The civil and criminal filings allege that Mr. Hawkins participated in a fraudulent scheme with other former McKesson officers to artificially inflate the company's financial results for the fiscal quarter ended March 31, 1999, by fraudulently recognizing revenue on a $20 million transaction between McKesson and Data General Corporation.  Mr. Hawkins and others caused revenue from the Data General transaction to be reported to the public as part of the company's earnings release on April 22, 1999 despite the fact that McKesson's independent auditors told Mr. Hawkins that revenue from the transaction could not be recognized.  Soon after the fraud was discovered in April 1999, McKesson's stock price tumbled from approximately $65 to $34, slashing the company's market value by more than $9 billion.

Mr. Hawkins becomes the twelfth person charged civilly by the SEC in connection with this investigation.  Six former HBOC executives have been charged criminally.  Four have pled guilty.  Former HBOC Co-President and Chief Financial Officer Albert Bergonzi pled guilty on October 16, 2003, to conspiracy and securities fraud.  Former HBOC Co-President and Chief Financial Officer Jay Gilbertson pled guilty on April 24, 2003, to conspiracy to commit securities fraud and falsifying the company's books and records.  On May 16, 2000, former Sales Vice President Dominick DeRosa pled guilty to conspiracy to commit securities fraud, and on January 5, 2001, former Finance Vice President Timothy Heyerdahl pled guilty to insider trading.

In a superseding indictment returned in June 2003, Charles McCall, HBOC's chief executive officer and Chairman of McKesson's board of directors, and Jay Lapine, HBOC's general counsel, were charged with conspiracy and securities fraud.  The charges against these defendants remain pending.  A trial date has not yet been set.

Kevin V. Ryan, United States Attorney for the Northern District of California and a member of the President's Corporate Fraud Task Force said, "The integrity of our financial markets demands that corporate officers make truthful statements to auditors and the investing public.  In this case, the allegations, which now reach into the McKesson side of the company, involve a deception of striking magnitude, with an overall loss to investors from a fraudulent scheme involving this and other defendants that reaches into the billions of dollars."

Helane L. Morrison, District Administrator of the SEC's San Francisco District Office said, "We have charged Richard Hawkins with deceiving McKesson's shareholders and the public by deliberately releasing false information about the company's operating results and with  failing to heed the warnings of McKesson's auditors not to announce operating results that he knew to be inaccurate and misleading."

FBI Special Agent in Charge Mark Mershon said, "Today's indictment demonstrates the FBI's continuing commitment to investigating corporate crime in America.  This investigation has been a lengthy and aggressive pursuit by the FBI, the SEC, and the U.S. Attorney's Office to hold corporate executives who abuse their positions and defraud the public accountable for their actions.  It shines a spotlight on the government's tremendous success in the fight against corporate corruption in the Bay Area."

According to the civil complaint and the criminal indictment, the charges against Mr. Hawkins stem from his involvement in a single fraudulent $20 million transaction between McKesson and Data General.  The transaction allowed McKesson to report to the public that the company met Wall Street analysts's expectations for the quarter ended March 31, 1999, which was the first quarter of combined operations after McKesson's acquisition of HBOC.  The civil complaint and criminal indictment allege that the Data General transaction was fraudulent for three reasons:  the deal was backdated, gave Data General an unconditional right to return the McKesson product, and was a swap that was not accounted for as a swap. 

According to the charging documents, the Data General transaction was conceived, negotiated, and executed in its entirety after the close of the quarter.  The transaction consisted of two separate contracts.  The first contract was allegedly backdated to March 31, 1999.  The second contract was dated April 5, 1999.  Both contracts were contingent upon each other and negotiated contemporaneously as part of the same transaction.  The second contract also contained a provision requiring McKesson to buy back any software that Data General was unable to resell. 

According to the civil complaint and the criminal indictment, although McKesson's outside auditors informed Mr. Hawkins that revenue from the transaction could not be recognized under Generally Accepted Accounting Principles, Mr. Hawkins and others included the $20 million transaction in the company's earnings release on April 22, 1999.  Mr. Hawkins also allegedly made false statements to the company's auditors regarding the Data General transaction.

The SEC's civil complaint charges Mr. Hawkins with securities fraud (Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder), falsifying McKesson's books and records (Section 13(b)(5) of the Exchange Act and Rule 13b2-1 thereunder), and lying to accountants (Rule 13b2-2 under the Exchange Act).  The complaint seeks to enjoin Mr. Hawkins from committing future violations of these provisions, compel him to pay disgorgement and civil monetary penalties, and to bar Mr. Hawkins from serving as an officer or director of a public company. 

In the criminal indictment, Mr. Hawkins is charged with conspiracy to commit securities fraud, in violation of 18 U.S.C. § 371, which carries a maximum penalty of five years imprisonment and a fine of $250,000.  He is also charged with violations of the securities laws, including securities fraud, in violation 15 U.S.C. § 78j(b), and making materially false or misleading statements to an accountant, in violation of 15 C.F.R. § 240.13b2-2.  Each violation of the securities laws carries a maximum penalty of 10 years imprisonment and a $1 million fine.  If convicted, Mr. Hawkins would be obligated to pay restitution to investors harmed by the alleged fraud.

Any criminal sentence following conviction would be dictated by the Federal Sentencing Guidelines, which take into account a number of factors, and would be imposed in the discretion of the Court.  An indictment simply contains allegations against an individual and, as with all defendants, Mr. Hawkins must be presumed innocent unless and until convicted.