Biovail Settles with SEC.  Three Executives Still under Investigation.

The U.S. Securities and Exchange Commission said on Monday that Canada‘s Biovail Corp. will pay $10 million to settle fines stemming from a probe into fraudulent accounting. 

The SEC said current and former senior Biovail executives were obsessed with meeting quarterly and annual targets, and they overstated earnings and hid losses to deceive investors.

The SEC complaint alleges that in October 2003, Biovail and some of its executives schemed to deceive investors by falsely attributing nearly half of Biovail’s failure to meet its third quarter forecast to a single truck accident.

The complaint also alleges that over several reporting periods in 2001 and 2002, Biovail improperly moved about $47 million in research and development expenses off its financial statements and on to the financial statements of a special purpose entity.

The SEC also claimed that Biovail intentionally misstated foreign exchange losses that caused its 2003 second quarter loss to be understated by about $3.9 million.

Despite the settlement, the drugmaker’s founder, Eugene Melnyk, and three other current and former executives still face charges.

In addition, Canada‘s major securities regulator, the Ontario Securities Commission, said it has scheduled a hearing for April 22 on issues concerning Biovail.