A publicly traded global pharmaceutical company and several former executives settled SEC charges for making misleading disclosures to investors in financial reports and earning presentations.
According to the SEC Order, the pharmaceutical company failed to disclose that a significant revenue increase in the second quarter of 2015 resulted from a 500 percent increase in the price of one drug. The SEC found that the pharmaceutical company attributed the increase to numerous products which was misleading.
The SEC also found that the pharmaceutical company failed to disclose that much of its sales increase came from sales it made to a mail-order pharmacy that the company helped to create and subsidize. According to the SEC Order, the pharmaceutical company improperly recognized the revenue, failed to disclose its relationship to the mail-order pharmacy and failed to disclose associated risks.
To settle the charges, the pharmaceutical company agreed to (i) cease and desist from future violations of securities regulations and (ii) pay a civil money penalty of $45,000,000. The SEC considered remedial acts taken promptly by the pharmaceutical company in determining to accept the offer of settlement.
In separate SEC Orders (see here, here and here), former executives of the pharmaceutical company agreed to cease and desist from future violations of securities regulations, and two of the former executives agreed to pay civil money penalties of $100,000 and $250,000, respectively. The other former executive is banned for one year from practicing as an accountant, upon which time she may reapply for registration with SEC.
Primary Sources
- SEC Press Release: Pharmaceutical Company and Former Executives Charged with Misleading Financial Disclosures
- SEC Order: Valeant Pharmaceutical Companies International, Inc., now known as Bausch Health Companies Inc.
- SEC Order: Howard B. Schiller
- SEC Order: J. Michael Pearson
- SEC Order: Tanya R. Carro
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