What’s this? Michael Pearson may not be the bad guy in the Valeant debacle after all

Criminal charges are finally coming down in the alleged fraud surrounding Valeant Pharmaceuticals, but from the looks of it, ousted CEO Michael Pearson may have been in the dark about the scam.

Reams have been written about Valeant and Philidor, but the complaint unveiled by Manhattan US Attorney Preet Bharara offered some stunning revelations about the two men who cooked up a multimillion dollar kickback scheme: a Valeant exec and the man who ran its notorious specialty pharmacy, Philidor.

Philidor CEO Andrew Davenport allegedly agreed to pay $10 million in kickbacks to Gary Tanner, who in 2012 became a Valeant exec after it acquired a company called Medicis –if Tanner could convince Valeant to buy Philidor, which would enrich Davenport. Tanner did that in 2014, which is when outsiders have thought the Valeant Philidor relationship began. According to the complaint, the secret illegal plan goes all the way back to 2012.

According to the FBI agent’s statement in the complaint, “In email communications between TANNER and DAVENPORT concerning the scheme, DAVENPORT, evoking images from the old Western, Butch Cassidy and the Sundance Kid, talked about how they would “ride into the sunset” together enjoying the game which I believe TANNER meant he would keep pretending to act solely in Valeant’ s interest, while in fact advancing DAVENPORT’ s and TANNER’ s personal interests.”

It may upset several journalists and some short sellers of Valeant stock to learn that Tanner consistently denied to Valeant execs that he had a financial relationship with Philidor and was expressly denied the option to have one. (The going theory was that Philidor was something Pearson had cooked up to push its expensive drugs, but if so, it was a terrible channel. Valeant actually lost money on the drugs routed through Philidor.)

Valeant ended up paying $300 million to Philidor, and Davenport routed the $10 million to Tanner through various offshore accounts with names like “End Game.” (Now, the end game looks like prison.)

Obviously Valeant’s largest investor , Bill Ackman, who was not even a board member at the time, knew nothing about this and no amount of due diligence could have uncovered it. But it looks like perhaps much-maligned Pearson (who is also under investigation) is also in the clear, at least on the Philidor-related charges.

Nonetheless, Pearson is gone and Ackman, whose Pershing Square hedge fund has lost billions of dollars in the process, is left to pick up the pieces. For some background, here is the Fortune profile I wrote about the fraying of their relationship.



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