Walgreens Pays $34.5 Million Over Charges Of Misleading Investors

DEERFIELD, IL — Walgreens will pay more than $34 million to settle charges the company and its top executives misled to investors, the Securities and Exchange Commission announced Friday. The enforcement action stems from claims about the Deerfield-based company's profit projections during its merger with the Swiss firm Alliance Boots GmbH. In addition, two former Walgreens executives, ex-CEO Gregory Wasson and Wade Miquelon, the former chief financial officer, will each pay $160,000 penalties for acting "negligently" during earning calls.

Walgreens announced the merger in June 2012 along with projections that the two companies, now Walgreens Boots Alliance, would generate profits of $9 billion to $9.5 billion in for the 2016 fiscal year. After initially buying 45 percent of shares in Alliance Boots, but before completing the second part of the merger, internal forecasts showed there was an increasing and significant risk of missing those projections, according to the SEC.

Despite the data, Walgreens, Wasson and Miquelon repeated the projections publicly without disclosing the increased risk over the course of the next two years, according to the order from market regulators. When the company announced it was completing the second phase of the merger in August 2014, it lowered its initial projection by 20 percent. In one day, the company's stock price fell by 14.3 percent.

“Over multiple reporting periods, senior Walgreens executives misled investors about the company’s public financial goal,” said SEC Enforcement Division Co-Director Stephanie Avakian. “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.”

The company and its executives do not admit or deny the findings, however they agreed to a finding that they violated antifraud provisions of the Security Act of 1933.

Walgreens said it fully cooperated with the SEC investigation. In a release, it said it believes the agreement is in the best interest of the company and the $34.5 million penalty has already been full reserved for.

"The settlement does not involve any of Walgreens Boots Alliance’s current officers or executives, nor does it allege that anyone acted intentionally or recklessly at any time," it said.

Wasson was CEO of Walgreens from 2009 to 2015, departing when the Boots Alliance merger was complete, according to CNBC. Miquelon was CFO from 2008 until 2014.

"We are committed to holding corporate executives accountable when they are in the best position to ensure that disclosures are accurate and not misleading," said Melissa Hodgman, associate director of the SEC's enforcement division.

Walgreens Boots Alliance stock, which had been up almost 22 percent over the past three months, was trading down nearly 1 percent Friday afternoon following the news.