Biovail founder acted against public interest -OSC

* Rules Biovail founder did not break securities law

* Sanctions hearing to be set within 30 days

TORONTO, Oct 1 (Reuters) - The Ontario Securities Commission said on Friday that Biovail Corp founder Engene Melnyk did not contravene Canadian securities law in a case related to trucking accident in 2003, but it ruled that he acted contrary to the public interest.

In an 84-page document, the OSC ruled that Melnyk was the founder and driving force behind Biovail, and therefore could not separate himself from the company’s actions.

“The decision speaks for itself,” said OSC director of enforcement Tom Atkinson. “Mr. Melnyk was found not to have contravened Ontario securities law, but his conduct was found to be contrary to public interest.”

The multi-vehicle accident in 2003 involved a truck carrying a shipment of Biovail’s WXL drug.

The company -- which has since merged into Valeant Pharmaceuticals International VRX.TO -- said at the time that the accident was one of the reasons for a downward revision in its earnings forecast for the third quarter of 2003.

Biovail’s stock price plummeted after the statement.

The commission later alleged that Biovail overemphasized the importance of the accident as a reason for the drop in earnings, while, in fact, other reasons had greater significance.

Melnyk was the only former Biovail executive to contest OSC allegations of misconduct. Three other executives, as well as the company itself, paid penalties as part of a settlement agreement with the regulator.

The OSC said a sanctions hearing in the matter would be set within 30 days. (Reporting by Julie Gordon; editing by Peter Galloway)