corporation (“NDCHealth”), a then public company which was acquired by Per-Se in January 2006, prior to our
acquisition of Per-Se. In March 2005, NDCHealth restated its financial statements for the fiscal years ended May
28, 2004, May 30, 2003 and May 31, 2002, and for the fiscal quarters ended August 22, 2004 and August 29, 2005,
to correct errors relating to certain accounting matters. NDCHealth produced documents to the SEC and fully
cooperated with the SEC in its investigation. The SEC has taken testimony from a number of current and former
NDCHealth employees. There has been no activity in this matter for some time and the SEC has taken no action
against NDCHealth or its successor to date.
VI. Environmental Matters
Primarily as a result of the operation of our former chemical businesses, which were fully divested by 1987, we
are involved in various matters pursuant to environmental laws and regulations. We have received claims and
demands from governmental agencies relating to investigative and remedial actions purportedly required to address
environmental conditions alleged to exist at seven sites where we, or entities acquired by us, formerly conducted
operations and we, by administrative order or otherwise, have agreed to take certain actions at those sites, including
soil and groundwater remediation. In addition, we are one of multiple recipients of a New Jersey Department of
Environmental Protection Agency directive and a separate United States Environmental Protection Agency directive
relating to potential natural resources damages (“NRD”) associated with one of these seven sites. Although the
Company’ s potential allocation under either directive cannot be determined at this time, we have agreed to
participate with a potentially responsible party (“PRP”) group in the funding of an NRD assessment, the costs of
which are reflected in the aggregate estimates set forth below.
Based on a determination by our environmental staff, in consultation with outside environmental specialists and
counsel, the current estimate of reasonably possible remediation costs for these seven sites is $10 million, net of
approximately $2 million that third parties have agreed to pay in settlement or we expect, based either on
agreements or nonrefundable contributions which are ongoing, to be contributed by third parties. The $10 million is
expected to be paid out between April 2008 and March 2028. Our estimated liability for these environmental
matters has been accrued in the accompanying consolidated balance sheets.
In addition, we have been designated as a PRP under the Superfund law for environmental assessment and
cleanup costs as the result of our alleged disposal or hazardous substances at 18 sites. With respect to these sites,
numerous other PRPs have similarly been designated and, while the current state of the law potentially imposes joint
and several liability upon PRPs, as a practical matter costs of these sites are typically shared with other PRPs. Our
estimated liability at those 18 sites is approximately $1 million. The aggregate settlements and costs paid by us in
Superfund matters to date have not been significant. The accompanying consolidated balance sheets include this
environmental liability.