Ex-Valeant executive, ex-pharmacy CEO charged for fraud scheme

Thu Nov 17, 2016 6:41pm EST
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By Nate Raymond

NEW YORK (Reuters) - A former Valeant Pharmaceuticals International Inc (VRX.TO: Quote) executive and the former CEO of mail order pharmacy Philidor Rx Services were arrested on Thursday on charges that they engaged in a multimillion-dollar fraud and kickback scheme.

Federal prosecutors in Manhattan accused Gary Tanner, a ex-senior Valeant director, of secretly working with former Philidor Chief Executive Officer Andrew Davenport to promote the specialty pharmacy's business within the Canadian drugmaker.

The scheme culminated in Valeant agreeing to pay $100 million for the right to buy now-defunct Philidor, resulting in Davenport earning $40 million, $10 million of which he covertly kicked back to Tanner, prosecutors said.

The charges came amid what prosecutors said was an ongoing probe of Laval, Quebec-based Valeant, which has been the subject of a number of recent investigations related to Philidor, including by congressional panels and the U.S. Securities and Commission.

The Federal Bureau of Investigation arrested Tanner, 39, and Davenport, 48, on Thursday morning at their residences in Arizona and Pennsylvania, respectively, authorities said.

Valeant said in a statement that Tanner no longer works for the company and that the charges included allegations that the defendants defrauded the drugmaker. It said it is cooperating with authorities.

Tanner's attorney, Howard Shapiro, in a statement said he planned to prove his client's innocence at trial, saying that he had "been charged with a crime for doing his job." A lawyer for Davenport did not respond to requests for comment.

The development is the latest to hit Valeant, whose stock has plunged more than 90 percent since August 2015 amid intense criticism of its drug pricing and business practices and various investigations.   Continued...

U.S. Attorney for the Southern District of New York Preet Bharara speaks during a news conference regarding the arrests of former Valeant Pharmaceuticals Inc. executive Gary Tanner and former Chief Executive Officer of Philidor Rx Services LLC Andrew Davenport for allegedly engaging in a multi-million dollar fraud and kickback scheme in Manhattan, New York, U.S., November 17, 2016.  REUTERS/Andrew Kelly