Valeant wants U.S. probe into short seller

SEC called on to investigate Citron Research after report comparing firm to Enron

MONTREAL— Embattled drugmaker Valeant Pharmaceuticals is asking U.S. securities regulators to investigate Citron Research, whose explosive report about the Quebec-based company’s business practices caused its stock to crater.

Chief executive Michael Pearson told analysts on a conference call Monday that the main reason for Valeant’s recent problems is that it’s the victim of false allegations by outsiders who want to manipulate the market to their own profit.

Pearson says he has called on the Securities and Exchange Commission to investigate Citron Research and Andrew Left, its executive editor, after the U.S. short seller compared Valeant to Enron, the U.S. energy firm that collapsed after widespread deception and fraud at the highest levels of management.

“His motivation is the same as someone who runs into a crowded theatre to falsely yell, ‘Fire.’ He wanted people to run,” Pearson said.

“He intentionally designed the report to frighten our shareholders to drive down the price of our stock so he could make money for his short selling.”

Left said it’s Pearson who owes people an explanation.

“Before accusing me of market manipulation, Pearson should ask himself why Philidor was undisclosed to Valeant shareholders,” Left said in an email. The SEC declined to comment. Citron is a short seller’s research firm that publishes reports online about companies.

Short sellers earn money when a stock declines. Citron says on its website that it does not guarantee that it is providing all available information, and its principals “most always” hold a position in securities profiled on its site.

Pearson said Valeant follows the law as well as accounting and disclosure rules, adding he would not hesitate to take action if he finds violations.