May 22, 2018 / 3:11 PM / a year ago

Ex-Valeant, Philidor executives convicted of kickback scheme

NEW YORK (Reuters) - A former Valeant Pharmaceuticals International Inc VRX.TO executive and the former chief of mail order pharmacy Philidor Rx Services were found guilty on Tuesday of defrauding Valeant through a multimillion-dollar kickback scheme.

FILE PHOTO: Former Philidor Chief Executive Officer, Andrew Davenport (2nd-L) and ex-senior Valeant director Gary Tanner (C) walk on the street with their lawyers after exiting the Manhattan Federal Court in New York, U.S. February 23, 2017. REUTERS/Eduardo Munoz/File Photo

The verdict, handed up by a jury in Manhattan federal court, comes on the heels of Valeant’s announcement that it will change its name to Bausch Health Companies Inc as it seeks to distance itself from a series of scandals under its previous management.

Gary Tanner, a former senior director at Valeant, and Andrew Davenport, the former head of the now-defunct Philidor, were convicted of fraud and conspiracy.

“We are of course disappointed in the verdict, but we look forward to addressing the many legal and evidentiary issues on appeal,” said Tanner’s lawyer, Brendan McGuire, in an email.

“We believe the jury’s verdict reflects the facts of the case,” Valeant said in a statement.

A lawyer for Davenport could not immediately be reached for comment.

The two-week trial of Tanner and Davenport put a spotlight on the relationship between Valeant and Philidor, which had drawn concern from investors and regulators.

Philidor was founded in 2013 with Valeant’s help, and the vast majority of the drugs it dispensed were Valeant’s.

Prosecutors claimed that Valeant was the victim of a scheme in which Tanner passed inside information to Davenport to bolster Philidor’s business as Valeant’s primary pharmacy partner.

In exchange for Tanner’s help, prosecutors said, Davenport paid Tanner nearly $10 million when Valeant exercised an option to buy Philidor, taking $40 million for himself.

At times using the fake name “Brian Wilson,” Tanner sabotaged potential deals between Valeant and other pharmacies, according to prosecutors.

The defendants’ lawyers argued there was nothing illegal about the dealings between the two men, or between Valeant and Philidor. They said Tanner was hired by Valeant to help Philidor grow and that the companies’ close relationship made Valeant hundreds of millions of dollars.

Valeant’s stock fell sharply in October 2015 after it disclosed it had been subpoenaed by U.S. prosecutors over various business practices. Later that month, a short-selling firm published a report claiming Valeant hid its ties to Philidor, and used the pharmacy to artificially inflate sales to drive up prices.

The company has denied any wrongdoing in connection with Philidor.

Reporting by Brendan Pierson in New York; Editing by Steve Orlofsky and Chris Reese

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