Bristol's Probation Ends

It signed a deferred prosecution agreement 24 months ago.
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A cloud was lifted from

Bristol-Myers Squibb

(BMY) - Get Report

Thursday as federal prosecutors said the company had successfully completed a two-year probation relating to charges of improper inventory and accounting practices.

Bristol signed a deferred prosecution agreement 24 months ago with the U.S. Attorney's Office for New Jersey, promising to clean up its operations. If the company made internal improvements and didn't violate terms of the deal for two years, the U.S. Attorney wouldn't file criminal charges alleging securities fraud.

The deadline is Friday, and the company passed its test, said U.S. Attorney Christopher Christie. Bristol "has made significant and transformational changes in its compliance practices," Christie said in a prepared statement.

"The company believes its business operations are stronger today as a result of having embraced a culture of compliance," Bristol said in a brief press release.

The company

hinted in late April that it expected to survive the deferred prosecution agreement. The deal with the U.S. Attorney focused on "channel stuffing" from 1999 to 2001, a practice of inflating sales to wholesalers. The deferred prosecution agreement included the payment of $300 million into a shareholders' fund and the requirement that Bristol fix its management and accounting practices.

Former federal Judge Frederick Lacey, who was appointed to monitor Bristol's conduct, said in prepared remarks that Bristol made a "remarkable transformation." Lacey had been named an independent adviser to the company in 2003.

Lacey said Bristol had improved its budgeting process, made sure directors had a greater role in corporate governance and established "the highest standards of integrity, ethics and accountability."

Bristol had one close call during its two-year probation, when it was

investigated by the Justice Department and the Federal Trade Commission for trying to discourage a company from selling generic versions of the anticoagulant Plavix, its biggest drug.

Although the U.S. Attorney said Bristol violated terms of the deferred prosecution agreement with the bungled Plavix deal, he said Bristol

moved quickly to correct the problem, including the dismissal of "certain senior executives."

Former CEO Peter Dolan and general counsel Richard Willard left in September 2006 after the generics deal unraveled. The U.S. Attorney said Bristol's action prompted him to refrain from taking action under the deferred prosecution agreement.

Bristol has

pleaded guilty to two counts of making false statements to the FTC and paid a $1 million fine to settle the Justice Department investigation.