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The head office and logo of Valeant Pharmaceuticals are pictured in Montreal on May 27, 2013. Valeant Pharmaceuticals, now known as Bausch Health, was an investor darling, with a market capitalization that topped $100-billion in the summer of 2015.

Ryan Remiorz/The Canadian Press

The U.S. Securities and Exchange Commission said the former Valeant Pharmaceuticals Inc., once Canada’s most valuable company, will pay US$45-million to settle charges it misled investors during its boom years about its revenue growth and profits.

The company, now known as Bausch Health Cos. Inc., avoided a formal finding of securities fraud in Friday’s settlement. The SEC also settled with three former executives, including CEO Michael Pearson. As part of the settlement, Neither Bausch nor any of the three admitted or denied the findings.

Valeant was an investor darling, with a market capitalization that topped $100-billion in the summer of 2015 – when it became the largest company on the TSX – as investors embraced what Mr. Pearson was selling: A drug company that snapped up smaller drug companies and their underpriced products, rather than spending billions on drug development.

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All along, however, there were aggressive accounting choices, as a handful of skeptics, including Toronto’s Veritas Investment Research observed. Ultimately, the company ran into political trouble for its pricing practices, and investors turned against the company’s debt-heavy, growth-through-acquisition model as questions about its finances increased.

In the settlement, Mr. Pearson, former chief financial officer Howard Schiller and former controller Tanya Carro agreed to pay civil penalties of US$250,000, US$100,000 and US$75,000, respectively. Mr. Pearson and Mr. Schiller also agreed to reimburse Valeant US$450,000 and US$110,000 respectively.

Valeant emphasized an “organic growth” measure that included sales to a company called Philidor. Valeant helped establish Philidor but failed to disclose its relationship with the company, and should not have booked the sales it made to it, the SEC said. Valeant ultimately restated its financials to remove the revenue.

The SEC also said Valeant failed to disclose the true effects of a 500-per-cent price increase of a single drug it acquired in April, 2015. Valeant instead told investors the revenue came from more than 100 unrelated products.

Michele Layne, director of the SEC’s Los Angeles regional office, said in a statement that “when public companies and their senior executives tout strong financial measures, they must provide investors with all of the information needed to make fully informed investment decisions.”

The SEC thanked the Autorité des marchés financiers, Quebec’s securities regulator, for assistance in its announcement Friday.

For Mr. Pearson, the fine is a tiny fraction of the wealth he retained even after Valeant crumbled.

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Mr. Pearson’s stock, largely awarded to him as incentive compensation, was worth more than US$2.8-billion in July, 2015. By March, 2016, when Valeant revealed it had received a subpoena from the SEC, the stock was worth $600-million. Mr. Pearson left the company in May, 2016.

In a statement, Bausch CEO Joseph Papa said the company “co-operated closely with the SEC during its investigation, and we appreciate that the SEC acknowledged the significant remedial actions of our current leadership team and Board of Directors in the settlement agreement.”

In 2018, Valeant rebranded itself as Bausch Health, taking part of the name of its well respected eye-care subsidiary Bausch + Lomb.

In December, Bausch said it had agreed to pay US$1.21-billion to settle a U.S. class action lawsuit filed by investors over the stock’s 90-per-cent drop from its peak to its 2016 lows.

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