Valeant Pharmaceuticals Intl Inc (NYSE:VRX) stock is down around six percent following the arrest of a former Valeant executive and a former CEO of Philidor Rx Services LLC on charges that the two were involved in a multi-million-dollar fraud and kickback scheme.
Gary Tanner, a former Valeant executive, and Andrew Davenport, the former CEO of specialty pharmacy Philidor, were charged in a criminal complaint filed in a Manhattan federal court, prosecutors said. (Source: “Two men charged with kickback scheme at Valeant,” Reuters, November 17, 2016.)
Advertisement
The two men are accused of secretly working together to promote Philidor’s business with the goal of orchestrating a purchase option between Valeant and Philidor. The backdoor dealing resulted in tens of millions of dollars flowing to Davenport personally, while Tanner received close to $10.0 million in secret payments, the complaint said.
Charges are to be announced later on Thursday during a press conference held by the U.S. Attorney’s Office for the Southern District of New York.
VRX stock has been in a downward spiral since 2016 began, dropping 84% this year. This is in large part due to the multiple investigations that are taking place looking into suspicious practices by the pharmaceutical company. And these are just the latest charges to be filed. Back in early November, two other former Valeant executives were said to be under fraud investigation in relation to the Philidor acquisition. See the following details from our first piece on the Valeant investigation:
Former CEO J. Michael Pearson and former CFO Howard Schilling could face charges within weeks.
The investigation is examining possible accounting fraud resulting from Valeant’s hidden ties to Philidor Rx Services LLC, a specialty pharmacy company that Valeant secretly controlled. Bloomberg reported that other executives beyond these two could also face charges.
The case revolves around Valeant registering Philidor’s purchases as revenue when Valeant, in fact, secretly controlled the company. This led to a restating of its earnings for 2014 and 2015. This also led to Schiller stepping down as CFO, although he disputes the claims of wrongdoing.
All in all, it’s been a rough time for Valeant Pharmaceuticals Intl Inc and VRX stock. And until these investigations die down, it doesn’t seem like there’ll be any treatment for Valeant’s woes in the near future.
