Valeant Pharmaceuticals International Inc.'s former chief executive officer accused the drug maker of failing to deliver 3 million shares promised him as part of an exit package.
Ex-CEO Michael Pearson stepped down in May after Valeant's shares plummeted and it became the subject of U.S. Justice Department and congressional investigations. In his lawsuit filed Monday, he claimed the company promised him 580,676 restricted shares and 2.46 million performance shares. Based on Monday's closing price of $10.81, that number of shares would have a market value of $32.8-million, although exhibits to the lawsuit suggest the value for Pearson could be higher.
"Despite Mr. Pearson's attempts to resolve this dispute outside of the courts, and to his severe detriment, Valeant has refused to deliver the shares and to meet certain of its other remaining obligations," providing no factual or legal support for its position, according to the complaint in federal court in New Jersey.
In January, Pearson's lawyer was worried about the tax implications of the undelivered shares and asked for an explanation, according to the complaint. An outside attorney for the company wrote back: "Valeant believes it would be inappropriate or inequitable in the current environment for Mr. Pearson to receive additional compensation – to the tune of millions of dollars – at a time when countless other Valeant employees have been asked to sacrifice for the good of the company and its shareholders."
Valeant also owes Pearson $180,000 in consulting fees, although it has made good on its promise to provide a $9-million severance payment, insurance coverage, office space and an administrative assistant, according to the complaint.
A spokesman for Valeant declined to comment on the lawsuit.
Pearson stepped down as CEO in May, amid increasing controversy at the company. Its stock continued to fall after his departure, and this month Valeant announced a refinancing with creditors intended to buy it more time to pay off debt.
His successor at Valeant, Joseph Papa, is one of the drug industry's best-paid executives – though with one large caveat. Papa's $62.7-million 2016 pay package includes almost $40-million in stock and options that are worthless unless the shares increase.
Valeant, which is headquartered in Quebec but run mostly out of the U.S., changed its executive bonus program by linking future payouts to earnings before interest, taxes, depreciation and amortization instead of adjusted earnings per share. Analysts say the move was made to please creditors, who closely monitor Ebitda.
The case is Pearson vs. Valeant, U.S. District Court, District of New Jersey (Trenton).