The U.S. Department of Justice announced charges against former Valeant Pharmaceuticals (VRX) and Philidor Rx Services executives for engaging in "a multi-million dollar fraud and kickback scheme."
Both Gary Tanner, a former executive at Valeant, and Andrew Davenport, the former CEO of pharmacy benefit manager Philidor Rx Services LLC will be charged. Tanner was Valeant's executive director of commercial analytics, while Davenport created Philidor.
Both were arrested on charges that they allegedly laundered and stole money that belonged to Valeant shareholders.
"They had, in effect, illegally converted Valeant shareholders' money into their own nest eggs," said Preet Bharara, U.S. Attorney for the Southern District of New York at a press conference on the matter held in New York at noon Thursday.
Valeant had "standards of business conduct" in place that prohibited employees from engaging in business relationships outside of the company. This, though, didn't stop Tanner from allegedly working with Davenport, who promised to pay Tanner $10 million if he pushed Davenport's interest at Valeant.
Davenport also allegedly benefited from Valeant's agreement to pay $100 million for the option to purchase Philidor. Davenport received $40 million from that transaction, which he allegedly put into shell companies.
According to the investigation's findings, an unnamed Valeant executive was suspicious that Tanner held a stake in Philidor. These suspicions were based on Tanner's influence at Philidor and his efforts to advance Philidor's interest within Valeant.
Though the executive asked Tanner if he had any equity interest in Philidor repeatedly, Tanner denied involvement in the company.