Cefort Cefort Cefort Cefort: United States District Court District of New Jersey

Case 3:17-cv-07636-MAS-LHG Document 1 Filed 09/28/17 Page 1 of 158 PageID: 1
StephenW . Tountas SerenaP. H allowell(prohacviceforthcoming)

K ASO W ITZ BENSO N TO R R ES LLP JonathanGardner(prohacviceforthcoming)
O neGatewayCenter EricJ. Belfi(prohacviceforthcoming)
Suite2600 ThomasW . W atson(prohacviceforthcoming)
Newark, NJ07102 LABATO N SUCH AR O W LLP
Tel: (9 73)645-9 462 140 Broadway
Fax: (9 73)643-2030 New Y ork, NY 10005
Tel: (212)9 07-0700
LocalCounselforPlainti
ffs
CounselforPlaintif
fs
UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY
TH E BO EING CO M PANY EM PLO Y EE CivilCaseNo. ____________________
R ETIR EM ENT PLANS M ASTER TR UST
andTH E BO EING CO M PANY
EM PLO Y EE SAVINGS PLANS M ASTER COMPLAINT AND DEMAND FOR JURY
TR UST, TRIAL
Plaintiffs,
v.
VALEANT PH AR M ACEUTICALS
INTER NATIO NAL, INC.;J. M ICH AEL
PEAR SO N;H O W AR D B. SCH ILLER ;
R O BER T L. R O SIELLO ;TANY A CAR R O ;
andPR ICEW ATER H O USECO O PER S,
D efendants.
TABLE OF CONTENTS
Page
I. INTR O D UCTIO N .............................................................................................................. 1
II. JUR ISD ICTIO N AND VENUE ......................................................................................... 6
III. PAR TIES ............................................................................................................................ 6
A. Plaintiffs.................................................................................................................. 6
B. D efendants.............................................................................................................. 7
IV. TH E ENTER PR ISE ............................................................................................................ 9
A. TheValeantEnterpriseM embers........................................................................... 9
1. Valeant........................................................................................................ 9
2. Pearson...................................................................................................... 10
3. Schiller...................................................................................................... 11
4. R osiello..................................................................................................... 12
5. Carro......................................................................................................... 13
6. Tanner....................................................................................................... 13
7. O therValeantEmployees......................................................................... 15
B. ThePhilidorEnterpriseM embers......................................................................... 16
1. Philidor...................................................................................................... 16
2. Andrew D avenport.................................................................................... 17
3. M atthew D avenport.................................................................................. 18
C. ValeantBoardM embersAndAuditCommittee.................................................. 18
D. PwC....................................................................................................................... 19
E. O therEnterpriseM embers.................................................................................... 20
V. TH E CR IM INALSCH EM E ............................................................................................. 21
A. Valeant’sD eceptiveBusinessM odel................................................................... 21
i
1. GrowthByAcquisition............................................................................. 21
2. PriceGouging........................................................................................... 22
3. TheEnterpriseInflatesSalesThroughA SecretNetworkO f
CaptivePharmacies................................................................................... 25
4. TheEnterpriseEnsuresSalesO fPrice-GougedD rugsBy

M anipulatingPatientAssistantProgramsAndA Specially
D esignedPR Campaign............................................................................ 28
5. ThroughPhilidor, TheEnterpriseCreatesA NationalNetworkO f

CaptivePharmacies................................................................................... 30
6. ValeantFormalizesItsControlO verPhilidorThroughExecution
O fAnUndisclosedPurchaseO ptionAgreement..................................... 35
B. D efendant’sAccountingViolations...................................................................... 36
1. Valeant’sGAAPR esponsibilities............................................................. 36
2. PricewaterhouseCooper’sGAAS R esponsibilities................................... 40
3. ValeantandPwC’sViolationsofGAAPandGAAS............................... 43
C. TheEnterprise’sM aterialM isrepresentationsAndO missions............................ 47
1. TheEnterpriseFalselyAttributedValeant’sR apidR evenue

IncreasestoO rganicVolumeGrowthandO bscuredValeant’s
R elianceonPriceIncreases...................................................................... 50
2. M isrepresentationsconcerningPhilidor................................................... 63
(a) D efendants’incompleteandmisleadingdescriptionsofthe
AlternateFulfillmentProgram...................................................... 64
(b) D efendants’misrepresentationsandomissionsregarding
PhilidorpriortotheD ecember2014 purchaseoption
agreement...................................................................................... 66
(c) D efendants’omissionsandmisstatementsregarding
PhilidoraftertheD ecember2014 purchaseoption
agreement...................................................................................... 69
3. M isrepresentationsR elatedtotheM anipulationofR evenue

R ecognition............................................................................................... 72
(a) ValeantM ateriallyO verstatesItsR eportedR evenue................... 72
ii
4. Valeant’sComplianceW ithGAAP.......................................................... 77
5. Valeant’sCertificationsO fInternalControls........................................... 79
6. PwC’s2014 AuditO pini

on....................................................................... 82
7. D efendants’ContinuedM isstatementsandO missionsasthe

Enterprise’sCriminalSchemeBeginstoUnravel.................................... 84
VI. TH E SCH EM E’S CO NNECTIO NS TO NEW JER SEY ............................................... 109
VII. SUM M AR Y O FD EFEND ANTS’SCIENTER ............................................................. 110
A. TheIndividualD efendants’R oleinValeant’sUnsustainableBusinessM odel. 111
B. IndividualD efendants’ControlofPhilidor........................................................ 114
C. Valeant’sR efusaltoPursueR emediesAgainstW rongdoers............................. 120
D. ExecutiveD epartures.......................................................................................... 121
E. ExecutiveCompensation.................................................................................... 122
F. InflatingValeant’sStockPriceToFacilitateAcquisitions................................. 125
G. InternalValeantCommunicationsandCongressionalTestimony...................... 126
VIII. R ELIANCE ..................................................................................................................... 127
IX. LO SS CAUSATIO N....................................................................................................... 132
X. NO SAFE H AR BO R ...................................................................................................... 133
XI. D AM AGES..................................................................................................................... 133
XII. CAUSES O FACTIO N ................................................................................................... 136
CO UNT I R ACK ETEER ING IN VIO LATIO N O FN.J. STAT. ANN.

2C:41-2(c)(AgainstallD efendants)....................................................................136
CO UNT II R ACK ETEER ING IN VIO LATIO N O FN.J. STAT. ANN.

2C:41-2(d)(AgainstallD efendants)...................................................................143
CO UNT III AID ING AND ABETTING R ACK ETEER ING IN VIO LATIO N
O F N.J. STAT. ANN. 2C:41-2(c)AND (d)(AgainstallD efendants)................145
CO UNT IVVIO LATIO NS O FSECTIO N 10(b)O FTH E SECUR ITIES

EXCH ANGE ACT O F19 34 AND R ULE 10b-5 (AgainstallD efendants)......145
iii
CO UNT VVIO LATIO NS O FSECTIO N 18 O FTH E SECUR ITIES

EXCH ANGE ACT O F19 34 (AgainstD efendantsValeant,Pearson,
Schiller, andR osiello)..........................................................................................147
CO UNT VI VIO LATIO NS O FSECTIO N 20(a)O FTH E SECUR ITIES

EXCH ANGE ACT O F19 34 (AgainstD efendantsPearson, Schiller, and
R osiello)...............................................................................................................148
CO UNT VII CO M M O N LAW FR AUD /FR AUD ULENT IND UCEM ENT
(AgainstallD efendants)......................................................................................150
CO UNT VIII NEGLIGENT M ISR EPR ESENTATIO N (AgainsttheValeant

D efendants)..........................................................................................................151
XIII. PR AY ER FO R R ELIEF................................................................................................. 152
XIV. JUR Y D EM AND ............................................................................................................ 152
iv
Plaintiffs, as defined below, through theirundersigned counsel, allege the following
based upon the investigation ofcounseland personalknowledge as to plaintiffs and their
purchaseofsecuritiesofValeantPharmaceuticalsInternational, Inc. (“Valeant”or“VR X”orthe
“Company”).1 The investigation included, butwasnotlimited to, a review and analysisof:
filingsmadebyValeantwiththeUnitedStatesSecuritiesandExchangeCommission(“SEC”);
pressreleasesissued by Valeant; transcriptsofValeant’spublic earningscallsand investor
conferences; media reports concerning Valeant; pleadings in civil litigations, regulatory
proceedingsandcriminalactions;consultationwithexperts;testimony, interrogatoryresponses
and documentssubmitted to theU.S. SenateSpecialCommitteeon Aging;and otherpublicly
availableinformation.
I. INTRODUCTION
1. Thisactionarisesfrom amassive, fraudulentschemeperpetratedbyValeant, its
seniorexecutives, auditors, andthoseworkinginconcertwiththem toartificiallyinflatetheprice
of Valeant’s securities through a clandestine pharmacy network, deceptive pricing and
reimbursement,andfictitiousaccounting.
2. Valeantisapharmaceuticalandmedicaldevicecompanythatisengagedinthe
manufacturing and marketing of branded and generic drugs. Traditional pharmaceutical
1
L. Civ. R . 10.1 Statement: PlaintiffsTheBoeingCompanyEmployeeR etirementPlans
M asterTrustandTheBoeingCompanyEmployeeSavingsPlansM asterTrustaretax-qualified
trustsfundingretirementplanssponsoredbyTheBoeingCompanyandaffiliates, andarelocated
at100 NorthR iverside, Chicago, IL60606;D efendantValeantPharmaceuticalsInternational,
Inc. (“Valeant”)hasitsU.S. H eadquartersat400 SomersetCorporateBlvd., Bridgewater, NJ
08807;D efendantPricewaterhouseCoopersLLP(“PwC”)hasitsprincipalplaceofbusinessat
300 M adisonAvenue, New Y ork, NY 10017;D efendantM ichaelPearson’s(“Pearson”)address
is74 VillageR oad, New Vernon, NJ079 76;D efendantH owardSchiller’s(“Schiller”)addressis
40 M ontview Ave., ShortH ills, NJ07078;D efendantR obertL. R osiello’s(“R osiello”)address
is55 D avisH illR oad, W eston, CT 06883-2003;andD efendantTanyaCarro’s(“Carro”)address
is231 R onanW ay, Branchburg, NJ08853-4184.
1
companies spend 15–20% of revenues on research and development (“R & D ”) of new
medicationsto treatand curediseases. New drugsenjoyaperiod ofexclusivityduringwhich
timegenericequivalentsareexcludedfrom themarkettoallow thepharmaceuticalcompanyto
recoupitsR & D costsandgenerateaprofit.
3. By contrast, Valeant implemented a growth-by-acquisition model, whereby
Valeant acquired already-established pharmaceuticals from other companies, massively
increasedthepricesofthoseproducts, anddrovesalesthroughdeceptiveandunlawfulpractices.
In furtherance ofthis objective, Valeanttargeted “orphan drugs” which treatrare medical
conditionsandfacelittleornogenericcompetition. Forexample, in2014, Valeantidentifiedtwo
medications used to treat emergency heart conditions, Nitropress and Isuprel, which the
Company believed had pricing “flexibility by multipleordersofmagnitude.”Two daysafter
acquiring the rights to Nitropress and Isuprel from M arathon Pharmaceuticals LLC
(“M arathon”), Valeant massively increased the prices of the drugs by 212% and 525%,
respectively. Valeantemployedsimilartacticswithdozensofotherdrugs.
4. The mastermind behind Valeant’s growth-by-acquisition and price-gouging
strategieswasitsformerChairmanandChiefExecutiveO fficer(“CEO ”), M ichaelPearson. A
formerM cK inseyconsultant, withnobackgroundinmedicineorpharmaceuticals, Pearson, who
joinedValeantin2008, believedR & D investmenttoprovidelow returnsbecauseitoftenfailed
toresultinmarketabledrugs. Accordingly, underPearson’stenure, Valeant’sR & D costswere
scaledbackto3% ofrevenue. Insteadofinvestinginresearch, between2008 and2015, Valeant
completed over100 acquisitionsatacostofover$40 billion, which theCompany financed
throughitspositivecashflow andnewlyissueddebtandequitysecurities.
2
5. Toperpetuatetheschemeandfinanceadditionalacquisitions, Pearsonandthose
workinginconcertwithhim soughttoconvinceinvestorsofthelong-term valueoftheirstrategy
andassuageconcernsthatValeant’sgrowth-by-acquisitionmodelwaslimit
edbytheexistenceof
feweracquisitiontargetsandincreasinglevelsofdebtfinancing. Infurtheranceofthisobjective,
Valeantand itsseniorexecutivesconsistentlyrepresented to investorsthatValeant’sdramatic
growthinrevenueandprofitabilitywastheresultofValeant’ssuperiormarketing, salesteams,
andleadership— whichresultedinsalesvolumeincreasesthatwere“greater than price in terms
of our growth.”D efendantsfurtherassuredinvestorsthatValeanthadstronginternalcontrols
and compliance, and that its accounting complied with Generally Accepted Accounting
Principles(“GAAP”). Theserepresentationswereknowingly, orrecklessly, false.
6. Inresponsetotheseandothersimilarmisrepresentations, between2012 and2015,
Valeant’sstock pricesoared nearly350% from justover$60 to ahigh of$262 on August5,
2015. Likewise, Valeantsolddebtsecuritiestothemarketatinflatedprices.
7. In fact, unbeknownstto investors, Valeant’srevenuegrowth relied on asecret
network ofcontrolled pharmaciesand deceptive businesspracticesimplemented to facilitate
Valeant’sextremeprice-hikesand shield Valeant’sproductsfrom genericcompetition. Atthe
centerofthisnetworkwasPhilidor, aPennsylvaniamail-orderpharmacy, foundedin2013 with
theassistanceofValeant, includingtheprovisionoffinancing, staffing, andsupervision. Valeant
then created a seriesofshellcompaniesowned through Philidor, which D efendantsused to
acquireinterestsinadditionalretailpharmaciesallovertheUnitedStates.
8. Philidoremployees, as wellas Valeantemployees working atPhilidorunder
aliases, wereinstructedtoemployahostofdeceptiveandillegal“backdoor”practicestoprevent
the substitution ofcheapergeneric equivalents forValeant-branded drugs. These backdoor
3
practiceswerecatalogued in employeemanuals, including: (i) changing prescription codeson
claimsto ensurethattheprescription befilled with Valeant’sbrand-namedrugsratherthan a
genericequivalent;(ii) makingclaimsforrefillswithoutpatientrequest;(iii)misrepresentingthe
identity ofdispensing pharmaciesto bypassdenialsofclaimsforValeantdrugs; (iv)waiving
patientco-paystoremovepatients’incentivetoseekoutcheaperdrugs, andthenmisrepresenting
the “actualcharges” forValeantdrugs by failing to accountforthe co-pay waivers; and
(v)utilizing pharmacieswithin theEnterprise, defined below, to enablePhilidorto indirectly
operateinstateswhereithadbeendeniedalicense. M anyofthesepracticesviolatedapplicable
lawsandregulationsand/orValeant’scontractswiththirdpartypayors.
9. To solidify its controlover Philidor and artificially inflate its revenues, in
D ecember 2014, Valeantentered into an undisclosed “Purchase O ption Agreement” with
Philidorpursuantto which itpaid $100 mil

