ANDREW KNEW ITWAS A BALL OF GASOLINE- SOAKED RAGS. HE THREWA MATCH ON IT. specialty pharmacy, a small one in California called R&O, was billed by Valeant for $69 million for drugs it did not buy. Further, Boyd reported, that pharmacy appeared to be closely related to Philidor. Left was ruminating on all this when the New York Times reported that Michael Pearson, Valeant’s chief executive, had set up an option to purchase Philidor . Now that was really weird. What company of Valeant’s size would bother with buying a regional pharmacy? Filling prescriptions was a totally separate business from selling medicines; you don’t see Toyota acquiring car dealerships. Unless, Left thought, the point was never to purchase it. Unless the point was to prove, by pretending to prepare to acquire it, that Philidor was a separate company to begin with. Trying to weave the threads into a narrative, Left released his third report. Valeant, he wrote, was the “pharmaceutical Enron.” Just as Enron established shell companies to inflate its balance sheets, he wrote, Valeant maintained a network of “ghost ship” pharmacies designed to buy product that no one had actually ordered, a form of fraud
known as channel stuffing. Left’s explanation would turn out to be inaccurate – the real fraud, if anything, was more tangled – but the swagger of his TV appearances represented the layup at the end of Boyd’s better-researched assist. Introducing the word “Enron” was the key, because it forced the news media to debate with great earnestness a question that, as of the day before, had never been asked. “ Is Valeant the pharmaceutical Enron? ” Fortune wondered. “ Report alleges Enron-like fraud ,” CNN said. Pearson called the comparison “erroneous” and asked the S.E.C. to investigate Left. But as any public-relations agent knows, if you’re denying, you’re already on the back foot. By the time the company announced an emergency news conference the following morning, the stock was down 40%. “Andrew erased the idea that buying Valeant was a smart strategy,” Boyd said. “I just thought it was a good story. Andrew knew it was a ball of gasoline-soaked rags. He threw a match on it.” Among those who smelled smoke was the United States attorney for the Southern District of New York, Preet Bharara. In November 2016, he indicted two men on charges of wire fraud and kickbacks: Gary Tanner, a senior executive at Valeant, and Andrew Davenport, the chief executive of Philidor. For all intents and purposes, the indictment alleges, Philidor was not an independent company. That much Left had suspected. What was shocking was the nature of the relationship between the businesses. It was not simple channel stuffing, the indictment alleges, but theft.
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