SEC charges Walgreens and two former executives with misleading investors with rosy earnings forecasts
The Securities and Exchange Commission charged Walgreens Boots Alliance Inc., former CEO Gregory Wasson, and former CFO Wade Miquelon on Friday with misleading investors by publicly reaffirming earnings forecasts despite increased risks of missing the projections, after the Walgreen Co. merger with Alliance Boots GmbH in 2012. Walgreens, Wasson, and Miquelon did not admit or deny the findings, but Walgreens Boots Alliance will pay a $34.5 million penalty, and Wasson and Miquelon will each pay a $160,000 penalty. Walgreens announced its two-step merger with Alliance Boots in June 2012, and at the same time projected that the combined entity would generate $9 billion to $9.5 billion in combined adjusted operating income in the 2016 fiscal year. However, after completing the first step of the merger, its internal forecasts indicated that the risk of missing its 2016 projection had increasing significantly. Instead of alerting investors, Walgreens, Wasson, and Miquelon repeatedly publicly reaffirmed the rosier projections. When Walgreens subsequently announced that it was moving forward with the second step of the merger in August 2014, it announced an adjusted earnings projection of $7.2 billion for fiscal 2016, a 20% decline over its initial projection and its stock price dropped 14.3% on the day of the announcement.