lion, plusvariousmilestone paymentsbased on
Philidorsales, fortheten-yearoptiontoacquirePhilidorfor$0.
10. Notwithstanding Valeant’s consolidation of Philidor in its financial results,
D efendants, workinginconcertwithValeant’sinternalandexternalauditors, D eloitte& Touche,
LLP andPricewaterhouseCoopersLLP, respectively, deliberatelyconcealedfrom regulatorsthe
ownership and controlofPhilidorin violation ofGAAP and Generally Accepted Auditing
Standards(GAAS), andissuednumerousfalseandmisleadingstatementstoamultitudeofother
constituencies, includinginvestorsandgovernmentregulators.
11. The fal

lout from t
he unmaski
ng of Val
eant
’s fraudul
ent scheme has been
devast
ati
ng. ShortlyafterValeant’srelationshipwithPhi
lidorwasexposedinO ctober2015, the
threelargestpharmacybenefitmanagersintheU.S. announcedthattheyweredroppingPhilidor
4
from their networks. Almostimmediately thereafter, Valeantwas forced to announce the
terminationofitsrelationshipwithPhil
idor.
12. TherevelationofpervasivemisconductatValeanthasalsoforcedthedepartureof
mostof the senior executives and directors responsible for the wrongdoing. Valeanthas
specificallyattributeditsfictitiousaccountingtothe“improperconduct”ofH owardSchiller, its
formerCFO , TanyaCarro, itsformerCorporateController, aswellastheunethical“toneatthe
top”setbyseniormanagement, includingPearson, itsformerCEO . TheseValeantexecutives
havenow beenterminatedandreplaced. Inaddition, Valeanthasannouncedthereplacementof
themajorityofitsAuditCommittee, whoreviewedandapprovedtheaccountingforPhilidorand
conductedduediligenceofthePhilidorPurchaseO ptionAgreement.
13. Val
eanthasal
sowi
thdrawni
tsfi
nancialstat
ement
sandacknowl
edgedt
hem t
obe
fal
se, restat
ed i
tsrevenueforfi
scalyear2014, drast
ical
ly reduced i
tsrevenueand profi
tabi
lity
gui
dancefor2015 and 2016, and admi
tted t
hattheCompany’sdi
scl
osurecont
rol
sand i
nternal
cont
rolsoverfi
nancialreport
inghadbeeni
nadequat
e. Current
ly, Val
eanti
sthefocusofnumerous
governmenti
nvest
igat
ions, i
ncl
udi
ngbyt
heSEC, t
heSt
ateofTexas, theSt
ateofNort
hCarol
ina,
andbot
hhousesofCongress, aswel
lasacri
minalprobebyt
heU.S. D epart
mentofJust
ice. In
NovemberandD ecember2016, aformerseni

orexecut
iveatVal
eant
, GaryTanner(“Tanner”), and
t
he formerCEO atPhi
lidor, Andrew D avenport, were arrested on fourcount
s offraud and
conspiracyi
nconnect
ionwi
tht
hemassi
veschemet
ofraudul
ent
lypeddl
eVal
eantpharmaceut
ical
s.
O nJanuary27, 2017, t
heywerenamedasdefendant
sinanindi
ctmentfi
ledi
ntheSout
hernDi
stri
ct
ofNew York.
14. Defendant
s’fraudulentscheme had a devast
ating i
mpacton i
nvestors. As t
he
marketl
earnedt
het
rut
haboutValeant
, Val
eant
’sst
ockpricepl
ummetedfrom ahighofover$262
5
pershareonAugust5, 2015 t
olesst
han$15 onAugust19 , 2016, adecl
ineofmoret
han9 0%, and
t
heval
ueofi
tsdebtsecuri
tiessi
mil
arly col
lapsed. In t
otal
,theCompany’sshareholdershave
suffered over$80 bi
lli
on i
n marketcapi
tal
izat
ion l
ossest
o date. Theenterprise’sreach wasso
widespreadanddevastatingthatcommentatorshavedubbeditthe“PharmaceuticalEnron.”
II. JURISDICTION AND VENUE
15. This Courthas jurisdiction over this action pursuantto Section 27 of the
ExchangeAct, 15 U.S.C. §78aa, and28 U.S.C. §1331, andhassupplementaljurisdictionover
thestatelaw claimspursuantto28 U.S.C. §1367(a).
16. VenueisproperlyinthisD istrictpursuanttoSection27 oftheExchangeAct,and
28 U.S.C. §139 1. TheactsandconductdescribedinthisComplaint,includingthedissemination
offalseandmisleadingstatementsandinformation, occurredinsubstantialpartinthisD istrict.
17. Inconnectionwiththeseacts, D efendants, directlyorindirectly, usedthemeans
and instrumentalities of interstate commerce, including the United States mails, interstate
telephonecommunications, andthefacilitiesofanationalsecuritiesexchangeandmarket.
III. PARTIES
A. Plaintiffs
18. PlaintiffsThe Boeing Company Employee R etirementPlansM asterTrustand
TheBoeingCompanyEmployeeSavingsPlansM asterTrust(collectively, the“BoeingTrusts”
or“Plaintiffs”)aretrustsestablishedbyTheBoeingCompany. Atallrelevanttimes, theBoeing
Trusts’ investments in ValeantSecurities were made and managed by outside investment
managers, whohadfullauthority, andtheresponsibilitytomakeandmanagetheseinvestments.
19 . PlaintiffspurchasedValeantsecuritiesbetweenJanuary10, 2015 andM arch23,
2106 atpricesthatweremateriallyinflatedasaresultofthemisrepresentations, omissions, and
otherunlawfulconductallegedherein, andsufferedmassiveeconomiclosseswhenthemarket
6
pricesofthosesecuritiescollapsedfollowingtherevelationoftheillegalschemeallegedherein.
Specifically Plaintiffs purchased Valeant’s common stock and Valeant’s 5.375% notes due
M arch15, 2020 (CUSIP 9 1831AAA9 ) (the“5.375% Notes”);Valeant’s6.125% notesdueApril
15, 2025 (CUSIP 9 1831AAC5) (the“6.125% Notes”);Valeant’s5.5% notesdueM arch1, 2023
(CUSIP 9 19 11K AE2) (the “5.5% Notes”); Valeant’s7.5% notesdue July 15, 2021 (CUSIP
9 29 12EAA1) (the “7.5% Notes”); Valeant’s6.75% notesdue on August15, 2018 (CUSIP
9 29 12EAC7) (the “6.75% Notes”); and Valeant’s5.875% Notesdue M ay 15, 2023 (CUSIP
9 1831AAB7)(the“5.875% Notes”)(collectively, the“ValeantNotes”).
B. Defendants
20. D efendantValeantisaCanadian corporation, which hasitsU.S. headquarters,
nerve center, and principal place of business, at 400 Somerset Corporate Boulevard,
Bridgewater, NJ. Valeantisapharmaceuticalandmedicaldevicecompanythatmarketsabroad
rangeofbranded, genericandbrandedgenericpharmaceuticals, over-the-counterproducts, and
medicaldevices, directly orindirectly, in over100 countries. Valeantisone ofthe largest
pharmaceuticalcompaniesintheUnitedStates. SharesofValeantstocktradeontheNY SE and
theTSX underthetickersymbol“VR X.”Inaddition, Valeantissuednumerousdebtsecurities
thattradedduringtherelevantperiod.
21. D efendantPearsonservedasValeant’sCEO andamemberofValeant’sBoardof
D irectorsfrom February 2008 untilM ay 3, 2016, exceptduring January and February 2016,
duringwhichtimePearsontookamedicalleaveofabsence. From M arch2011 throughJanuary
2016, Pearson served astheChairman ofValeant’sBoard ofD irectors. O n M arch 21, 2016,
Valeantannounced thatPearson had been terminated. D uringhistenureatValeant, Pearson’s
compensation, includingcashandstockawards, was$7 millionin2013, $10.3 millionin2014,
7
and$14.3 millionin2015. M oreover, between2013 and2015, PearsonheldValeantstockand/or
stockawardsvaluedatover$2 billion.
22. D efendantSchillerservedasValeant’sCFO andanEVP oftheCompanyfrom
D ecember2011 untilJune30, 2015, whenheresignedfrom bothpositions. Schilleralsoserved
asamemberofValeant’sBoard ofD irectorsfrom September2012 untilJune14, 2016. O n
M arch 21, 2016, Valeantannounced thatSchil

lerhad engaged in “improperconduct” that
“contributed to themisstatementof[financial]results”and led to Valeant’srestatementofits
historicfinancialstatementsforfiscal2014 and thefirstquarterof2015. In 2013 and 2014,
Schiller’s compensation, including cash and stock awards, was $4 million and $27 million,
respectively.
23. D efendantR osiello served as Valeant’s CFO and EVP from July 2015 until
D ecember31, 2016. R osiellobrieflyservedasamemberofthethree-person“O fficeoftheChief
ExecutiveO fficer,”alongwith ChiefGeneralCounselR obertChai-O nn and Group Chairman
AriK ellen, inJanuaryandFebruary2016 inPearson’sabsence. R osielloworkedwithPearsonat
M cK insey& CompanypriortojoiningValeant.
24. D efendantCarro served asValeant’sCorporateControllerand in thatcapacity
oversaw thepreparation ofValeant’sfinancialreportsand audits, and participated in investor
conference calls. O n M arch 21, 2016, Valeant announced Carro had been placed on
administrativeleaveaftercommitting“improperconduct”relatedtoValeant’srestatement.
25. D efendantsPearson, Schiller, R osiello, and Carro arereferred to herein asthe
“IndividualD efendants”and, withValeant,asthe“ValeantD efendants.”
26. D efendantPricewaterhouseCoopersLLP (“PwC”) isanaccountingfirm basedin
theU.S. withitsprincipalplaceofbusinesslocatedat300 M adisonAvenue, New Y ork, NY .
8
PwC served asthe outside auditorsforboth Valeantand Philidor. Throughoutthe relevant
period, PwC conductedt

heauditsofValeant’syear-endfinancialresultsandsignedcleanaudit
opinionswhichwereaffixedtoeachofValeant’syear-endfinancialstatements.
IV. THE ENTERPRISE
27. Theunlawfulschemedescribed herein wasdevised and executed by an illegal
enterprise (the “Enterprise”) consisting of various legally distinct but associated-in-fact
pharmaceutical companies, specialty pharmacies, auditors, individuals, and others who
associated togetherforthepurposeofcarrying outthepattern ofracketeeringactivityalleged
herein, including, butnotlimi

tedto, usingthemailsandwirestodefraudinvestors, engagein
marketmanipulation, obtainillegalkickbacks, transportandtransmitmisappropriatedfundsand
property through interstate commerce, and conspiraciesto do the same. The enterprise was
comprisedof, amongothers, thefollowingmembers:
A. The Valeant Enterprise Members
1. Valeant
28. Beginningin2008, underthedirectionofitsnew CEO , Pearson, Valeant
identifiedanew revenuegrowthstrategy. Insteadofinvestingsignificantportionsofitsrevenues
into R & D to develop orimprove pharmaceuticalproducts, which had a low rate ofreturn,
Valeantsetouttoacquirepharmaceuticalcompanieswithalready-establishedproductstosell,
allowingValeanttocutR & D costs. Between2008 and2015, Valeantpurchasedmorethan100
pharmaceutical companies and drug portfolios, including M edicis Pharmaceutical Corp.
(“M edicis”) (for $2.6 billion), Bausch & Lomb H oldings Inc. (for $8.7 billion), Salix
Pharmaceuticals, Ltd. (for$14.5 billion), SproutPharmaceuticals, Inc. (for$1 billion), and
M arathon’sdrugsIsuprelandNitropress(for$350 million) whichallnow fallundertheaegisof
Valeant.
9
29 . Through these acquisitions, Valeant acquired a portfolio of pharmaceutical
productsthatwerevulnerabletomassivepriceincreases. Todoso, Valeantappliedacriticalnew
salesstrategyknowninternallyasalternativefulfillment(“AF”) bywhichValeant, throughthe
creationofasecretnetworkofpharmacies, implementedunconventional, deceptiveandillegal
practices to reduce barriers to sales of, and reimbursementfor, drugs sold atprices thata
transparentmarketwould nottolerate. Asa resultofitsAF strategy, Valeant’sdrug prices
increasedonaverageby66%— fivetimestheaveragepriceincreaseimplementedbycomparable
pharmaceuticalmanufacturers— andwellover5,000% inthecaseofsomedrugs.
30. Unknown to investors, Valeant’sorganicgrowth wasfueled primarily bythese
price-hikes and improper sales tactics and notby increased sales volume, as D efendants
misleadingly stated publicly. Investors were furtherunaware thatValeantwas only able to
chargethesehighpricesbytheuseofadistributionchannelthatusedcaptivepharmaciesand
otherimproperpractices. Valeant’spublicfinancialstatementsconcealed thisrealityby, inter
alia, failingtodiscloseanyinformationaboutValeant’scontroloverPhilidorandothercaptive
pharmaciesinviolationofGAAPandthesecuritieslaws.
2. Pearson
31. Pearson, aNew JerseyresidentandformerheadofM cK insey’sglobalhealthcare
consultancy, becametheCEO ofValeantin February 2008. According to Valeant’sboard of
directors, “PearsonwasValeant,”anditwas“alwaystheM ichaelPearsonshow at[Valeant’s]
M adisonexecutiveoffices.”Pearson’scompensationwastied toaggressiveshareholder-return
goals, andthushefacedan“inordinateamountofpressure”todriveupValeant’sstockprice.
32. Pearson led the implementation of “tough tactics” atValeant, including its
“roll-up”strategyofacquisitionandpricegouging. H e“hire[d]cronieslikehisformerM cK insey
partner R obert R osiello,” his brother-in-law, and the children of former clients. Pearson
10
personallyinsistedonastronomicalpriceincreases, overandabovetheguidanceofhisbusiness
unit,inordertomeet“seeminglyimpossibleshareholder-returngoals.”
33. Assetforthindetailherein, inadditiontoimplementingValeant’sacquisitionand
pricegougingstrategy, PearsonorchestratedtheEnterprise’sconcealmentofthetruedriversof
Valeant’s revenue growth and its corresponding artificialinflation ofthe price ofValeant
securities. Forexample, Pearson consistently touted thepurportedly successfulvolume-based
revenuegrowth strategy on which Valeant’sclaimsofsustainabilityand justificationsforthe
value ofthe Company’s securities were based, including during public earnings calls and
investorconferences.
34. PearsonalsocoordinatedcloselywithothermembersoftheEnterpriseincluding
Valeant’sCFO (Schiller), Controller(Carro), andtheD irectorofValeant’sAccessSolutionteam
(Tanner). AsValeant’sCEO , Pearsoncommunicatedandattendednumerousmeetingswithkey
members of the Enterprise, and he was privy to confidential, proprietary and non-public
information concerning everyaspectofValeant’soperations, finances, and businessprospects
andthoseofValeant’sacquisitiontargets, includingPhilidor. M oreover, Pearsonsignedallof
Valeant’s quarterly and annualfinancialstatements, including the Sarbanes-O xley (“SO X”)
certifications thatattested to the accuracy of Valeant’s financials and effectiveness ofthe
Company’sinternalcontrols.
3. Schiller
35. AsValeant’sCFO betweenD ecember2011 andJune30, 2015, Schiller, working
alongsidePearson, “religiouslytrack[ed]eachdealonaquarterlybasis,”and “track[ed]every
[Valeant]productaround the world.” Like Pearson, Schillercoordinated closely with senior
ValeantandPhilidorexecutivesandwasintimatelyinvolvedintheplanning, approval,direction,
11
and monitoring ofevery aspectofthe fraudulentscheme, including directly authorizing the
implementationofillegalpracticesinValeant’sAFprogram.
36. M oreover, Schiller was responsible for Valeant’s financial accounting and
reporting and signed all of Valeant’s quarterly and annual financial statements and
accompanyingSO X certificationsduringhistenureasCFO . Thus, Schiller, alongwithPearson,
and othersworking in concertwith them, facilit

