A former executive at Valeant Pharmaceuticals International Inc. and the former head of a startup mail-order pharmacy were sentenced to one year in prison on Tuesday after being convicted of defrauding the drug maker through a secret kickback scheme.
Gary Tanner, 41, the former Valeant executive, and Andrew Davenport, 50, the former chief executive of Philidor Rx Services LLC, were also ordered to forfeit US$9.7-million, representing the alleged kickbacks.
The sentences were imposed by U.S. District Justice Loretta Preska in Manhattan.
Both defendants had been convicted in May on four charges, including honest services wire fraud and conspiracy to commit money laundering.
Prosecutors had recommended prison terms of between 2½ and 10 years for Mr. Tanner, and 2½ and eight years for Mr. Davenport. The defendants said no prison time was justified.
Lawyers for Mr. Tanner and Mr. Davenport did not immediately respond to requests for comment.
The case was the first criminal prosecution arising from multiple probes into Valeant’s business practices, including its ties to the now-defunct Philidor.
Those ties began drawing scrutiny in October, 2015, when investors learned that Valeant had in 2014 acquired an option to buy Philidor, and was suspected of using it to boost sales.
The revelations contributed to a steep fall in Valeant’s share price that was compounded by the probes and the Laval-based company’s heavy debt load.
Management was overhauled, and Valeant changed its name to Bausch Health Cos in July, taken from the name of its Bausch & Lomb eye-care unit.
Mr. Tanner had managed Valeant’s relationship with Philidor as well as Valeant’s “alternative fulfillment” program, through which the drug maker sought to increase prescriptions for its own drugs instead of generic substitutes.
Prosecutors accused Mr. Tanner of steering Valeant business to Philidor, while concealing a US$9.7-million kickback from Mr. Davenport that came from the roughly US$50-million Mr. Davenport received when Valeant acquired the option to buy his company.
“I deeply regret giving money to Gary Tanner,” Mr. Davenport told Justice Preska.
Prosecutors said that to keep the scheme secret, Mr. Tanner often used an e-mail account with the name “Brian Wilson” to communicate with Mr. Davenport and sabotage potential business with rival pharmacies.
“Tanner was entrusted to manage Valeant’s relationship with Davenport’s company,” U.S. Attorney Geoffrey Berman said in a statement. “Instead, they devised a scheme to pillage Valeant and share the proceeds.”