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Syncor Finds More Payments

The probe discloses $500,000 in illegal transactions in Taiwan. Cardinal may get $24 million if merger fails.

November 20, 2002|E. Scott Reckard | Times Staff Writer

Syncor International Corp., which is investigating suspected bribes by its overseas units, said Tuesday that its Taiwan operation made $500,000 in apparently illegal payments to customers in the last five years.

Woodland Hills-based Syncor also said a committee of its outside directors turned up "questionable payments and other transactions" in at least six other countries, which it said may have violated the Foreign Corrupt Practices Act and other U.S. laws.

In its third-quarter filing with the Securities and Exchange Commission, Syncor also said the directors' committee is scrutinizing "certain limited aspects" of Syncor's U.S. operations, but declined to elaborate on that probe. And it added that changes in payments for Medicare and Medicaid services could negatively affect its revenue.

Analysts said the disclosures did little to calm the worries surrounding Syncor, the leading provider of radioactive diagnostic tools and medicines. The biggest uncertainty is whether the company can complete its planned merger with Cardinal Health Inc., a deal shareholders are supposed to vote on Dec. 6.

Cardinal, an Ohio-based drug wholesaler, had agreed to buy Syncor because of the strength of its U.S. operations. But it put the acquisition on hold after Cardinal investigators turned up the questionable foreign payments. Cardinal didn't return phone calls Tuesday.

The latest news "seems to take the problems to a new level," said Tom Burnett, president of Merger Insight, an independent New York investor advisory firm that doesn't own stakes in the companies it covers.

Syncor disclosed the questionable payments two weeks ago, saying it had alerted the SEC and the Department of Justice. In the latest filing, it characterized the settlement discussion with the SEC and federal prosecutors as "advanced," saying it has set aside $2.5 million to pay fines. But it said it could offer no assurances that the $2.5 million would be enough.

It also said it may have to pay as much as $24 million to Cardinal if the merger, which is supposed to close Dec. 31, falls through.

Despite the problems, Syncor "still believes the conditions of the merger will be satisfied," said Allan Mayer of Sitrick & Co., a public relations firm hired by Syncor that specializes in crisis management.

In the filing, Syncor also reported a third-quarter loss of $28.5 million, or $1.04 a share, on revenue of $192.2 million, contrasted with net income of $7.8 million, or 29 cents, on revenue of $149.8 million in the third quarter of 2001.

Syncor's stock fell 50% in the days after the investigation of the overseas payments was made public, although it subsequently regained some of the lost ground. On Tuesday, it fell 82 cents to $24.41 on Nasdaq.

Tuesday's news came after the market closed. Syncor's stock fell to $22 in after-hours trading.

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