ated theartificialinflation ofthepriceofthe
Valeantsecuritiesby, among otherthings, concealing the relationship between Valeantand
PhilidorbyfailingtodisclosePhilidorasavariableinterestentity(“VIE”) inValeant’syear-end
financialstatements. In addition, asthe Company’sCFO , Schillerenabled the Company to
inflateitsreported revenueand netincomeby improperly consolidating Philidor’ssaleswith
Valeant’sfinancialresults.
37. AsdirectevidenceofSchiller’smaterialrolein theEnterprise, in M arch 2016,
Valeantadmitted thatSchillerhad engaged in “improperconduct” that“contributed to the
misstatementof[financial]results” and led to Valeant’srestatementofitshistoric financial
statementsforfiscal2014 andthefirstquarterof2015.
4. Rosiello
38. R osiello served asValeant’sCFO and EVP from July 2015 to D ecember31,
2016. A former colleague of Pearson’s from M cK insey, R osiello operated and managed
Valeant’sroleandparticipationintheEnterpriseby, amongotherthings, orchestratingValeant’s
growth-by-acquisition, pricegouging, andAF strategies, personallyoverseeingthepreparation
of Valeant’s false and misleading financialstatements, and repeatedly misrepresenting to
investorsValeant’srelationshipwithPhilidorandthedegreetowhichValeantreliedonprice,
ratherthanvolume, todriverevenuegrowth.
12
5. Carro
39 . CarrohadoperationalandmanagerialcontroloverValeantandparticipatedinthe
illegalschemebyamongotherthings: (i) directlyauthorizingtheimplementationofPhilidor’s
illegalandunsustainablepracticesintheAF program;(ii)orchestratingmassivepriceincreases
of, amongothers, thedrugCupriminebynearly6,000%;and(iii)overseeingthepreparationof
Valeant’sfalseandmisleadingfinancialstatements.
6. Tanner
40. Priorto Valeant, Gary Tannerworked atM edicis where he directed the AF
program forpharmaceuticalsthatexperiencedlow ratesofinsurancecoveragebecauseoftheir
costandtheavailabilityofgenericsubstitutes. M edicis’AF program directedpatientstobring
theirprescriptionsforsuch M edicisdrugs to certain specialty pharmaciesthatwould assist
patientsand doctorsin obtaining insurancecoverage forthosedrugsorwould provideother
incentivesforpatientstopurchaseM edicis-brandeddrugsinsteadofgenericsubstitutes.
41. FollowingitsD ecember2012 acquisitionofM edicis, ValeanttappedTanner, and
otherswho worked underTannerin running M edicis’AF program, to develop aValeantAF
program. InternalValeantdocumentsdescribeTanneras“keyorganizationtalent”acquiredfrom
M edicis. By April2013, Valeanthad appointed Tannerto SeniorD irectorforthe “Access
SolutionsTeam,”andTannerwaslaterpromotedtoVPresponsibleforAccessSolutions.
42. In thatrole, Tannerworked with othermembers ofthe Enterprise to create
Philidor, anddevelopedtheproposalforValeanttopartnerwithPhilidorasawayofsupporting
Valeant’sAF program and facilitated the funding forPhilidor. Specifically, by emaildated
January3, 2013, Tannersoughtapprovalfrom ValeantexecutivesforthePhilidorproject, anda
commitmenttoadvance$2 millioninfundstoPhilidorafterfulfillmentofcertainmilestones,
andtoprovideexpertiseandothersupporttothenew pharmacy. In connectionwithTanner’s
13
request, TannersubmittedastandardValeantcontractapprovalform (“CAF”) thatlistedTanner
asthe “Initiator”ofthe contractwith Philidorand described him asthe“ValeantEmployee
Primarily R esponsible for Administration And Performance of Contract.” The CAF was
ultimatelysignedbyeightValeantexecutivesinthesummerof2013, includingPearson.
43. NotwithstandingTanner’sresponsibilityforValeant’sAF program, beginningin
January2013, TannerfocusedprimarilyondevelopingPhilidorandsolidifyingitsrelationship
withValeant. Indeed, TannerspentsomuchtimeinPhilidor’sPennsylvaniaofficesthatTanner
wasassignedhisownofficethere.
44. Tanner was involved in all aspects of Phil

idor’s operations, including the
implementationofPhilidor’sillegalandunsustainablepractices. Inaddition, Tannerpersonally
directed Philidoremployeesto resubmitdenied claimsforreimbursementto end payorsusing
differentpricesuntilPhilidorreceived paymentatthe highestpossible amount. To conceal
Tanner’sdirectinvolvementin Philidor’soperationswhile an employee ofValeant, Tanner
communicatedwithPhili
doremployeesunderthealias“BrianW ilson.”
45. Beginning in oraround August2014, Tannerfacilitated Valeant’spurchaseof
Philidor, whichwasconsummatedonD ecember15, 2014, whenValeantandPhilidorexecuteda
Purchase O ption Agreementwhereby Valeantpaid $100 million for a ten-year option to
purchasePhilidorfor$0 (the“PhilidorO ption”).
46. In August 2015, Valeant terminated Tanner. Immediately following his
termination, TannerwashiredbyPhilidor. Notwit

hstandinghisretentionbyPhilidor, beginning
in September2015, Tannernegotiated a consulting agreementwith Valeantto continue to
perform servicesforValeantwhilesimultaneouslyservingasaPhilidoremployee.
14
47. LikePearson, Schiller, R osiello, andCarro, Tanner’smotivationforparticipating
intheEnterprisewasfinancial. InadditiontothemillionsofdollarsincompensationthatTanner
reaped from Valeant’spricegouging and AF strategies, afour-countindictmentfiled against
TanneronNovember16, 2016 bytheU.S. AttorneyfortheSouthernD istrictofNew Y orkand
theFederalBureau Investigation (“FBI”), charging Tannerwith fraud and conspiracy, reveals
Tanner’s involvementin an elaborate kickback scheme, whereby he was compensated $10
millionforfacilitatingthePhilidorO ptionandpromisedmanymillionsmoreifPhilidorreached
certainsalesmilestonesforValeantproducts.
7. Other Valeant Employees
48. O therValeantemployees directed and coordinated the Enterprise’s activities,
includingbutnotlimitedto:
(a) BijalPatel–aformerM edicisemployeewhoworkedunderTanner, Patel
joined Valeant in January 2013 following Valeant’s acquisition of M edicis. Patel was
instrumentalin the creation ofPhilidorand coordinated closely with Tannerand Andrew
D avenportin developing Philidor’s “back door” practices forreimbursementand routinely
providedproprietaryinformationtoPhi
lidor, includinginformationconcerningthemostpopular
drugs and which physicians were prescribing them, to facilitate Philidor’s sales and
reimbursement.
(b) Laizer K ornwasser – served as Valeant’s EVP and Chairman from
February2013 throughJuly2015. K ornwasserwashandpickedbyPearsontoserveasaliaison
betweenValeantandPhilidorduetohisunderstandingofspecialtypharmaciesandhisexpertise
in exploi
ting thelack oftransparency within thelabyrinthinestructureofspecialty pharmacy
distributionchains. K ornwasserwasTanner’ssupervisorandreporteddirectlytoPearson.
15
(c) AriK ellen – served asValeant’sEVP, CompanyGroup Chairman from
January1, 2014 toD ecember31, 2016. BetweenM archandD ecember2016, K ellenservedas
the head ofValeant’sU.S. dermatology business. Like R osiello, K ellen wasa colleague of
Pearson’sfrom M cK insey. K ellenoperatedandmanagedValeant’sroleandparticipationinthe
Enterpriseby, amongotherthings, orchestratingValeant’sgrowth-by-acquisition, pricegouging,
andpersonallyoversaw theimplementationofValeant’sAFmodel.
B. The Philidor Enterprise Members
1. Philidor
49 . PhilidorwascreatedonJanuary2, 2013 byValeantexecutive, GaryTanner, and
the principalofa Pennsylvania pharmaceuticalindustry communication and marketing firm,
Andrew D avenport. Philidor’ssolepurposewastoserveasashillthroughwhichValeantcould
facilitatesalesofitsmassivelyinflatedbrandedpharmaceuticals. Indeed, ValeantwasPhilidor’s
onlycustomerandValeantemployeeswereinstrumentalintheformationandstaffingofPhilidor
with severaleventually joining Philidorfulltime. By thetimeValeantacquired an option to
purchasePhilidorinD ecember2014, Philidorhadgrowntoacompanywithapproximately450
employeeswith tensofmillionsofdollarsin revenue, which wasnearly allderived from its
relationshipwithValeantandthesaleofValeantproducts.
50. Philidorfalsely portrayed itselfasa specialty pharmacy. H owever, while true
specialtypharmaciesfocusonself-administrationofhighlydifferentiatedbrand-namedrugsfor
patientsundergoingintensivetherapiesforchronic, complexillnessessuchascancerandH IV,
PhilidorwasprincipallydevotedtodispensingValeant’sundifferentiatedtraditionaldrugs, most
ofwhich had low-costgeneric substitutes. Through Philidor, Valeantinsulated itselffrom
generic competition, by among otherthings, flouting statutory orcontractualmandates for
substitutionofgenericequivalentsforValeant-brandeddrugs, submittingfalseclaims, making
16
claimsforrefillswhichwereneverrequested, andimplementingfraudulentandillegalpatient
co-payassistanceprograms. Throughtheseimproperandillegaltactics, PhilidorenabledValeant
to massively increase the prices of its drugs and inflate the number of claims paid on
prescriptionsforthosedrugs.
51. Assetforthherein, toconcealtherelationshipbetweenPhilidorandValeant, the
EnterprisecreatedahostofshellcompaniestiedtoPhilidor, whichtheyusedtoacquireinterests
insmallerretailpharmaciesallovertheUnitedStatesandsecretlyextendtheircaptivepharmacy
network.
2. Andrew Davenport
52. Andrew D avenportwastheprincipalofBQ6 M edia, acommunicationsandmedia
firm, which catersto the pharmaceuticalindustry, and held himselfoutasPhilidor’sCEO .
D avenportmetTannerwhenBQ6 M ediaperformedservicesinconnectionwiththedevelopment
of M edicis’ AF program. Following Valeant’s acquisition of M edicis, Andrew D avenport
worked with Tannerand othersto create Philidor. D avenportowned approximately 40% of
Philidorpersonally and through hiswholly owned shellcompany, End Game. Theremaining
equity interestin Philidorwasheld by D avenport’scolleagues, formerbusinessand personal
associates, andentitiesassociatedwiththoseindividuals.
53. Assetforth herein, D avenportcoordinated closely with Tannerand othersat
ValeanttofacilitatethesaleandreimbursementofValeant’sdrugsthroughPhilidor, including
thedevelopmentof“backdoor”policies. M oreover, assetforthherein, D avenportcoordinated
closely with Tannerto solidify the relationship between Valeantand Philidorthrough the
executionofthePhilidorO ptioninD ecember2014, from whichD avenportpersonallyprofited
intheamountof$40 mil
lion. AsaresultofD avenport’sinvolvementint
hefraudulentscheme,
and hispaymentofakickback to Tannerin theamountof$10 million forTanner’srolein
17
facilitating thePhilidorO ption, in D ecember2016, D avenportwasarrested and charged with
fourcountsoffraudandconspiracyandreleasedfrom jailon$2 millionbail.
3. Matthew Davenport
54. M atthew D avenport, Andrew D avenport’sbrother, wasa principalofPhilidor
and, attimes, heldhimselfouttobePhilidor’sCEO . Assetforthherein, M atthew D avenport
participatedin, andcoordinatedtheEnterprise’sfraudulentscheme, throughhiscertificationof
Philidor’sfraudulentapplicationsforpharmacy licensesin variousstatesto extend Phi

lidor’s
captivepharmacynetworkandconcealitsrelationshipwithValeantanditsdeceptiveandillegal
businesspractices.
C. Valeant Board Members And Audit Committee
55. Norma Provencio, K atherine B. Stevenson and Theo M elas-K yriaziwere the
membersofValeant’sBoardofD irectorswhoservedonValeant’sAuditCommitteeduringthe
relevanttimeperiod. TheCompany’sBoardofD irectorsalsoincludedR obertA. Ingram, R onald
H . Farmer, ColleenGoggins, AndersLonner, andR obertN. Powerduringthistimeframe.
56. Valeant’sBoardM embersandAuditCommitteefacilitatedandparticipatedinthe
Enterprise’sillegalschemeby, amongotherthings, approvingthe$100 millionPhil

idorO ption
andconcealingthisinformationfrom investorsandregulatorsbyfailingtoidentifyPhilidorasa
VIE in the Company’sfinancialreporting. Indeed, the ValeantBoard and AuditCommit

tee
toured Philidor’sPennsylvaniafacilitiespriorto approving thepurchaseagreementand were
providedfurtheraccesstoPhilidor’soperationsandbusinesspractices.
57. D uring an O ctober 26, 2015 conference call, CFO R osiello conceded that
Valeant’s“FinanceandTransactionCommittee, AuditandR iskCommitt

eeandtheFullBoard
all reviewed the [Philidor] transaction [and] [t

]the appropriate accounting treatment was
determinedbymanagementandreviewedwiththeAuditandR iskCommi
ttee.”
18
D. PwC
58. As Valeant’s outside auditor, PwC was responsible forconducting audits of
Valeant’syear-end financialsinaccordancewith U.S. GenerallyAcceptedAuditingStandards
(“GAAS”) andissuingauditopinionsconcerningtheadequacyofValeant’sfinancialreporting
and internal controls. D ocuments released in connection with the ongoing congressional
investigationintoValeant’sfraudulentschemerevealthatPwC alsoservedasPhilidor’soutside
auditor, andthushaddirectknowledgeofthePhilidorO ption, aswellasValeant’sconsolidation
ofPhilidor’ssalesintheCompany’spublicfinancialstatements.
59 . PwC, working in concertwith otherenterprise members, enabled Valeantto
conceal the relationship between Valeant and Phil

idor, including by certifying Valeant’s
fictitiousaccounting. Forexample, in theauditopinion thataccompanied Valeant’syear-end
financialstatementsforfiscal2014, PwC statedthat: Valeant’s“consolidatedbalancesheets. . .
present fairly, in all material respects, the financial position of Valeant Pharmaceuticals
InternationalInc. anditssubsidiaries. . . atD ecember31, 2014 andD ecember31, 2013, andthe
resultsoftheiroperationsandtheircashflowsforeachofthethreeyearsintheperiodended
D ecember31, 2014 are in conformity with accounting principles generally accepted in the
United StatesofAmerica.”Additionally, PwC’s2014 auditopinion represented thatValeant
“maintained, in allmaterialrespects, effective internalcontroloverfinancialreporting asof
D ecember31, 2014.”
60. These statementswere materially false atthe time they were made. Since the
Enterprise’sschemehasbeen exposed, Valeanthasadmitted thatitsfi

nancialstatementsfor
fiscal2014 and thefirstquarterof2015 overstated revenuesby $58 million, netincomeby
$33 million, andearningspershareby$.09 pershare, andhasacknowledgedmaterialfailuresin
itsinternalcontrolsandviolationsofGAAP. PwC haslikewiseadmittedthefalsityofitsown
19
statements, includinginitsaccountingrestatementforValeant, whichconfirmedthatValeant’s
2014 financialstatementsviolated GAAP, vastl

