Ex-Valeant, Philidor execs arrested for fraud, conspiracy
Former executives of Valeant Pharmaceuticals and a related mail-order pharmacy were charged Thursday with running a fraudand-kickback scheme that bilked Valeant out of millions of dollars.
Their arrests are part of an ongoing investigation of the scheme, according to Preet Bharara, U.S. Attorney for the Southern District of New York, who announced the charges at a Manhattan news conference. Other arrests are possible, he said.
Bharara’s office said it has charged Gary Tanner, a former Valeant executive, and Andrew Davenport, who had been the chief executive of Philidor, a mail-order pharmacy that is now defunct, with two counts of wire fraud, along with money laundering and conspiracy.
The criminal complaint alleges that Tanner and Davenport conspired to enrich themselves with Valeant funds after the two helped Valeant set up Philidor in early 2013, primarily as a vehicle to market and distribute Valeant drugs.
According to the complaint, Tanner focused on building up Philidor’s business, resisted his superiors’ directives to line up other distributors for Valeant’s products and ultimately received a $10 million kickback from Davenport. Meanwhile, Tanner repeatedly told Valeant he was following its conflicts of interest rules.
The complaint alleges that in the fall of 2014, the two orchestrated Valeant’s agreement to buy an option to purchase Philidor, which cost Valeant at least $133 million. More than $40 million of that went to shell companies controlled by Davenport, including one called “End Game LP,” which kicked $10 million of that back to Tanner.
Davenport used that money to buy stocks, luxury goods and a $50,000 custom wine cellar, according to the complaint.
Both men were taken into custody Thursday morning at or near their homes and faced court appearances later in the day.
Tanner, 39, of Gilbert, Arizona, had been Valeant’s primary contact with Philidor and headed Valeant’s “access solutions team,” which worked to get patients’ insurers to cover brand-name Valeant medicines instead of muchcheaper generic ones. Davenport, 48, of Haverford, Pennsylvania, a Philadelphia suburb, was Philidor’s largest owner as well as its CEO.
Valeant has been under scrutiny for aggressively jacking up prices of old drugs with little or no competition and for questionable accounting practices, including prematurely reporting sales of its drugs made through Philidor.
Valeant is the target of more than 10 different government probes, plus multiple shareholder lawsuits. Its stock price has plunged more than 90 percent since the former Wall Street darling came under the microscope for its business and accounting practices.
At the news conference, Bharara cited emails investigators uncovered in which Davenport told Tanner, using the alias Brian Wilson, he could picture them “riding off into the sunset.” Tanner responded, “Will have to keep playing the game,” according to the complaint.
“As of today, the game is up and they will not be riding off into the sunset together,” Bharara said.