NEW YORK — Federal prosecutors are focusing on Valeant Pharmaceuticals International Inc.’s former CEO and CFO as they build a fraud case against the company that could yield charges within weeks, according to people familiar with the matter.
Authorities are looking into potential accounting fraud charges related to the company’s hidden ties to Philidor Rx Services LLC, a specialty pharmacy company that Valeant secretly controlled, the people said. Federal prosecutors in Manhattan and agents at the Federal Bureau of Investigation in New York have been investigating the company for at least a year.
Federal prosecutors in Boston and Philadelphia are also said to be conducting separate inquiries of Valeant. Boston’s investigation, according to a person familiar with the matter, focuses on Valeant’s payments to charities that then helped patients make copayments for the soaring cost of Valeant drugs, some of the most expensive on the market. The Philadelphia case is examining Valeant’s billing of government health care programs for the company’s drugs, another person said.
The US attorney’s office in Boston didn’t respond to a request for comment. Michele Mucellin, a spokeswoman for the US attorney in Philadelphia, declined to comment.
Prosecutors are examining the actions of J. Michael Pearson, Valeant’s former chief executive officer, and Howard Schiller, the former chief financial officer who became interim CEO during a medical leave by Pearson, according to the people, who discussed the confidential proceedings on the condition of anonymity. Prosecution of individual executives could go beyond just those two, one person said, adding that Philidor executives could also be charged.
“We are in frequent contact and continue to cooperate’’ with US authorities, Valeant said in a written statement. “We do not comment on rumors about investigations, and cannot comment on or speculate about the possible course of any ongoing investigation. Valeant takes these matters seriously and intends to uphold the highest standards of ethical conduct.’’
A Pearson lawyer, Bruce Yannett, declined to comment. Dan K. Webb, a lawyer for Schiller, didn’t immediately comment. Spokesmen for the FBI and Preet Bharara, the US attorney in Manhattan, declined to comment. Jonathan Rosen, a lawyer for Philidor, didn’t respond to requests for comment.
No charging decisions have been made and the case remains fluid, the people said. Among the possibilities, the Justice Department could settle with the company and later take action against individuals.
Valeant shares dropped more than 12 percent to $17.84 in New York, the lowest closing pricing since June 2010. The company’s most actively traded debt, $3.25 billion of 6.125 percent notes due in 2025, dropped 2 cents to 77 cents at 4:09 p.m. in New York according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.
Prosecution of top corporate executives over accounting fraud allegations is a rare step, and the complexity of such cases can make them hard to bring.
