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Federal jury convicts two pharmaceutical executives for roles in kickback scheme

[JURIST] A jury in the US District Court for the Southern District of New York [official website] on Tuesday found Valeant Pharmaceuticals International, Inc.'s former executive officer Gary Tanner and former CEO of Philidor Rx Services, LLC (Philidor) Andrew Davenport guilty [press release] for their roles in the multimillion-dollar kickback scheme.

The convictions include counts related to wire fraud and conspiracy to commit money laundering.

Valeant is a pharmaceutical manufacturer and Philidor is a specialty mail-order pharmaceutical company. Tanner was the primary responsible executive to manage the relationship with Philidor. Throughout their dealings as separate companies, "at least 90 percent of the drugs dispensed by Philidor were Valeant-branded drugs."

Valeant purchased an option to buy Philidor for $133 million to its owners, as well as an additional $100 million if Philidor were to meet certain sales targets. Tanner and Davenport then used the option contract to aid the kickback scheme:

Among other things, Tanner and Davenport set up shell company bank accounts in order to launder the kickbacks to Tanner. While these preparations were underway, Tanner secretly advised Davenport on his negotiations with Valeant. Tanner did this in contravention of his duties to Valeant and despite the fact that he was also internally advising Valeant in its negotiations with Davenport about the Option. . . In addition to secretly helping Davenport negotiate against Valeant in exchange for the promise of a kickback from Davenport, Tanner took other actions to benefit Philidor and Davenport personally, and against the direction of his supervisors at Valeant.
Sentencing for Tanner and Davenport is set to take place September 19.

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