y overstated Valeant’srevenues, income and
earningspershare, andfalselyreportedthatValeant’sinternalcontrolswereadequate.
61. In addition, on or aboutM arch 16, 2015, Valeant, with PwC’s knowledge,
benefitedfrom PwC’s“clean”auditreportforfiscal2014 byraisingover$1.45 billionthrougha
publicofferingof7.3 millionsharesofcommonstockatapriceof$19 9 pershare.
E. Other Enterprise Members
62. The Enterprise also includes other members known and unknown who
participatedinandfacilitatedthescheme, includingbutnotlimitedto:
(a) IsolaniLLC – shellcompany created by Philidorand used to purchase
R & O Pharmacy;
(b) Lucena H oldings – shell company created by Philidor and used to
purchaseastakein W estW ilt

shirePharmacy in CaliforniaafterCaliforniadenied Philidora
license;
(c) Back R ank, LLC – shellcompany created by Philidor and used to
purchaseastakeinO rbitPharmacy, Inc. inH ouston, TX;
(d) K GA FulfillmentServices, Inc. –wholly-ownedValeantsubsidiaryused
to lend money to Philidor’sownersand thevehiclethrough which Valeantheld thePhilidor
O ption;
(e) FiftyM oves, LLC;ELO PharmacyLLC;C-K PharmaciesLLC;Tarrasch
PharmacyH oldings, LLC;NC3 PharmacyLLC;andLaskerPharmacies, LLC –Philidor-created
shellcompaniescreatedtoextendthecaptivepharmacynetwork;and
20
(f) SafeR x Pharmacy; D & A Pharmacy; Prescription Shoppe; H eritage
CompoundingPharmacy;ParkwestPharmacy–additionalspecialtypharmaciesthroughwhich
PhilidordistributedValeant’sprice-gougeddrugs.
63. Although theseentitiesand personsaredistinctand independentofeach other,
and freeand incentivized to actin and advancetheirown interestsindependently, they have
associatedinfactwithacommonpurpose, identi
fiablerelationshipsandsufficientlongevityto
pursuetheircommonpurpose. Specifically, beginningnolaterthanJanuary2013 andcontinuing
untilthe illegalscheme was revealed, they have been engaged in a mutually understood,
agreed-uponandcoordinatedcampaignofracketeeringactivityforfinancialgain, resultinginthe
enrichmentoftheEnterprisemembers, andartificialinflationofthepriceofValeant’ssecurities,
allattheexpenseofValeant’sinvestors. Thesewrongfulactshaveresultedinthelossoftensof
billionsofdollarsininvestorvalue.
V. THE CRIMINAL SCHEME
A. Valeant’s Deceptive Business Model
1. Growth By Acquisition
64. InFebruary2008, ValeantappointedPearsontoserveasitsCEO . W hilePearson
lacked any experience in developing and manufacturing drugsthrough internalresearch and
development, ValeantchosePearsonforhisbusinessacumenandhiscut-throattacticstorealize
even greaterprofits. And Pearson did justthat. H e ran Valeantlike a hedge fund, and was
compensated with an aggressive stock-based compensation uncommon in the pharmaceutical
industry. AtthepeakoftheEnterprise’soperation, Pearson’sstockcompensationwasvaluedat
over$2 billion.
65. Pearson’s first move as Valeant’s CEO was to gut the Company’s R & D
department,whichPearsonviewedtobelow-returnsinceitdidnotoftenyieldmarketabledrugs.
21
W hile traditional pharmaceutical companies devote 15–20% of revenue to R & D , under
Pearson’sleadership, ValeantslasheditsR & D budgetdowntoonly3%. R ather, Valeantfocused
on acquiring companieswith already established productsand surreptitiously manipulating a
labyrinthinehealthcaresystem, and priceexploit

ation oflong-developed and off-patentdrugs
thathadbeenlow-coststaplesoftreatmentforsomeofAmerica’smostvulnerablepatientsfor
decades.
66. Tomaintainitsgrowth-by-acquisitionstrategy, Valeantpurchasedmorethan100
pharmaceuticalcompaniesordrugportfoliosbetween2008 and2014, includingM edicis, Bausch
& Lomb, Salix, Sprout, and Isupreland Nitropress. Valeantborrowed heavily to finance its
acquisitions, andby2015, Valeantwascarrying$31 billiondollarsindebtwithcorrespondingly
enormousdebtpayments.
67. Valeant targeted for acquisition “orphan drugs,” which treat rare medical
conditions. D uetothesmallpopulationthatthesedrugsservice, orphandrugsfacelittletono
competition despitebeingpastthepointofprotection from genericequivalents, providing the
manufacturerwithmonopolypricingpower. Likewise, “orphandrugs”havepatientswhodepend
onthem, sometimestosurvive, andareeffectivelycaptivetotheirprescriptions, whichfurther
solidifiedValeant’spricingpoweroveritsnewly-acquireddrugs.
68. In addition, Valeant’sacquisition strategy focused on healthcaresectorswhere
therewasnosignificantcompetitionfrom othermajorpharmaceuticalmanufacturers, including,
amongothers, thedermatology, neurology, andophthalmologysectors.
2. Price Gouging
69 . Valeant’sacquisitionstrategyleftitunderimmensepressuretocreatetherevenue
necessarytocarryitsheavydebtload. Atyear-end2014, Valeanthad$15.2 billionindebtand
only$323 millionincash. BySeptember2015, Valeant’sdebtballoonedto$30.7 billion.
22
70. So long asValeant’sstock price remained high and itsrevenuescontinued to
grow, itsacquisitionmodelappearedtobeworking, butifeithermetricslipped, Valeant’sdebt
riskedoverwhelmingtheCompany. Thus, Valeanthadtodemonstratetoinvestorsandlenders
thatitwasgenerating sufficientcash flow from itsacquisitions. Valeantdid so bymassively
inflatingthepricesofitsnewlyacquireddrugs.
71. A reportby the U.S. Senate details how, in late 2012, Valeantwas facing
decliningrevenueinitsNeurologicalandO therdivision. Tocombatthisdecline, theCompany’s
top executives, including Pearson, developed and approved a plan, called the “O rphan D rug
PricingStrategy”thatrefocusedthedivisiononusingsteepandrepeatedpriceincreasestomake
up forthedeclinein revenue. O ncetheplan wasadopted, Pearson and othertop executives
personallydeterminedhow muchtoraisedrugprices.
72. Forexample, following Valeant’sacquisition ofCuprimine, adrug used since
19 65 totreatW ilson’sdisease, arareconditionthatpreventsthebodyfrom processingcopper,
Valeantseniorexecutives, includingPearson, R osiello, andCarro, decidedtoraisethepriceof
Cupriminebynearly5,800% toallow Valeanttorecoupitsinvestmentpriortotheapprovalof
generalcompetition. Valeantemployed similarpricegouging tacticswith respectto Syprine,
raisingtheprice3,200%.
73. O nce itwassuccessful, Valeantapplied thisprice-gouging strategy acrossthe
board. Valeant’sexecutionoftheprice-gougingstrategyonIsuprelandNi
tropress— drugsused
to treatacute heartconditions— is a case in point. O n D ecember3, 2014, Andrew D avis,
Valeant’sSVP forBusinessD evelopment, sentane-mailtoLaizerK ornwasser, statingthathe
hadidentifiedanotheropportunityinthedrugmanufacturer, M arathon, whose“valueislargely
derivedfrom 2 hospitalproducts[IsuprelandNi
tropress]. . . whichhavenoIP [i.e., protection
23
from generic competition].” Steve Sembler, Valeant’sGM ofNeurology, responded thatthe
purchase“wouldalsohavetobeapriceplay(ifwedeterminethereisupsidetotakeprice)[.]”
74. Thereafter, Valeantworked with consultantsatM arketing M edicalEconomics
and M cK insey to determinethepricing potentialforIsupreland Nitropress. The consultants
advisedthatM arathonhadincreasedthepriceofNitropressfrom $47 to$214, andIsuprelfrom
$48 to over$200, butnoted that“mostpatientstreated [with Nitropress, forexample]arein
criticalcondition,”andthusadvisedValeantthattherewasstill“upwardpotentialforpricing”of
thesedrugs. M cK insey, Pearson’sformeremployer, similarlyadvisedPearsonbye-maildated
D ecember29 , 2014 thatthesedrugshad “materialpricing potential”because“[s]maller/older
products (e.g., Isupreland Nitropress) are notreviewed on formulary [and] [Isupreland
Nitropress]havebeen in thesystem forso long thatreviewsarepracticallyrubberstamped.”
M oreover, ValeantprojectedthatIsuprelandNitropresswouldnotfacegenericcompetitionuntil
2017 attheearliest.
75. Two daysafteracquiring the rightsto Ni

tropressand Isuprelfrom M arathon,
Valeantmassivelyincreasedthepricesofthedrugsby212% and525%, respectively. Valeant
employedsimilartacticswithdozensofotherdrugs.
76. Though Valeantis a large drug manufacturer, with many productlines and
hundredsofindividualdrugs, thepriceincreasesapplied to newly-acquired drugslikeIsuprel
and Nitropress provided disproportionate short-term gains. For example, Valeantrecorded
$150 millioninrevenuesonIsuprelandNitropressin2014, and, afterdramaticallyraisingprices
onbothdrugs, overhalfabilliondollarsinrevenuesin2015. Valeant’stotalrevenuesfor2015
were$10.4 billion. Thus, pricegouging strategiesapplied to only two newly-acquired drugs,
providedover5% ofValeant’srevenuesin2015.
24
77. R eportsindicatethatin2015, Valeantraiseditsbrandnamedrugpricesby66%
on average— five timesmore than any otherpharmaceuticalcompany in the industry. O ther
examplesofdramaticpri
ceincreasesinclude: (a) inflatingthepriceofCaracCream, atreatment
for precancerous lesions, by more than 1,100%, from $230 per tube to over $2,800;
(b)increasingthepriceofGlumetza, adrugusedtocontrolbloodsugarforpeoplewithtype2
diabetes, bymorethan1,000%, from $9 00 per9 0 tabletstoover$10,000;(c)gougingtheprice
ofTargetin, atreatmentforskinproblemsassociatedwithT-celllymphoma, byover1,600%,
from $1,800 pertubetoover$30,000;(d) raisingthepriceofW ellbutrinXL, ananti-depressant
drug, by $1,400 per one month’s supply while the generic alternative sells for $30; and
(e)raisingthepriceofAddyi, alibidoenhancingdrugforwomen, by100% immediatelyafter
Valeantacquiredthedrugfrom Sprout.
78. AlthoughValeant’spriceincreasesappearedtoboostitsprofitabilityinthenear
term, themannerinwhichtheywereachievedwasinfactunsustainableandexposedValeantto
numerousrisks, including, amongothers, thatpatients, insurers, andotherpayorswouldrefuseto
paysuchdrasticallyincreasedpricesorwouldsubstitutegenericoralternate-brandproductsfor
Valeantbranded drugs. Valeantalso risked regulatory scrutiny, and relationship and/orbrand
damage in response to the price increases. These short-term gains misled investors as to
Valeant’struefinancialperformanceandprospects.
3. The Enterprise Inflates Sales Through A Secret Network Of Captive

Pharmacies
79 . Valeant’sprice-gougingstrategyrequiredittoraisethepriceofitsdrugsbeyond
whatothermarketparticipantswould normally accept. Typically, pharmacy benefitmanagers
(“PBM ”), intermediariesbetweenpharmaceuticalmanufacturersandpatientsandotherpayors,
prevent unreasonable price gouging and reduce instances of fraud. These intermediaries
25
negotiatedrugpricesandreimbursementrateswithdrugmanufacturers, andoftenencouragethe
automaticsubstitutionofcheaperproductsforhigh-priced, brand-namedrugs. A keycomponent
oftheEnterprise’sschemewastoavoidthiscostcontrolmechanism altogether.
80. R ealizing that Valeant could not execute its drug pricing strategy through
traditionalpharmaceuticalchannels, the Enterprise setaboutcreating its own, secret, drug
distributionnetworkofcaptivepharmacies, madeupofentitiesnamedafterchessplayersand
strategies. Atthe centerofthisclandestine pharmacy network wasPhilidor, which Valeant
helpedform inJanuary2013— immediatelyafteradoptingtheO rphanD rugPricingStrategy—
underthedirectionofTannerandAndrew D avenport. Valeantprovidedfinancing, staffingand
otherresourcestodevelopPhilidor.
81. Valeant immediately tested its new AF scheme in its newly acquired
Arizona-based M edicis dermatology unit. Valeant, through M edicis, retained Philidor to
dispense its products, communicate with patients and otheractors in the prescription drug
distributionchain, managethepriorauthorizationprocess, handledeliveryofValeantproducts,
andmanageValeantprescriptionrefills. Throughthisarrangement, Valeantincreaseditsformal
controloverPhilidor, obtainingtherighttoinspectPhilidor, auditPhil

idor’scompliancewiththe
parties’arrangement,andto“assessandevaluatetheoperationoftheprogram.”
82. ToconcealtheclosetiesbetweenValeantandPhilidor, Tanner, andmanyother
Valeantemployees conducting work on behalfofPhilidor, used aliases, including, “Brian
W ilson”and “PeterParker”used by Tannerand BijalPatel, respectively. W ith thesealiases,
Valeantemployees provided Philidorwith proprietary, non-public prescription and referral
information so thatPhilidorcould facilitatethesaleand reimbursementofValeantdrugsand
avoidautomaticsubstitut
ionofgenericequivalents.
26
83. SeniorValeantexecutives were aware of, and indeed directed and facilitated
Philidor’soperations. Forexample, inoraroundNovember2013, ValeantexecutiveK ornwasser,
Tanner’s directsupervisorwho reported directly to Pearson, toured Philidor’s Philadelphia
facility. D uring thattour, K ornwasserwitnessed first-hand Valeant’s extensive controlover
Philidor, includingthatValeantemployee, Tanner, wasassignedanofficeatPhilidor, hadaccess
toallaspectsofPhilidor’soffices, andexercisedmanagerialcontroloverPhilidor’soperations
and employees. Notwithstanding K ornwasser’sdirectknowledgethatValeantexercised direct
controloverPhilidorthroughTanner— whichK ornwasserreportedtohissupervisors, including
Pearson— ValeantdidnotterminateTanner’sroleatPhilidor, butrathercontinuedtocapitalize
onTanner’sroleatPhilidorasaninstrumentalitytosolidifyValeant’scontroloverPhilidor.
84. Likewise, when Valeant’s Chief Compliance O fficer, Seana Carson, raised
questionsinternallyastowhetherTannerheldanundisclosedequityinterestinPhilidor, Valeant
executives, includingPearson, Schillerandothers, turnedablindeyetotheseconcerns. Valeant
tooknodisciplinaryactionagainstTanner, permittedhim tokeepoperatinginhisdualroleat
Valeantand Philidor, and concealed Tanner’smisconductbecause Philidorwasvitalto the
Enterprise’sprice-gougingstrategy.
85. Valeant’sexecutiveswerewellawareoftheCompany’srelianceonPhilidor, and
planned to rely on itfrom itsinception. In a 2013 emailto K ornwasserand K eller, Tanner
updated theCompanyon hiseffortsto pursue“alternativearrangements”with, among others,
BluegrassPharmacy, CardinalH ealthPharmacy, BergenM edicalPharmacyInc. andCarepoint
R x Pharmacy “in the eventPhilidorcannotbe scaled quickly enough” to achieve Valeant’s
“financialgoals.” In response, the Valeantsupervisors supported and encouraged Tanner’s
effortstoimplementValeant’spricegougingandAFstrategies.
27
4. The Enterprise Ensures Sales Of Price-Gouged Drugs By

