NEW YORK (TheStreet) -- Shares of Valeant Pharmaceuticals (VRX) closed down by 12.31% to $17.84 on Monday afternoon, as the pharmaceutical and medical device company is said to be under investigation for accounting fraud by the DOJ, sources told Bloomberg. The company's former CEO Michael Pearson and CFO Howard Schiller are said to be the focus of investigation.

Christian Berthelsen is a Bloomberg reporter that helped to break this news and he appeared on this afternoon's "What'd You Miss" on BloombergTV to discuss the investigation and what he discovered.

"Valeant disclosed about a year ago that it was under investigation by a couple of different U.S. attorneys' offices and the subsequently disclosed the investigation by the SEC. So the prosecutors and investigators have been looking at this for quite a while," Berthelsen said.

BloombergTV's Joe Wiesenthal questioned Berthelsen as to what Valeant's accounting story is and why it is so controversial.

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"This has been a practice among some pharmaceutical companies, of using these specialty pharmacies to market their drugs. Investigators in Congress and elsewhere have said it's a way of getting around what would ordinarily be price controls by HMOs or benefits managers by basically steering patients onto the branded drug instead of the generic," Berthelsen responded.

Valeant announced last October that it terminated its relationship with specialty pharmacy Philidor over scrutiny related to its business practices.

"The claim at the time was that this was essentially an owned and operated specialty pharma owned by Valeant, but technically that wasn't clear from the books," Wiesenthal added. "It had the appearance of being an independent company."

"Initially it did appear to be an independent company, it had its own separate operations but some of the lawsuits that had been filed allege that...Valeant was the only client of Philidor," Berthelsen said.

Separately, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:

You can view the full analysis from the report here: VRX

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