VRX Bausch Health Cos

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 23, 2018).

By Rebecca Davis O'Brien 

A Manhattan federal jury found a former executive at Valeant Pharmaceuticals International Inc. guilty of charges that he defrauded the pharmaceutical giant through a multimillion-dollar kickback scheme.

The former Valeant executive, Gary Tanner, and his co-defendant, Andrew Davenport -- the former chief executive of Philidor Rx Services, a specialty mail-order pharmacy involved in the scheme -- were both convicted Tuesday on all four criminal counts they faced, including honest services wire fraud and money-laundering conspiracy.

"We are of course disappointed in the verdict, but we look forward to addressing the many legal and evidentiary issues on appeal," said Brendan McGuire, a lawyer for Mr. Tanner.

A lawyer for Mr. Davenport didn't immediately respond to a request for comment.

"As a unanimous jury has found, Gary Tanner sold his loyalty to Andrew Davenport for $9.7 million," Manhattan U.S. Attorney Geoffrey S. Berman said in a statement. "Unbeknownst to his employer, Tanner became the fox guarding the henhouse."

The trial is the first criminal prosecution to emerge from multiple investigations into Valeant's sales practices. Some of the investigations are continuing. Valeant has said it is cooperating with the various investigations, including the one in Manhattan. Several current and former Valeant executives testified at the nearly three-week-long trial of Messrs. Tanner and Davenport.

"We believe the jury's verdict reflects the facts of the case," a spokeswoman for Valeant said in an emailed statement.

Prosecutors had argued that Valeant was the victim of a yearslong fraud, saying Messrs. Davenport and Tanner conspired to persuade the pharmaceutical company to funnel business to Philidor. Mr. Davenport paid Mr. Tanner about $10 million in kickbacks, while Mr. Tanner used his position at Valeant to facilitate deals that helped Mr. Davenport take in more than $40 million, prosecutors alleged.

Defense lawyers had argued that Messrs. Tanner and Davenport were working in Valeant's interest, developing Philidor as a partner and reaping "incredible profits" for both companies.

Valeant was for years considered a pioneer in the drug industry, with a business model focused not on research and development, but acquiring pre-existing drugs and selling them, often with significant price increases. The now-closed Philidor, which was based in Pennsylvania, helped Valeant sell some of its higher-priced products. At one point, at least 90% of the drugs Philidor dispensed were from Valeant, prosecutors said.

Earlier this month, Valeant announced plans to change its name to Bausch Health Cos., in an attempt to distance the company from past controversies.

Write to Rebecca Davis O'Brien at Rebecca.OBrien@wsj.com

(END) Dow Jones Newswires

May 23, 2018 02:47 ET (06:47 GMT)

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