Manipulating Patient Assistant Programs And A Specially Designed
PR Campaign
86. Valeant’s scheme to ensure sales of its price-gouged drugs depended on
manipulating patient assistance programs such as patient copays. The purpose of this
manipulation was to avoid the scrutiny ofregulators, media attention, and resistance from
patientsandpayors.
87. Typically, patientcopays, whichrequirethepatienttopayaportionofthecostof
thetreatmenttheyareprescribed, encouragepatientstoresisthigh-pricedtreatmentoptionsorto
substitutegenericalternativesforhigh-priced drugs. H owever, Valeantwaived and eliminated
patientcopays, increasing theirpatientassistance program costsby over1,100%, from $53
millionin2012 to$600 millionin2015, toensuresalesofitsprice-gougeddrugs— apractice
which violates criminal anti-kickback laws when perpetrated on government payors like
M edicaid. In addition, these practices breached contracts, and angered doctors, payors, and
PBM s, andpresentedseriousbusinessrisks, includingthatifValeant’stacticswerediscovered,
PBM sandpayorswouldrefusetopayValeant’shighprices, resultinginmassivereductionsin
salesvolume. Valeantprojected itwould spend morethan $1 bill

ion on itspatientassistance
programsin2016. D espitetheballooningcostsofthesemeasures— whichwerecriticaltokeep
upsalesofValeant’sprice-gougeddrugs— Valeant’srevenueswerenotkeepingpace, risingby
only300% between2012 and2015, from $3.5 billionto$10.4 billionduringthattimeperiod.
88. W hile properpatientassistance programsare designed to ensure patientscan
afford necessary medicaltreatment, Valeantmanipulated its patientassistance program to
manipulatepayorsandpatientsandensuresalesofitsprice-gougeddrugs. Indeed, intestimony
before Congressduring itsinvestigation into Valeant’spricing and businesspractices, M ark
M erritt, the Presidentand CEO ofthePharmaceuticalCare M anagementAssociation, which
28
representsPBM s, statedthatValeanthadforced“employer’sunionsandotherstopayhundreds
ofthousandsmoreforthemostexpensivebrandson theformulary,”practicesthatconstitute
illegalkickbackswhenperpetratedongovernmentpayors.
89 . InternalValeantpresentationsreflectthatitspatientassistanceprogramswerepart
ofthedeceptivesalespracticesusedtomaintainValeant’sprice-gougingstrategy. Forexample,
onesuchpresentationexplainedthattheincreasesinpatientassistancewouldbe“fundedthrough
planned priceincreases” and “[i]nvolve[d]acombination ofalternative/restricted distribution
model, advocacy supportand patient assistance programs.” To ensure sales of Valeant’s
price-gouged drugs, the presentation urged employeesto use patientassistance programsto
enticepatientstoacceptValeant’sbrandeddrugsoverlowerpricedalternativesortoofferfree
goods“asalastresort.” Valeantknew theinstitutionalrisksthesetacticspresented, and the
presentationnoted that“[s]ubstantialpriceactionscouldattractunduenegativepublicityfrom
patients, H CP’s[healthcareproviders], payors, and/orgovernmentagencies,”soitimplemented
a“PR M itigation”planand“[p]rivatelyaddress[ed]concernsfrom patients, insurancecompanies
ormanagedcareproviderstopreventpublicdisplaysofnegativesentiment[and][m]inimi
ze[d]
mediacoverageof[]pricingincrease[s].”
9 0. The same presentation provided Valeant employees with a “PR D raft
Communications Plan [for] O rphan D rug R ate Increases,” stating that orphan drugs can
“command asubstantialpremium in themarket— to offerpharmaceuticalcompaniesagreater
returnoninvestment.”H owever, itcautioned, “[w]hi

lethehighcostoforphandrugshasbeen
largelytoleratedbythemedicalcommunitybecausetheoverallimpactofthesepharmaceuticals
onhealthbudgetshasbeenrelativelysmall, therehasrecentlybeenarenewedfocusonthecost
ofthese drugs[and the]presshasalso picked up on these trends.” The presentation further
29
warnedthatValeant’splantoincreaseCuprimineandSyprine, theW ilson’sdiseasetreatments,
“needstobemanagedcarefully.”
9 1. To prepareValeantemployeesforquestionsaboutitsprice-gouging, including
whether“Valeant[was]justtryingtomakeinsurersandmanagedcareproviderspayasmuchas
possibleforthesedrugs,”Valeantemployeeswereinstructedtoliebyprovidinganswerssuchas,
“No. TheserateincreasesareessentialtoensurethatValeantisabletocontinuetoofferthese
importantpharmaceuticalstoourpatientswhoareafflictedwith[forexample]W i
lson’sdisease
whilealso remaining commerciallyviable.”Forexample, when BernaH eyman, who suffered
from W ilson’s disease and wrote to Pearson and expressed heroutrage atthe steep price
increaseson Syprine, Valeantfalsely responded: “there are many challengesassociated with
developingtreatmentsforrareconditionssuchasW ilson’sdisease, theinvestmentswemaketo
develop and distributenovelmedicinesareonly viableifthereisareasonablereturn on the
company’sinvestmentandifourbusinessissustainable.”Inreality, Valeantdoesnotdevelop
new drugs, nordoesitinvestin thedevelopmentofnovelmedicinesexceptthepaltry3% of
revenuesthatValeantpurportedtospendonR & D .
9 2. The price-gouging strategy described herein was criticalto the Enterprise’s
scheme, asitallowed Valeantto drive massive short-term revenues, providing an excellent
sellingpointtonew investorsinValeant.TheEnterprisetoutedtheseshortterm gainstomislead
investorsthatValeanthad hitupon a sustainable and legitimate businessmodelthatwould
continuetoproducesuchperformanceintothefuture.
5. Through Philidor, The Enterprise Creates A National Network Of

Captive Pharmacies
9 3. Inadditiontomanipulatingpatientassistanceprograms, theEnterprisecreateda
webofshellcompanies— whichwereallassignednamesrelatedtochessplayersorstrategies—
30
throughwhichPhilidorpurchasedownershipstakesinpharmaceuticalcompaniesallaroundthe
country. ThisownershipstructureenabledtheEnterprisetoselltheirprice-gougeddrugsinevery
marketacrossthenationwithoutrevealingthatthosesaleswereinfactdirectedandcontrolled
byValeant. ThepurposeofcreatingthisnetworkwastoobscureValeant’sroleintheaggressive
pharmacy-led promotion and saleofitsprice-gouged drugs, and to createtheappearancethat
ostensibly independentpharmacies across the country were promoting and selling Valeant
productsoftheirown volition and based on the meritsofValeant’sproducts. M oreover, as
describedherein, thenetworkalsoallowedValeanttoimplementdeceptivepracticesdesignedto
trickpayorsintoreimbursingValeantfordrugs.
9 4. Infurtheranceofthisobjective, Philidorattemptedtoobtainapharmacylicensein
California. H owever, in M ay 2014, theCaliforniaStateBoard ofPharmacydenied Philidor’s
applicationuponlearningitcontainedfalserepresentationsmadetoconcealthetrueownership
ofPhilidorandthecloserelationshipbetweenValeantandPhilidor.
9 5. TocircumventthedenialandenableittoconductbusinessinCalifornia, Philidor
created IsolaniLLC (“Isolani”), a wholly-owned shellcompany with the sole purpose of
acquiring a licensed California pharmacy, R & O Pharmacy (“R & O ”). In fact, Philidorbegan
using R & O ’sunique nationalprovideridentifier(“NPI”) before the sale agreementbetween
R & O andIsolaniwasevencompleted, bothwithinCaliforniaandoutsideofCalifornia. Upon
discovering Philidor’simproperuseoftheitsNPI, R & O ’sprincipal, R usselR eitz (“R eit

z”),
confrontedPhilidor, which, throughAndrew D avenport, falselyassuredR eitzthatPhilidorhad
discontinueditsimproperuseofR & O ’sNPI.
9 6. AsR eitzdiscoveredotherfraudulentandimproperpracticesinPhilidor’ssalesof
Valeantproductsthrough Philidor, hestopped remittingchecksto Phili

dor, and instead began
31
depositing them in an R & O account. Afterarguing with Philidorforseveralmonths, R eitz
received a letterfrom R obertChai-O nn, Valeant’sGeneralCounsel, demanding “immediate
payment” ofmore than $69 mill

ion and warning thatany delay in paymentwould resultin
“furtherdamagetoValeantandotherparties.”R eitzfoundthissuspicious, becauseupuntilthis
time, PhilidorhadnotdisclosedthatithadanyrelationshipwithValeant,andR & O hadnodirect
commercialrelationship with Valeant. Undeterred, R & O filed acomplaintagainstValeantin
O ctober2015, whichstatedthatR & O hadnorelationshipwithValeantandthateitherR & O and
ValeantwereboththetargetofafraudulentschemeorValeantwasattemptingtodefraudR & O .
9 7. TheR & O lawsuitprovidedthefirstglimpseofValeant’stiestoPhilidorandthe
means and instrumentalities through which Philidor exploited its relationship with R & O ,
including: (i) Philidor’ssalesoflarge volumesofValeantdrugsusing R & O ’sNPI in states
whereR & O wasnotlicensed, usingR & O ’sNPI fordrugsR & O hadneverdispensed, andfilling
prescriptionsundertheR & O NPI bypharmaciesunaffiliatedwithR & O ;(ii) EricR ice, Phil

idor
employeeandsolememberofPhilidorshellcompany, Isolani,signedanR & O auditthatR & O ’s
CEO R eitzrefusedtosign;and(iii) Philidorrefusedtoapplyfor, orprovideR & O withproofof
applicationfor, pharmacylicensesinstateswherePhilidoroperatedundertheR & O name.
9 8. Inview ofthismisconduct, R & O ’sgeneralcounselwrotetoaseniordirectorat
Philidor, EricR ice, onJuly22, 2015 informingPhilidorthatit“appear[ed]tobeengagingina
widespreadfraud.”ByAugust31, 2015, R & O hadterminateditsengagementwithIsolani, and
sentIsolanialetterstatingthat“[i]tisnow crystalclearthatIsolani/Philidorfraudulentlyinduced
M r. R eitz to [engage with Philidor/Isolani]in orderto allow Isolani/Philidorto engage in a
massivefraud.”R & O noted that“Isolaniissimplyashellcreated byPhilidorto perpetratea
massive fraud againstnotonly M r. R eitz and R & O , butalso the California State Board of
32
Pharmacy, [and]variouspayernetworks,” and accused Philidorof“creat[ing]Isolaniasthe
instrumentality to improperly use R & O ’s NationalCouncilforPrescription D rug Programs
(“NCPD P”) andNPI numberstodistributepharmaceuticalsinjurisdictionsthatPhilidorwould
nothavehadaccesstobutforR & O .”
99. Philidorl
ikewisecreated LucenaH oldings(“Lucena”), anothershellcompany,
with thesolepurpose ofpurchasing a stake in W estW ilshirePharmacy (“W estW iltshire”).
Filings with the California State Board ofPharmacy show that: (i) SherriLeon, Philidor’s
D irectorofPharmacy O perations, wasLucena’sCEO ; (ii) Gregory Blaszczynski, a Philidor
owner, waslistedasanownerofLucena;and(iii) JamieFleming, Phil

idor’sController, wasa
directorofLucena. Philidorconcealedtheseindividuals’affiliationswithPhilidor, andfalsely
statedthattheywerenotassociatedwithanyentitythathadpreviouslybeendeniedapharmacy
licenseinCalifornia.
100. Isolaniand Lucenaarenottheonly shellcompanieswith chess-themed names
thattheEnterprisecreated to carry outitsfraudulentscheme. Forexample, in 2015 Phi

lidor
createdtheshellcompanyBackR ankwhichhadextensiveconnectionswithPhilidor: BackR ank
used an e-mailaddress atthe “philidorrxservices.com” domain name; used as its address
Philidor’sH atboro, Pennsylvaniaaddress;GretchenS. W isehart(“W isehart”), Philidor’sgeneral
counsel, servedasBackR ank’sgeneralcounsel;andPhilidor’sControl

ler, Fleming, wasBack
R ank’spresident. TheEnterprisein turn used Back R ank to buy acontrolling stakein O rbit
Pharmacy, Inc. (“O rbit”), apharmacybasedinH ouston, Texas. O rbitthenchangeditsaddressto
theH orsham, PennsylvaniaaddresssharedbyBQ6, Philidor, andanuntoldnumberofPhilidor’s
shellcompanies. TheEnterprisefalselyreportedtotheTexasStateBoardofPharmacythatnone
33
ofitsownersorpartnershadeverbeenthesubjectofaprofessionaldisciplinaryactionorbeen
deniedalicense, despitePhilidor’spriorlicensedenialinCalifornia.
101. The Enterprise used this nationwide network ofshellcompanies and captive
pharmaciestoimplementPhilidor’srangeofdeceptiveandillegalsalespractices. Specifically,
Philidorcreated aseparate“adjudication”departmentwithin Philidorto receiveprescriptions
from doctorsandshipdrugstopatientsbeforehealthinsurancecoveragewassecured. Philidor’s
adjudication department followed an “Adjudication R eference Binder,” Philidor’s training
manual,whichinstructedemployeesonspecificdeceptiveandfraudulentpractices, including: (i)
applicationof“backdoor”approachessothatinsurerswhowouldnotbewillingtopayPhilidor
directlyweretrickedintopayingPhilidorindirectly;(ii) fillingprescriptionsthroughPhilidori
n
stateswhereneitherPhilidornorthepharmaciesinitssecretnetworkofcaptivepharmacieshad
apharmacylicense;and(iii) altering doctors’prescriptionswithoutauthorizationtoincludea
“dispense as written” instruction to preventa pharmacy from substituting cheaper generic
equivalentsfortheprescribedmedication.
102. The Enterprise created the false impression thatPhilidorand its nati
onwide
networkofcaptivepharmacieswereindependentfrom Valeantsothatpatients, otherendpayors,
and PBM swould notview thesepharmacies’allegianceto Valeantproductswith heightened
scrutiny or refuse to pay for or reimburse the price-gouged drugs. Concealing the
Valeant-Philidorrelationship was criticalto the Enterprise’s scheme because, among other
reasons, thetacticsdescribedhereinviolatednumerousprovisionsofPBM agreementsgoverning
theirrelationshipswithpharmacies. AsevidencethatthesepracticesviolatedPBM agreements,
in 2015, O ptumR x sentceaseand desistletterst

o, and ceased doingbusinesswith, R & O and
W estW ilshire pharmacy upon discovery thatPhilidorwassurreptitiously operating through
34
thoseentities. And, asdiscussed below, when Valeant’srelationship to Philidorwasexposed,
severalmajorthird party payorsterminated theircontracts, leading to a massive decline in
revenueformanyofValeant’smostimportantdrugs.
6. Valeant Formalizes Its Control Over Philidor Through

