NEW YORK (TheStreet) -- On Thursday federal prosecutors in New York charged former top Valeant (VRX) executive Gary Tanner and ex-CEO Andrew Davenport of specialty pharmacy Philidor in a multimillion dollar kickback scheme.
"The charges today basically deal with defrauding Valeant," Bloomberg healthcare sector reporter Drew Armstrong said in an appearance on "Bloomberg Markets: Americas."
"What the government is alleging is that Tanner, instead of doing his duty to Valeant, was secretly concealing from Valeant that he was working with Philidor and with Andy [Davenport] to essentially steer all this business from Valeant and create this relationship. Valeant would pay $100 million and then [get] a kickback after the deal was done," Armstrong added.
The charges accuse Tanner and Davenport of building up Philidor through an almost exclusive deal with Valeant that would result in kickbacks of $10 million.
These charges are at the center of the issues currently facing Valeant in regards to its relationship with Philidor. The company cut ties with the specialty pharmacy after investigations into allegations of controlling drug prices.
Details of the charges show that unnamed Valeant executives were suspicious of the relationship between Tanner and Davenport. The company questioned Tanner about his having an office at Philidor and if he had any equity interest in the company.
"According to the criminal complaint [Tanner] lied about those things to Valeant," Armstrong said. He added that the company was "ripped off pretty hard by its own people."