Valeant efforts to put distance from past undermined by U.S. fraud probe

“We do not comment on rumours about investigations, and cannot comment on or speculate about the possible course of any ongoing investigation.”

The Office of the Attorney General in the U.S. declined comment.

Valeant’s relationship with Philidor was disclosed by a short-seller in October. At the time, then-CEO Michael Pearson said the company didn’t publicly reveal that affiliation earlier because it didn’t want to expose that to competitors.

Days later, Valeant (TSX:VRX) announced it was severing ties with the now-defunct Philidor, in which it had an ownership stake. It also restated earnings stemming from an accounting error related to its relationship with Philidor.

The news this week of the U.S. investigation adds to Valeant’s woes.

Valeant has said it is under investigation by the U.S. Attorney’s offices in New York and Massachusetts, receiving two federal subpoenas related to pricing, distribution and patient support services.

It is also under investigation by the U.S. Securities and Exchange Commission related to whether Salix, a company purchased by Valeant last year, misled investors about inventory levels.

Quebec’s securities regulator, L’Autorite des marches financiers, has requested documents from Valeant about an internal committee it set up to review Philidor, its relationship with the company, Valeant’s accounting practices and other matters.

An AMF official said it is monitoring developments in the U.S. and continues to collaborate with the SEC investigation.

Although the company has warned that investigations could result in fines, penalties and administrative sanctions, CEO Joe Papa told BNN Tuesday that the company has not set aside any money because its priority is to reduce debt and that any payments could be years away.

Industry observers expect any possible eventual settlements for these series of other probes could be costly.

“I think it’s going to be really expensive,” said Vicki Bryan, an analyst with corporate bond research company Gimme Credit.

“When you add up fines for all of these serious probes, it could go over $1 billion. That’s not unheard of in this space,” she said, referring to penalties faced by other pharmaceutical companies.

On Thursday, Valeant saw its shares fall by more than 11 per cent, settling at $31.76 on the Toronto Stock Exchange.

Follow @RossMarowits on Twitter.

Ross Marowits, The Canadian Press

by Canadian Press

Valeant efforts to put distance from past undermined by U.S. fraud probe

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