Execution Of An Undisclosed Purchase Option Agreement
103. TosolidifyitscontroloverPhilidor, onD ecember15, 2014, Valeantpurchased
for$100 millionaten- yearoptiontobuyPhilidorfor$0 (the“PhilidorO ption”). Thedealcame
withsupplementalpaymentsinincrementsof$25 or$33 milliondollarsuponcertainPhilidor
performancebenchmarks, which, ofcourse, werealsoriggedbecauseTannerworkedbothsides
ofthefenceandensuredthatValeantsentenoughbusinesstoPhilidorthatitwouldreacheach
benchmarksetbythetermsofthePhilidorO ption. Asdiscussedherein, thePhilidorO ptionwas
the subjectoffurthermalfeasance by Tannerand Philidor’sCEO , Andrew D avenport, who
exploited the Valeant-Philidor relationship and the Philidor O pt

ion dealto operate a side
kickbackandmoneylaunderingschemethatyieldedthepairnearly$50 millionandeventually
landedthem underfederalcriminalindictmentforviolationofahostoffederallaws. Valeant’s
topexecutiveteam wasawareof— andindeedsanctioned— Tanner’sandAndrew D avenport’s
sidescheme, butdid nothing to preventordisclosetheirillegalconductbecauseTannerand
Andrew D avenportwerethegreaseallowingtheEnterprise’sValeant-Philidorgearstoturn.
104. ThePhilidorO ptionwasstructuredtoconcealtheValeant-Philidorrelationship,
and this structure was approved at the highest level. Indeed, in connection with the
Congressionalprobes, PhilidorwasaskedwhyValeantdidnotsimplypurchasePhilidoroutright
ratherthanacquiretheoptiontopurchaseitfor$0. Philidor’scounsel,inawrittenresponse, said
that“Philidor concluded thatValeant’s conductwas consistentwith a concern aboutthe
economic impactsofany PBM response ifValeanthad purchased Philidor.” Thus, Philidor
35
confirmedthatValeantknew PBM swouldrefusetoreimbursePhilidorprescriptionsifPBM s
knew ofthecontrollingrelationship.
105. To add an additionallayerofsecrecy, thePhili

dorO ption wasrouted t
hrough
Valeant’swhollyowned subsidiaryK GA FulfillmentServices, Inc. (which standsfor“K ing’s
GambitAccepted,”yetanotherchess-themed entity created solely to concealtheEnterprise’s
fraudulentscheme).
106. Thissecretnetworkofcaptivepharmacies, andtheirhostofdeceptiveandillegal
salespractices, waspartofthevaluethatValeantsoughtwhenitpurchasedthePhilidorO ption.
Indeed, thepurchasing agreementrequired Valeantto enterinto subsequentagreementswith
Philidorshellcompanies, suchasLucenaandIsolani.
B. Defendant’s Accounting Violations
1. Valeant’s GAAP Responsibilities
107. Underthefederalsecuritieslawsandtheregulationsandguidancepromulgated
bytheSEC pursuanttothoselaws, companieswhosestockispubliclytradedintheU.S.— such
asValeant— haveimportantreportinganddisclosureobligations.
108. PubliccompaniesarerequiredtofilewiththeSEC certaindisclosuredocuments
containing comprehensive information about their business operations and their financial
condition. Investors, including Plaintiffs, rely on the accuracy and transparency of these
disclosureswhendeterminingwhethertoinvest.
109 . AsapubliclytradedcorporationwithsignificantoperationsintheU.S., Valeantis
requiredtoprepareitsfinancialstatementsinaccordancewithGAAP. GAAPisasetofrulesand
standardsthataredesigned to ensureuniform financialreporting. Failing to preparefinancial
statementsinaccordancewithGAAPrendersthem misleadingandinaccurate.
36
110. Among thosestandardsisASB Accounting StandardsCodification Topic810,
Consolidation (“ASC 810”). Among otherthings, ASC 810 sets forth rules governing the
disclosure by public companiesin theirfinancialstatementsof“variable interestentities” or
“VIEs.”Looselydefined, aVIE isanentityinwhichthereportingcompanyhasacontrolling
interest. Ifthereportingcompanyisthe“primarybeneficiary”ofaVIE, itmustconsolidatethe
VIE initsfinancialstatements. ASC 810 alsorequiresthatcertaininformationaboutanyVIE,
whetherconsolidatedornot,bedisclosedinareportingcompany’sfinancialstatements.
111. In addition to complying with GAAP, theSEC developed standardsgoverning
whatinformationpubliccompaniesmustdiscloseinfinancialstatementsandotherpublicfilings.
Forexample, withrespecttoassessingmaterialityinpreparingfinancialstatements, theSEC has
released StaffAccounting Bulletin No. 9 9 (“SAB 9 9 ”), which emphasizestheimportanceof
qualitativefactorsin determiningmateriality. In SAB 9 9 , theSEC stated thatwhileithad no
objection to using a numericalthreshold of5% asa starting pointin assessing materiality,
“quantifying, inpercentageterms, themagnitudeofamisstatementisonlythebeginningofan
analysisofmateriality;itcannotappropriatelybeusedasasubstituteforafullanalysisofall
relevantconsiderations.”Thus, forexample, aquantitativemisstatementofrevenueunder5%
mightbe deemed materialif“the misstatementhidesa failure to meetanalysts’consensus
expectations.”
112. Topic13 oftheSEC StaffAccounting Bulletin Series(“SAB Topic13”) sets
forththerulesonrevenuerecognition. UnderSAB Topic13, “revenueshouldnotberecognized
untilitisrealized orrealizableand earned.”Generally, revenueisrealized orrealizableand
earned when “[p]ersuasive evidence ofan arrangementexists”; “[d]eli

very has occurred or
37
serviceshavebeen rendered”; “[t]heseller’spriceto thebuyerisfixed ordeterminable”;and
“[c]ollectibili
tyisreasonablyassured.”
113. CertainSEC filings— suchastheissuer’sannualreport— arerequiredtocontaina
section titled “M anagement’sD iscussion and AnalysisofFinancialCondition and R esultsof
O perations”(the“M D & A”). Itsunderlyingpurposeistogiveinvestorsanopportunitytoseethe
issuer’s pastresults and future prospects through the eyes ofmanagement. See 17 C.F.R .
§229 .303.
114. SAB Topic13 furtherprovidesthatthetypesofrevenuetransactionsorevents
thatshould be disclosed in the M D & A include, among otherthings, “[c]hanging trends in
shipmentsinto, and salesfrom, a saleschannelorseparate classofcustomerthatcould be
expectedtohaveasignificanteffectonfuturesalesorsalesreturns.”
115. SAB Topic 13 also requiresdisclosure of“unusualorinfrequenttransactions,
known trends oruncertainties thathave had, ormightreasonably be expected to have, a
favorableorunfavorablematerialeffecton revenue, operating incomeornetincomeand the
relationship between revenueand thecostsoftherevenue.”Clearly, thePhilidortransactions
wereunusual. But, thesetransactionsalso materially affected reported incomebecauseofthe
high productpricing and attendantprofitability. In thissituation, SAB Topic13 describesthe
requireddisclosureasincluding“changesinrevenue,”which“shouldnotbeevaluatedsolelyin
termsofvolumeandpricechanges, butshouldalsoincludeananalysisofthereasonsandfactors
contributingtotheincreaseordecrease.”
116. SAB Topic13’sexamplesfurtherconfirm thatValeantshouldhavedisclosedits
transactionswithPhilidor. O nesuchexampleis“Anincreasingtrendtowardsalestoadifferent
classofcustomer, suchasaresellerdistributionchannelthathasalowergrossprofitmarginthan
38
existingsalesthatareprincipallymadetoendusers. Also, increasingservicerevenuethathasa
higherprofitmargin than productsales.”W hiletheexamplehighlightsaresellerwith lower
profitmargins, thecorollaryisalsorequired. ThiscircumstanceexactlydescribesValeant’ssales
toPhilidor.
117. PubliccompaniessuchasValeantarealsorequiredtomaintaineffectiveinternal
controls. Anissuer’stop-rankingexecutivesmustpersonallyguaranteetheeffectivenessofthe
company’sinternalcontrols.
118. The Committee ofSponsoring O rganizations ofthe Treadway Commission’s
InternalControl–IntegratedFramework(whichValeantpurportedtofollow) definesinternal
controlas “a process, effected by an entity’s board of directors, management, and other
personnel, designed to providereasonable assurance regarding the achievementofobjectives
relatingtooperations, reportingandcompliance.”
119 . Section 404 of the Sarbanes-O xley Act of 2002 (“SO X”) requires public
companiestopublishinformationintheirannualreportsconcerningthescopeandadequacyof
theirinternalcontrolstructure and proceduresforfinancialreporting, and also to assessthe
effectivenessofsuchinternalcontrolsandprocedures. Initsinterpretativeguidanceissuedfor
therulespromulgatedtoimplementSection404, theSEC instructedthat“managementshould
evaluatewhetherithasimplemented controlsthatadequately addresstherisk thatamaterial
misstatementofthefinancialstatementswouldnotbepreventedordetectedinatimelymanner.
[Thisinvolves]atop-down, risk-basedapproach. . . , includingtheroleofentity-levelcontrols
in assessing financialreporting risks and the adequacy ofcontrols.” Commission Guidance
R egardingM anagement’sR eporton InternalControlO verFinancialR eportingUnderSection
13(a) or15(d) oftheSecuritiesExchangeActof19 34, ExchangeActR eleaseNo. 559 29 , § I
39
(June 20, 2007). W hen managementidentifies a controldeficiency, itcannotclaim thatit

s
internalcontrolsareeffectiveifthecontroldeficiencyisdeemedtobeamaterialweakness.
120. Section 302 ofSO X requires a public company’s CEO and CFO to provide
certificationsconcerning theirreview of, and disclosureofinformation about, thecompany’s
internalcontrols. SeeCertificationofD isclosureinCompanies’QuarterlyandAnnualR eports,
ExchangeActR eleaseNo. 46427, §II.A (Aug. 28, 2002)(footnotesomitted).
2. PricewaterhouseCooper’s GAAS Responsibilities
121. Atalltimesduring the relevantperiod, PwC served asValeant’spurportedly
independentoutsideauditor. Independentauditorsperform avitalrolein capitalmarkets, and
they have been described as having the role of“public watchdog,” established, in part, to
improve the reliability offinancialstatements, and thereby enhance the credibility ofthose
statementsandsupportcapitalmarkets. SeeU nitedStatesv. ArthurYoung& Co., 465 U.S. 805
(19 84). R ecognizingtheenablingrolepurportedlyindependentauditorsplayedintheaccounting
scandalsoftheearly2000s, includingEnron and W orldCom, Congressestablished thePublic
CompanyAccountingO versightBoard (“PCAO B”) tooverseetheauditsofpubliccompanies
andprotectinvestors.
122. ThePCAO B wasgiventheresponsibilitytoestablishprofessionalauditstandards
applicabletoauditsofcertainpublicly-tradedcompanies, includingValeant. PCAO B Standards
“provideameasureofauditqualityandtheobjectivestobeachievedinanaudit”(AU 150.01).
AsValeant’sindependentauditor, PwC wasrequiredtoadheretoPCAO B Standardsandsatisfy
itsresponsibilitiesthereunder, and— aspartofitsauditofValeant’sfinancialstatements— PwC
certified in the 2013 and 2014 10-K ’sthatitperformed itsauditsofValeant’sfinancialsin
accordancewiththesestandards. PwC’sspecialroleasindependentauditormeantthatitcoul
d
notblindlyacceptValeant’srepresentationsaboutitsaccountingdecisions, anditalsomeantthat
40
in the case of certain unusual or potentially problematic arrangements— like Valeant’s
relationshipwithPhilidor— PwC hadaheighteneddutytosatisfyitselfonbehalfofValeant’s
investors, thatValeantmadetheproperdisclosures. Forexample, PCAO B standardsimposedthe
followingresponsibilitiesonPwC, amongothers:
123. First, PwC hadaresponsibilitytoplanandperform theaudittoobtainreasonable
assurance. This required PwC to plan and perform auditprocedures to obtain reasonable
assurance aboutwhether Valeant’s consolidated financialstatements were free of material
misstatement,whethercausedbyerrororfraud, (AU 110.02), andtoobtainreasonableassurance
aboutwhethermaterialweaknessesexistedinValeant’sinternalcontroloverfinancialreporting
(AS5.03).
124. Second, PwC hadtheresponsibilitytoapplydueprofessionalcareand exercise
professionalskepticism. Theseresponsibilitiesincludedreducingauditrisk2 toanappropriately
“low”level,(AS8.03;AS12.04;AS12.59 ;AS13.08), andrequiredPwC toexercise“professional
skepticism,”i.e., “anattitudethatincludesaquestioningmindandacriticalassessmentofaudit
evidence.” AS8.03; AS12.04; AS12.59 ; AS13.08. The exercise ofprofessionalskepticism is
“particularlyimportantinthoseareasoftheauditt
hatinvolvesignificantmanagementjudgments
ortransactionsoutsidethenormalcourseofbusiness, suchasnonrecurringreserves, financing
transactions, andrelatedpartytransactionsthatmightbemotivatedsolely, orinlargemeasure,
byanexpectedordesiredaccountingoutcome.”AuditStaffAlertNo. 10 (emphasisadded). In
addition, “Effectiveauditing involvesdiligentpursuitofsufficientappropriateauditevidence,
particularly ifcontrary evidenceexists, and criticalassessmentofalltheevidenceobtained.”
AuditStaffAlertNo. 10.
2
Auditriski
stheriskthattheaudit orexpressesaninappropri
ateaudi topinionwhent hefinanci
alstatementsare
materiallymi
sst
ated, i
.e., t
hefi nancialst
atementsarenotpresentedfairlyinconformitywiththeappli cabl
efinanci
al
reporti
ngframework. Audi triskisafunctionoftheriskofmat erialmisstatementanddetecti
onrisk. SeeAS8.04.
41
125. Third, PwC had additionalresponsibilitiesin connection with Valeantcommon
sharesanddebtsecuritiesofferingsduringtherelevantperiod. PCAO B standardsrequiredPwC
to follow additionalprocedurespriorto thereissuanceofpreviously released auditreportsin
connection with Valeant’saudited financialstatementsincorporated by referenceorincluded
withintheCompany’sO fferings. AU 711, FilingsU nderFederalSecuritiesStatutes. AU 711
establishes that the auditor should conduct a “reasonable investigation” with respect to
subsequentevents. AU 711.10. These are furtherdetailed in AU 560.12 and would include:
(a)readingthelatestavailableinterim financialstatementsofValeant, comparingthem withthe
financial statements being reported upon, and making any other comparisons considered
appropriateinthecircumstances;(b) makingcertainstipulatedinquirieswithValeant’sofficers
andotherexecutiveswhichcouldaffectPwC’sauditopinion, includingwhethertheCompany
hadenteredintoanysignificantunusualtransactionssincetheauditreportdate;and(c)inquiring
with Valeant’s legalcounselconcerning litigation, claims, and assessments. AU 711 also
requiredPwC toreadtheregistrationstatementandobtainwrittenrepresentationsfrom Valeant
astowhethermaterialeventshadoccurredwhichrequireddisclosure. AU 711.11. Ifso, PwC
wasrequiredtoadviseValeanttomakeappropriatedisclosure. AU 711.12;AU 561.06.
126. Fourth, PwC hadaresponsibilitytoperform additionalprocedurestotheextentit
becameawarethatValeant’s10-K sand/or10-QsmaynotcomplywithGAAP. AU 722.15. If
PwC wasawareofinformationindicatingthataValeant10-K and/or10-Q mayviolateGAAP,
PwC was required to make additionalinquiri

