The former chief of Sigma Pharmaceuticals, Elmo de Alwis, could face jail time after pleading guilty to falsifying the company's accounts in 2009 and 2010.
Mr de Alwis pleaded guilty on Thursday to two charges of falsifying the company's half-year and full-year accounts for the 2010 financial year in connection to the drug company's purchase of two new medicines in 2009.
Sigma's former chief financial officer, Mark Thomas Smith, also pleaded guilty to the charges.
One of the charges to which Mr de Alwis and Mr Smith pleaded guilty relates to the over-statement of Sigma's revenue, inventories, pre-payments and profit after tax in the company's full-year accounts for the year ending January 2010.
The County Court of Victoria heard Sigma's accounts overstated the company's income and revenue by $15.5 million, inventories by $11.3 million. Pre-payments to the company were inflated by $2 million and Sigma's profit after tax was overstated by $9.6 million.
The other charge Mr de Alwis and Mr Smith pleaded guilty to relates to the mis-stating of the amount of revenue and income in Sigma's half-year accounts for the period ending July 2009 by $3.5 million.
Lawyers for Mr de Alwis and Mr Smith indicated that both men would also plead guilty at a later date to two further charges relating to providing false and misleading statements to Sigma's auditors and the company's board.
The two men face a fine of $11,000 and/or two years in prison for falsifying the company's accounts. The charge relating to making false statements to the company's auditors and board carries a penalty of $22,000 and/or five years in jail.
The charges follow an investigation by the Australian Securities and Investments Commission.
Mr de Alwis and Mr Smith said nothing apart from entering their guilty pleas during the morning court session.
Sigma's financial woes during 2009 and 2010 have already resulted in the company agreeing to pay shareholders almost $60 million in 2012 to settle a class action brought by disgruntled investors.
The class action rested on the company predicting it would record modest profit growth when it was conducting a $300 million capital raising in September 2009.
Six months later, Sigma shocked the market by revealing a $424 million write-down that led to a $389 million loss for the 2010 financial year.
Mr de Alwis and Mr Smith both left Sigma during 2010 after the company's swingeing loss.
Both men will remain on bail until a plea hearing beginning on September 17.
