McKesson HBOC
shakes up management

Bloomberg News

SAN FRANCISCO -- McKesson HBOC Inc. fired its chairman and accepted the resignation of its senior management as the largest U.S. drug wholesaler attempts to recover from accounting discrepancies discovered at its recently acquired software business.

Charles McCall, who was president and chief executive of HBO & Co. when McKesson bought it for $13.9 billion last year, was removed as chairman and dismissed as an employee. McKesson President and Chief Executive Mark Pulido and Chief Financial Officer Richard Hawkins resigned.

McKesson shares have lost 45 percent of their value since April 27, the day before it announced that accounting discrepancies at HBO would cause it to restate earnings for several previous quarters and the year, reducing fiscal 1999 profit by 4.4 percent.

It said today it's unlikely to file its 10-K with the U.S. Securities and Exchange Commission by June 30.

"Somebody had to accept the blame for the HBO acquisition, which really has been a debacle," said Mike Krensavage, an analyst with Brown Brothers Harriman & Co. with a neutral rating on McKesson shares. "What was intended to be a merger that would help McKesson maintain its earnings growth, has really turned out ugly. And it's cost Mark Pulido his job."

McKesson named John Hammergren, the head of its supply management business, and David Mahoney, the head of its pharmaceutical services unit, as co-chief executive officers. It said former McKesson Chief Executive Alan Seelenfreund will become nonexecutive chairman. Heidi Yodowitz, McKesson's controller, will become acting chief financial officer. Hammergren and Mahoney were Pulido lieutenants who worked with him in engineering the purchase of HBO, Krensavage said.

"It does appear there will be a remainder of the senior McKesson management team running the company," he said.

"But I think it is in the company's interest to have executives who are familiar with the company and who have worked for McKesson a while to continue running the company."

The company fired four managers of its Information Technology Business unit, the former HBO & Company, for cause, based on findings from its review of HBO's books.

The four are Albert Bergonzi, who was president and chief executive of that unit; David Held, who was CFO and controller; Jay Lapine, who was general counsel; and Michael Smeraski, who was head of enterprise sales.

"Based on preliminary findings, we discovered these were significant improprieties and needed to be addressed quickly," said McKesson spokesman Larry Kurtz.

Graham O. King will be president of the Information Technology Business unit. He is the former head of Shared Medical Systems, which provides computer services to the health-care industry.

San Francisco-based McKesson fell 69 cents to $36.06 in early trading today.