In settling, Walgreens neither admits nor denies the allegations. The SEC was investigating whether the drugstore chain’s former chief executive and former chief financial officer failed to provide adequate warning about the risks associated with Walgreens’ planned merger with Alliance Boots.
The SEC alleged the two former executives, then-CEO Greg Wasson and then-CFO Wade Miquelon, acted “negligently” when giving financial forecasts in June, October and December of 2013 and March of 2014 during earnings calls.
When Walgreens announced a two-step merger with Alliance Boots in June 2012, it projected the combined company would generate $9 billion to $9.5 billion in combined adjusted operating income in the 2016 fiscal year. However, the SEC alleged that after completing the first step of the merger, Walgreens’ internal forecasts showed the company was at a “significantly” greater risk of missing those estimates.
Yet the two executives publicly reaffirmed the forecasts, the SEC alleged.
Then in August 2014, Walgreens gave 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. Shares fell 14.3 percent when Walgreens announced the new financial targets, according to the SEC.
“Over multiple reporting periods, senior Walgreens executives misled investors about the company’s public financial goal,” Stephanie Avakian, co-director of the SEC’s Division of Enforcement, said in a statement. “The penalty assessed against Walgreens is intended to punish and deter such conduct, which deprived investors of information necessary to make fully informed investment decisions.”