In this case, the U.S. Attorney's Office in New Jersey kept changing, or "morphing," the arguments and theories of their case. The case was narrowed and evidence tossed out. The Rove-Bush-Cheney U.S. Department of Justice appealed the decision in 2008.
The Wall Street Journal reported yesterday:
The Third Circuit Court of Appeals [yesterday] rejected the Justice Department’s attempt to reinstate part of its prosecution of Frederick Schiff, former chief financial officer at Bristol-Myers Squibb, the large pharmaceuticals company.
The Third Circuit, in a unanimous decision, wrote in a 59-page opinion that prosecutors overreached in part of their case. Prosecutors from the New Jersey U.S. attorney’s office argued that Schiff had a duty to disclose an inventory-related issue in regulatory filings, such as the 10-K or 10-Q, because he had “a general fiduciary obligation of ‘high corporate executives’ to the company’s shareholders” under Rule 10b-5 of the Securities and Exchange Act.
The Third Circuit stated: “This argument reaches too far.”
In 2005 Schiff was indicted with another former executive on securities-fraud charges for their role in the company’s use of incentives to get wholesalers to buy more products than needed. The practice, known as “channel stuffing,” inflated sales by $2.5 billion and earnings by $900 million from 1999 to 2001, the government alleged.
In 2008 the trial judge, Faith Hochberg, whittled down the case against Schiff by preventing prosecutors from introducing certain evidence and arguments because their legal theories had continued to “morph” until the eve of the trial.