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Company accusing former CFO of "improper conduct".


Yes. It looks like Ackman is going to clean house. They indirectly attribute this 'improper conduct' to "certain concerns related to those items with respect to the tone of the organization", and more specifically, " 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". (Quotes from today's PR.)

Reading between the lines, they seem to think that about $50m of Phildor revenue was recognized in late 2014 when it should have been recognized only in early 2015, perhaps to meet earnings targets so that management incentives would me maximized.

As for fixing this, "certain remediation actions have been recommended and are being implemented by the company, including placing the company's former Corporate Controller on administrative leave." These would include reviewing executives' compensation, where bonuses were obtained by the faulty reporting, and giving the boot to the CEO and CFO, and, presumably, revising the way they report revenue and, hopefully, earnings.

All in all, I think this is a good development for Valeant, and if it makes it more likely that they divest some assets, there may be reasonable returns going forward, although they will not come anywhere close to their previous valuation in the foreseeable future.

Regards, DTB
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