es orperform otherprocedures, sufficientto
determine whetherany materialmodificationsshould be made to Valeant’sinterim financial
information. AU 722.22.
42
3. Valeant and PwC’s Violations of GAAP and GAAS
127. Throughoutthe relevantperiod, Valeantand PwC represented to investors,
including Plaintiffs, thatValeant’saccounting and SEC filingscomplied with the applicable
publicreportingobligationsbytimelydisclosingtruthfulmaterialfactsaboutValeant’sbusiness,
accuratelyreportingitsfinancialresults, and maintainingeffectiveinternalcontrols. H owever,
unbeknownst to the market, Valeant omitted to disclose material information and made
misrepresentationsaboutitsillicituseofasecretnetworkofpharmacies, itsrecordedrevenue, its
relianceonPhilidor, anditsgrowth, which— whenthetruthwasslowlyrevealedtotheoutside
world— caused a precipitous decline in the value ofValeantsecurities. And, despite clear
indicationsthatthiswasthecase, PwC falselycertifiedtoinvestorsthatithadproperlyaudited
Valeant’sfinancialsinaccordancewithGAAS andthatValeant’sfinancialstatementscomplied
withGAAP. Indeed, ValeanthassinceadmittedthatitsaccountingviolatedGAAP andthatit
had inadequate internalcontrols during the relevantperiod, leading to the resignation of
D efendantsSchillerand Carro, and arestatementofValeant’srevenue— an admission thatits
GAAPviolationswerematerialtoreasonableinvestorsandneededtobecorrected.
128. Valeant’s financialstatements violated GAAP in severalways. First, Valeant
failedtodisclosePhilidordespitethefactthatPhilidorshouldhavebeenconsideredamaterial
VIE duringtheperiod, thatPhilidorwasamaterialchangeinsaleschannel, andthefactthatthe
PhilidorO ptionwasamaterialacquisition. Second, Valeantimproperlydouble-bookedrevenue
forsalestoPhilidorint
hefourthquarterof2014. Third, Valeant’sexecutivesfalselycertified
thatValeantmaintained adequate internalcontrols over financialreporting throughoutthe
relevantperiod, statementsthatValeantlateradmittedwereuntrue.
129 . As Valeant’s outside auditor, PwC had a responsibility to guard againstthis
financialfraud. Y etdespite itsrepresentation to the contrary in Valeant’s2014 10-K , PwC
43
violatedPCAO B StandardsasValeant’soutsideauditorduringthe2014 audit. Inthecaseofthe
Philidortransactions, severalclearfactors imposed upon PwC the responsibility to inquire
furtherinto theaccounting forPhilidorand notsimplyrelyon management’srepresentations.
Valeant’stransactionsrelatedtoPhilidorwere“significantunusualtransactions”that, according
toPCAO B standards, poseahigherriskforfraud, andrequiredPwC toinquirefurtherintothe
transactions. D espite thisheightened responsibility, PwC approved Valeant’sdecision notto
disclosePhilidordespiteclearindicationsthatPhilidorwasmaterialandthefactthatValeanthad
disclosed smallertransactionsasmaterialin thesametimeframe. Thus, PwC eitherfailed to
inquirefurtherintothePhilidorrelationship, thusfailingtoconductitsauditinaccordancewith
GAAS, orPwC did inquirefurther, and stillapproved Valeant’saccounting and certified its
internalcontrols, inviol
ationofaccountingstandards. BecausePwC certifiedinthe2014 10-K
thatithadconducteditsauditinaccordancewithGAAS, thatValeant’sfinancescompliedwith
GAAP in allmaterialrespects, and thatValeanthad adequateinternalcontrolsoverfinancial
reporting, atleastoneofthoserepresentationswasknowinglyorrecklesslyfalse.
130. PwC had aheightened responsibility to examinethePhilidortransactions. The
D ecember2014 PhilidorO ptionandValeant’ssalestoPhil

idorinthethirdandfourthquartersof
2014 weretransactionsthatoccurred “outsidethenormalcourseofbusiness”forValeant, or
“otherwiseappear[ed]tobeunusual.”PCAO B thereforerequiredPwC toconsiderthesetobe
“significantunusualtransactions,”whichareconsideredtoposeasignificantriskoffraudand
imposedadutyonPwC toconsiderthem moreclosely. SeeAU 316.66.
131. Severalfactors made itclearthatthe PhilidorO ption and Valeant’s sales to
Philidorleading up to thatagreementwere “significantunusualtransactions.” The option to
purchasePhilidorwastheonlyoneofitskind, involving $100 million up frontand potential
44
milestonepaymentsofuptoanadditional$133 million, andunusualrelativetoValeant’snormal
course of business: up until then, Valeant had acquired pharmaceutical companies, not
pharmacies. Inaddition, PhilidorwasasignificantcustomerofValeant,andGAAPrequiredboth
ValeantandPwC toevaluatewhetherthePhilidorO ptionhadbeennegotiatedincontemplation
ofothercontracts, includingsalescontracts, whichmaynothavebeennegotiatedpursuanttothe
Company’snormalbusinesspractices. SeeASC 605-25-25-1 and 2; ASC 605-25-55-4. PwC
shouldhavepresumedthatcontractsenteredintoatornearthesametimewerenegotiatedasa
package and evaluated them as a single arrangement. ASC 605-25-25-3. PwC also had a
responsibilitytoconsiderseveralclearindicatorsthatthesesaleswerenotnegotiatedbyPhilidor
atarm’slength, including: (1)non-standardsalesterms, includingunusuallylargesalesvolumes;
(2) artificially inflated salesprices; and (3) paymenttermsthatdelayed Philidor’spayment
obligations.
132. D espitetheseclearfactorstriggeringaheighteneddutytoexaminethePhilidor
transaction, PwC approvedValeant’sdecisionnottodisclosePhil

idor-relatedactivity, including
the2014 consolidationofPhilidor’sfinanceswithValeant’sandthepurchaseoptionagreement,
in Valeant’s audited 2014 financialstatements. Valeantlaterjustified hiding Philidorfrom
investorsby claiming in an O ctober26, 2015 i

nvestorconference callthatPhil
idorwasnot
quantitativelymaterial,asitfellbelow a“pre-establishedinternalthreshold.”
133. Y et, Philidor was clearly significant to Valeant’s business as defined by
ASC 250-10-S9 9 . Asaninitialmatter, Valeanthadagreedtopayupto$233 milliontoacquire
Philidor. Indeed, Valeanthad disclosed two smallertransactions, specialty pharmacy Natur
ProduktInternational, JSC ($149 .9 million) andGerotLannach($164 million), inits2014 10-K
(Valeant2014 AnnualR eportonForm 10-K , atF-21 andF-25). Philidorwouldaccountforover
45
7% ofValeant’s2015 sales. In addition, Valeant’ssalesthough Philidorinvolved products
pricedsignificantlyaboveaverage, andwerethusintegraltoValeant’sprofitability. For2014,
Valeantoriginallyattributedatotalof$111 mill
ioninsalestoPhi
lidor, but$58 mill
ionofthat
waslaterdeterminednottocomplywithGAAP, anoverstatementof109 %.
134. In addition, Valeant’s treatment of Philidor strongly suggests that Valeant
believedPhilidortobematerial.Forexample, PhilidorwasexplicitlyincludedinValeant’sSO X
testingofinternalcontroloverfinancialreporting. PCAO B StandardAS 5 statesthatlocations
withareasonablepossibilityofmaterialmisstatementsshouldbetested. AS 5.B11. Similarly,
Valeant’srestatementofPhilidor-relatedrevenueitselfconstitutesanadmissionofmateriality, as
restatementsarerequiredwhenamisstatementismaterial.
135. W hen Valeantfinally disclosed itsrelationship with Phil

idorin O ctober2015,
analystsconsideredthesetransactionstobesignificant. Forexample, M organStanleyestimated
thatPhil
idorcontributed over50% ofValeant2015 U.S. organic growth (M organ Stanley
R esearch, O ctober 30, 2015). BM O CapitalM arkets concluded thatValeantshould have
disclosed the structure ofits relationship with Philidorand the factthatconsolidation was
occurring, especially considering thatthesecretpharmacy channelrepresented about10% of
Valeant’srevenue(BM O CapitalM arkets, O ctober23, 2015).
136. Indeed, theEnterprisesuppressed information aboutPhilidor, falsely attributed
Valeant’sgrowthtovolumeincreases, andmisstateditsrevenuesbecausethisinformationwas
materialto investors. The Enterprise soughtto convince investorsthatValeant’sacquisition
strategycouldform thebasisforsustainable, volume-basedgrowth. Todothat, Valeantneeded
tocontinuallymeetrevenueexpectations, especiallyinrelationtonewly-acquireddrugs. Tomeet
theseexpectations, Valeantrelied on Philidorand itsnetwork ofsecretpharmaciesto obtain
46
reimbursementforitshigh-priced drugs. Ifinvestorsunderstood how much Valeant’sgrowth
reliedonconningthirdpartypayors, theywouldnothavevalueditashighly— asdemonstrated
bythemassivedevaluationofValeant’ssecuritiesasthetruthemerged.
C. The Enterprise’s Material Misrepresentations And Omissions
137. An essentialcomponentoftheschemewastheEnterprisemembers’effortsto
concealtheirprice-basedbusinessmodelanddeceptivesalestacticsbymakingprolificfalseand
misleadingrepresentationsaboutValeant’sbusinessmodel.W ithoutthecoverofitscampaignof
misrepresentations, theEnterprisewouldhavebeenunabletoretaininvestors, sellnew securities
atinflatedprices, orsustainitsshort-term businessmodelofreapingprofitsbygougingprices.
EachoftheEnterprise’sintentionalmisrepresentationsconstitutesaviolati
onofSection10(b) of
theExchangeActandgivesrisetoaseparateclaim ofsecurities, mailandwirefraud, and, as
such, eachconstitutesaseparatepredicateactofracketeeringunderNJR ICO .
138. D uring the relevant period, the Enterprise made numerous material
misrepresentations and omissions ofmaterialfactconcerning Valeant’s business, including:
(a)statementsindicatingthatvolumeplayedalargerroleinValeant’srapidrevenuegrowththan
itactuallydid;(b) statementsobscuringandomittingtodiscloseValeant’stiestoPhilidorand
useofanetwork ofsecretpharmaciesand deceptivebusinesspracticesto unsustainably and
artificiallyinflatesalesandpropupprices;(c) representationsthatValeant’sreportedfinancials
forthe third and fourth quarters and fullyearof2014, and the firstnine monthsof2015
complied with GAAP, and thattheCompany’sfinancialguidancefor2016 had areasonable
basisinfact;(d) generalrepresentationsbyD efendantsandcertificationsbyValeant’sexecutives
thattheCompanyhadadequateinternalcontrols;and(e)anauditopinionbyPwC certifyingthat
Valeant’sfinancialstatementscomplied with GAAP and thatValeanthad adequate internal
controls.
47
139 . Among other consequences, the Enterprise’s material misstatements and
omissionscaused Valeantsecuritiesto trade atartificially inflated pricesduring the relevant
period. Asdiscussedherein, thesestatementsandomissionsweremateriallyfalseandmisleading
because:
(a) From 2013 to2015, Valeantpursuedadeliberatestrategy— devisedatthe
highestlevelsofthecompany, buthiddenfrom investors— thatreliedonsteepandrepeatedprice
hikesratherthansustainablevolumeincreasestodriverevenuegrowth;
(b) Valeant helped create Philidor in 2013 sol

ely to benefit Valeant,
controlled thepharmacy by staffing itwith Valeantemployees, and through Philidorand its
networkofsecretcaptivepharmacies, implementeddeceptivebusinesspracticestodrivesalesof
Valeantdrugsbyensuringthattherapeuticallyidenticalgenericdrugswerenotsubstitutedfor
Valeant’sexpensivebrandeddrugs;
(c) Valeantemployed deceptive practices thatincluded: (i) implementing
enormousundisclosed price increasesthatD efendantsknew were unsustainable butallowed
Valeanttomeetfinancialtargets;(ii) usingValeant’ssalesforcetoroutepatientsintoValeant’s
networkofsecretandcaptivepharmaciesthatpresentedthemselvesasindependent;(iii) using
theso called “patientassistance”program and publicrelationsstrategiesto minimizepatient
complaintsanddeflectscrutinyintotheCompany’simproperpractices;and(iv)concealingthese
practicesfrom payorsandphysiciansinordertoobtainreimbursementfordrugsthatwouldnot
otherwisebereimbursedifthesepracticeswereknowntoprivatepayors, physicians, andPBM s.
(d) Valeant’s reported revenues, earnings pershare (“EPS”), profitability,
growth, and futurebusinessprospectsweredependenton theCompany’scontinued abilityto
48
concealand rely on these deceptive business practices and thus did notaccurately portray
Valeant’sbusinessprospectsandfinancialperformance;
(e) Valeant’scontrolanduseofPhilidoranditsnetworkofsecretpharmacies,
and theCompany’sdeceptivebusinesspracticesposed materialregulatoryand reimbursement
riskstoValeant’sbusinessprospects. Theserisksincludedgovernmentinvestigations, regulatory
sanctions, criminalcharges, reputationalharm, contractualviolations, and decreased salesand
revenues;
(f) Valeant’s growth and ability to service its debt were dependent on
maintainingacycleofacquiringcompaniesanddrugportfoliosandthengeneratingrevenueby
puttingthenewlyacquireddrugsthroughitsprogram ofmassivepriceincreasescoupledwiththe
deceptivepracticesdescribedabove. Byrelyingondeceptivepracticestosupportitsdebt-fueled
acquisitionstrategy, theD efendantsexponentiallymagnifiedbusinessriskstotheCompanyin
theeventthatdiscoveryforcedtheCompanytostopitssecretstrategy;
(g) Valeantfailed to disclose Philidoras a materialVIE, as required by
GAAP;
(h) Valeantimproperly recognized Philidorrevenue, in violation ofGAAP,
causingrevenues, netincome, andEPS tobemateriallymisstatedandinflated;
(i) Valeant’sfinancialpredictionsfor2016 didnothaveareasonablebasisin
factand wereissued to artificially inflateValeant’ssecuritiesin thefaceofnew revelations
aboutitsbusinessmodel;and
(j) Valeantdidnothaveadequateinternalcontrolsand, infact, Valeanthas
admitted thatcertain Valeantexecutives cultivated an “improper tone atthattop of the
organization”anda“performance-basedenvironment”whereemployeesprioritizedstockprice
49
andtheirowncompensationoverbuildingasustainablebusinessandcomplyingwithapplicable
laws, regulations, andcontracts.
1. The Enterprise Falsely Attributed Valeant’s Rapid Revenue Increases

to Organic Volume Growth and Obscured Valeant’s Reliance on
Price Increases
140. Throughoutthe relevantperiod, the Enterprise repeatedly misrepresented the
amountofValeant’srevenuegrowththatwasdrivenbyorganicgrowthinvolume, ratherthan
priceincreases. Thesestatementswerematerially falseand misleading becausethey failed to
disclose how dependentValeantwason price increases, supported by a network ofcaptive
pharmacies, to driverevenue. Becauseinvestorsassociatevolume-based revenuegrowth with
moresustainablelong-term cash flows, and considerpriceincreasesto beashort-term boost,
theserepresentationswerematerialto investors’decisionsto buy Valeantsecurities. Valeant
couldonlysustainthismodelaslongasitcouldrelyonasecretnetworkofpharmaciestohide
thereimbursementpracticesitneededtosustainitspriceincreases. Asthedetailsofitsdeceptive
practiceswere revealed, Valeantlostitsability to receive reimbursementforitshigh-priced
drugsanditsprofitsplunged.
141. O nJanuary4, 2013, PearsonandSchillerhostedaconferencecallwithinvestors
and analyststo discussValeant’s2013 financialguidance. O n the call, Pearson and Schiller
made several statements concerning Valeant’s business model and financial prospects.
R egardingValeant’sorganicgrowth, Pearsonstated:
2012 wasanothervery strong yearforValeant. From atop line

