Valeant in freefall as CEO Pearson exits
Valeant lurched further into crisis yesterday, announcing that its CEO Michael Pearson is to depart, with the board accusing chief financial officer of “improper conduct”, in connection with a ‘misstatement’ of financial results last month.
The Canadian company said it had asked former chief financial officer and board member Howard Schiller to tender his resignation as a director, but Schiller “has not done so,” according to Valeant.
Bill Ackman, CEO of Pershing Capital Management, which has a 9% stake in Valeant, has joined the board of directors, effective immediately.
Katharine Stevenson has voluntarily resigned from the board to create a vacancy to permit Ackman’s appointment.
Pearson had taken time off due to ill health but returned to his job late last month– but Valeant said today that it had begun looking for a replacement. He will remain as CEO and a director until his replacement is appointed.
The developments follow a tumultuous few months that has seen the Canadian firm become mired in an accounting scandal and investigated by US authorities over pricing.
But yesterday’s announcement was mainly concerned with the accounting problems, which centre around $58 million in net revenue relating to sales of distributor Philidor in the second half of 2014, which it said should not have been recognised upon delivery of product.
An independent committee appointed by Valeant to investigate the problems has concluded that financial statements for the quarter ended 31 December 2014 contain misstatements and “should no longer be relied upon”.
The following quarterly, six month and nine month reports for 2015 also “cannot be relied upon” and the company is restating them.
Valeant said: “The improper conduct of the company’s former chief financial officer and former corporate controller, which resulted in the provision of incorrect information to the committee and the company’s auditors, contributed to the misstatement of results.”
The company said that “the tone at the top of the organisation and the performance-based environment at the company, where challenging targets were set and achieving those targets was a key performance expectation, may have been contributing factors resulting in the company’s improper revenue recognition.”
Schiller denied the accusations in a statement issued by his law firm.
Valeant said it intends to file restated financial statements with U.S. and Canadian regulators, included with an annual report. The company said that it will file this before April 29, thus avoiding a default on covenants in its credit facility.
Bill Ackman hopes to steady the ship, but investors have been spooked by a signs of mismanagement and alleged fraud, resulting in Valeant’s share price plunging by 90 per cent.
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