perspectiveweaddedover$1 billioninrevenuein2012 . . . . O n
thebottom line, we delivered cash EPS growth of greater than
50% as compared to 2011, demonstrating once again the
sustainability of our business model.
Our businesses continued to deliver strong organic growth, and

weexpectfullyear2012 tohavesame-storesales, organicgrowth
50
of approximately 8%, and pro forma organic growth of

approximately10%.
142. Laterin the call, in response to an analyst’squestion aboutprojected organic
growth, Pearsonstated, “R eallytheonlytwobigchanges, Gary, areNeuro, which we expect as
we mentioned previously, to have positive organic growth this year, anddermatology, which
willprobablyfallmoreinlinewithwhatwe’veexperiencedasaCompany.”
143. O n February 28, 2013, the Pearson and Schill

erhosted a conference callto
discussfinancialresultsforthefourthquarterof2012. D uringopeningremarks, Pearsonstated,
“O rganicgrowthcontinuedtobestrongforboththequarterandtheyear. We are particularly
pleased to report a return to positive growth for our Neuro and Other business after six
quarters of decline. Aswementionedearlierthisyear, weexpectUS NeuroandO therbusiness
tocontinuetogrow throughout2013.”
144. Thestatementsin¶¶141–43, thatValeant’s“organicgrowth”demonstratedthe
“sustainability”ofValeant’sbusinessmodel,andthatValeantexpectedtheNeurologyandO ther
unittohavepositiveorganicgrowthwerefalseandmisleadingwhenmadebecauseD efendants
omittedtotellinvestorsthatPearsonandValeant’sexecutivesandseniormanagershadadopted
a strategy of boosting flagging revenues with dramatic price increases, rather than more
sustainablevolumegrowth. Forexample, asdiscussed aboveat¶¶71–76 and detailed in the
SenateD rugPricingR eport, inlate2012 Valeantexecutivesadoptedaplantoaggressivelyraise
pricesin Valeant’sNeurologyand O therunitto compensatefordecliningrevenueand turn it
intothemostprofitableunitwithinValeantin2013, aplantheCompanysubsequentlyputinto
practice. SeeD rugPricingR eport, at50–55. Valeant’sprice-hikestrategywasnotconfinedtoa
singlebusinessunit— duringhistestimonybeforetheU.S. Senateon April27, 2016, Pearson
51
admittedthatforeachquarter(exceptone) betweenJanuary1, 2013 andSeptember30, 2015,
“pricing has driven more growth than volume.”
145. O n O ctober31, 2013, the Company issued a release reporting its2013 third
quarter(“3Q13”) financialresults. ThereleaseagainemphasizedValeant’srapidgrowth, stating
that“Valeant’sD evelopedM arketsrevenuewas$1.14 billion, up77% ascomparedtothethird
quarterof2012”and that“[t]he growth in the Developed Markets was driven by continued
improvement in many of our Dermatology prescription brands, our aesthetics and oral health
portfolios, our orphan drug products and CeraVe.”
146. O nJanuary7, 2014, PearsonandSchillerhostedaconferencecallwithinvestors
and analysts. D uring thecall, Pearson again highlighted Valeant’spurportedly strong organic
growth:
IfwecompareValeant’sperformancein 2013 to thecompany’s

average performance from 2009 through 2012, you can see a
continuingtrackrecordofconsistentstrongperformanceinterms
ofgrowthinrevenues, earnings, andmostimportant, returnstoall
ofyou, ourshareholders. This is a result of achieving strong
organic growth in a fiscally responsible manner for the products
that we already own, coupled with a consistent track record of
buying durable assets in a very disciplined manner and
over-achieving in terms of improving growth rates and extracting
cost synergies.
147. Thestatementsin ¶¶145–46 werematerially falseand misleading when made
because Valeant’s revenue growth was notdriven by “improving growth rates,” or“strong
organicgrowth,”norwasValeant’sbusinessmodelsustainable. R ather, Valeantexecutiveshad
adopted a strategy ofrelying on repeated and dramatic price increasesto drive revenues, as
discussedin¶¶139 and144 above.
148. O nFebruary28, 2014, theCompanyfileditsannualreportonForm 10-K forthe
yearended D ecember31, 2013 (“2013 10-K ”). The 2013 10-K wassigned by Pearson and
52
Schiller. The2013 10-K includedstatementsattributingtheCompany’sgrowthtoapurportedly
legitimatelow-riskbusinessmodel.Forexample, the2013 10-K stated:
Thegrowthofourbusinessisfurtheraugmentedthroughourlower
risk research and developmentmodel. This model allows us to
advance certain development programs to drive future
commercial growth, while minimizing our research and
development expense . . . Thisisachieved primarily asfollows:
focusing our efforts on niche therapeutic areas . . . andacquiring
dossiers and registrations for branded generic products, which
requirelimitedmanufacturingstart-upanddevelopmentactivities.
149 . Thestatementsin¶148 weremateriallyfalseandmisleadingbecauseValeant’s
purported “low risk research model”could not, in fact, sustainably “drivefuturecommercial
growth.”R ather, inboththe“nichetherapeuticareas”[orphandrugsinitsNeurologyandO ther
unit]and“brandedgenericproducts,”Valeantwasrelyingonsteeppriceincreases, aswellasthe
improperbusinesspracticesdescribedin¶139 , todriverevenuegrowththroughouttherelevant
period.
150. O nApril22, 2014, Valeantissuedapressreleasestatingthatithadsubmittedan
unsolicited mergerproposalto Allergan’s Board ofD irectors. In total, the offerto acquire
Allergan, adrugmanufacturer, wasvaluedatapproximately$46 billion.
151. O nM ay8, 2014, theCompanyissuedapressreleaseannouncingValeant’sfirst
quarter2014 (“1Q14”) financialresults. The release discussed Valeant’scontinued trend of
extraordinarygrowth, includingrevenuegrowthwhichrepresented“anincreaseof77% overthe
prioryear,”which“[e]xceed[ed]ourexpectations,”alongwith“[p]ositive organic growth in the
U.S. . . .”ThereleasequotedPearsonasstating, inpart, “[o]ur first quarter results demonstrate
the strong, durable nature of our diversified business model.”
152. O n M ay 9 , 2014, Valeantfiled itsquarterly reporton Form 10-Q forthefirst
quarterended M arch 31, 2014 (“1Q14 10-Q”). The 1Q14 10-Q wassigned by Pearson and
53
Schiller. Inthereport, theCompanyagainattributeditscommercialgrowthtoalow riskmodel,
stating: “The growth of our business is further augmented through our lower risk research
and development model, which allows us to advance certain development programs to drive
future commercial growth, while minimizing our research and development expense . . . .”
153. The statements in ¶¶ 150–52 were false and misleading when made forthe
reasonsdiscussedin¶¶139 and144, above.
154. O nM ay12, 2014, AllerganissuedapressreleaserejectingValeant’sunsolicited
bid, statingitsBoardofD irectors“believesthattheValeantbusinessmodelisnotsustainable.”
D uring a conference callon the same day, Allergan’sChairman and CEO referred to “the
unsustainabilityofValeant’sbusinessmodel,”emphasizedValeant’slackoforganicgrowth, and
cautionedinvestorsto“verycarefully”checktheresults“actuallyachieved”byValeant’snew
productlaunchesand“diginwhatarethepriceincreasesbehindthoseverylow [organicgrowth]
numbersbecausetherearesomeeye-poppingincreasesofprice.”
155. In response to Allergan’scriticism, D efendantsfalsely insisted thatValeant’s
businessmodelwassust
ainable, andthattheCompany’srevenuegrowthwasbasedonorganic
volumegrowth, notpriceincreasesanddeceptiveandunsustainablebusinesspractices. Indeed,
D efendantsclaimedmultipletimesthattheCompany’smanagedcarecontractspreventeditfrom
raisingpricesmorethansingle-digitpercentageseachyear.
156. Forexample, onM ay28, 2014, Valeantheldaninvestormeetingandconference
calltorespondtoAllergan’saccusations. D uringthecall,Pearsonstatedthattheywouldprovide
“a much deeper understanding of our operating model and why we believe it is sustainable for
many years to come”andshow that“when we buy a platform asset, we have either maintained
the growth or in most cases, we have accelerated the growth . . . .”D uringthequestionand
54
answersession, Pearsonwasaskedtoreconcileindustrydatashowing15% priceincreaseswith
slidesused during thepresentation showing a1% increase. Pearson replied, in part, “We are
limited. For example in the US with our managed care contracts, I think the maximum price
increase we can take a year is 9% across dermatology, across ophthalmology, etc. So that is
what limits. It is managed care in the United States.”Pearsonconcludedthepresentationby
claimingValeant“has delivered strong organic growth since I have been here”and“[w]e are
very transparent”and“our basic underlying growth rate is about 8%[.]”
157. AlsoonM ay28, 2014, PearsonparticipatedintheSanfordC. BernsteinStrategic
D ecisionsConferenceonbehalfofValeant. InresponsetonumerousquestionsaboutValeant’s
businessmodel,PearsonagaininsistedthatValeant’sbusinesswassustainable, basedonorganic
volumegrowth, andthattheCompanycouldnotrelyonpriceincreasesforrevenuegrowth:
The only country in the world thatyou can really sustainably

increasepricing isthe United States. And in the United States,
you’re governed by managed care contracts. And the managed
care contract—the highest price increase we could take under
any managed care contract we have in the US is 9% a year.
So, wehavealotofconstraints, justlikeotherpharmacompanies

do, intermsofpricing. So, we focus on volume growth, and the
vast majority of our growth on a global basis—and we went
through some of that this morning—is volume.
158. D uringthesameconference, Pearson also justified Valeant’srefusalto provide
moredetaileddisclosuresaboutproductsales, stating, “We’re more like a generics company in
terms of the amount of revenue we get per product,”andthat“[it]justmakesnosense”tomake
suchdisclosures.
159 . Andagain, duringaJune17, 2014 conferencecallhostedbyPearsonandSchiller
“torefuterecentmisleadingassertionsmadebyAllergan,”Pearson emphasizedthatValeant’s
businesswas“strong”and“sustainable,”stating:
55
I am pleasedtoupdateallofyouthatourbusinessiscontinuingto
perform well. I finditveryoddthatAllergancontinuestosuggest
thatourQ2 and in particularourQ3 results willdemonstrate
weakness. . . . In short, our business is strong and I can assure
you our operating model is both durable and sustainable.
In Allergan’s investor presentation dated June 10, 2014, they

assertedthatValeanthasexperiencedvolumedecreasesin11 ofits
top15 worldwidepharmaceuticalproducts.
First, theproductslistedinthepresentationarenotValeant’stop
15 products by revenue. O nly 6 ofthe products listed are in
Valeant’s top 15 products. The presentation also claimed that
most of our products are not growing, when in fact, 13 of our top
15 products are growing and 9 of the top 15 are growing by
volume, not just price.
160. Laterinthecall, PearsoncontinuedtoinsistthatValeant’sgrowthwasbasedon
increasingvolume, statingthatwhen, atsomeunspecifiedtime, Valeantdoesbreakdownsales
intovolumeandprice, “itwillbesurprisingtopeoplebecauseI thinkvolume is a much larger
piece of our organic growth than most people would assume it is.”
161. PearsonfurtherstatedduringtheJune17, 2014 conferencecallthat“[o]ursales
forceindermatologynow hasbeenstableforafew quartersand. . . all our promoted products
in dermatology are growing.”
162. The statementsin ¶¶ 156–61 thatValeant’sbusinessmodelwas“strong” and
“sustainable,”thatthe“majority”oftheCompany’sgrowth was“volume,”thatValeantwas
“focused”on increasing volumegrowth ratherthan price, and that“volumeisamuch larger
piece of our organic growth than mostpeopl

e would assume” were materially false and
misleadingwhenmadeforthereasonsstatedin¶¶139 and144. Inaddition, Pearson’sclaims
thatValeantwas“limited”topriceincreasesof“9 %”wasmateriallyfalseandmisleadingwhen
madebecause Valeantimplemented priceincreasesfarbeyond 9 % in multipledrugs, across
severalbusinessunits. Forexample, in2013 and2014, ValeantincreasedthepriceofCuprimine
56
by 224% and 158%, respectively. These practices were widespread— the Senate R eport
concluded thatValeantpursued thisprice strategy “companywide,” and Pearson admitted in
Senatetestimonythatpricedroverevenuegrowthmorethanvolumeineveryquarterexceptone
betweenJanuary1, 2013 andSeptember30, 2015.
163. O n July 31, 2014, the Company issued a pressrelease announcing itssecond
quarter2014 (“2Q14”) financialresults. The release reported “2014 Second QuarterTotal
R evenue[of]$2.0 billion;anincreaseof86% overtheprioryear.”ItquotedPearsonasstating
“Valeant once again delivered strong quarterly results and, as expected, organic growth has
accelerated from the first quarter. Aswelookacrosstheentirebusiness, I haveneverbeenmore
confidentaboutthegrowthtrajectoryacrosstheentirecompany.”
164. O n August1, 2014, the Company filed itsquarterly reporton Form 10-Q for
2Q14 (“2Q14 10-Q”), signed by Pearson and Schiller. The2Q14 10-Q included astatement
regarding the commercialgrowth achieved through the Company’s purportedly lower risk
businessstrategy, stating: “Thegrowthofourbusinessisfurtheraugmentedthroughourlower
risk research and developmentmodel, which allows us to advance certain development
programs to drive future commercial growth, whileminimi

zingourresearchanddevelopment
expense.”
165. O nSeptember11, 2014, theCompanyfiledwiththeSEC alettersentbyPearson
toValeant’semployees, whichincludedreferencetoAllergan’s“attack[s]onourbusiness”and
“our business model and our track record of organic growth.”Intheletter, Pearsonresponded
that“[h]ighlightsacrossValeant’sbusinessesinclude. . . continued tremendous growth in our
U.S. Neuro & Other and OraPharma businesses.”
57
166. O nO ctober20, 2014, inresponsetofurthercriticism byAllergan, Valeantfileda
documenttitled “O ctober20th rebuttalitems.”In thedocument, Valeantdisputed Allergan’s
claim that“priceisalargedrive[r]ofgrowthforselectValeantU.S. pharmaceuticalbusinesses”
bystating, inpart, that: “Overall price/volume for the Valeant business was ~50% volume and
~50% price”; “Li

ke al
l PhRM A [Pharmaceut
icalR esearch and M anufact
urers of Ameri
ca]
compani
es, i
ncl
udi
ngAl
lergan, our managed care contracts restrict our price increases each year,
and many of our managed care contracts restrict price increases to less than 10% net price
increase per year”;and“Gross price increases could be seen as higher but do not contribute to
our reported net sales growth.”
167. The statementsin ¶¶ 163–66 aboutthe “sustainability” ofValeant’sbusiness
model, Valeant’sorganic volume growth, and the ability ofValeant’spurportedly “low risk
research model” to drive “commercialgrowth” were materially false and misleading forthe
reasonsdiscussedin¶¶139 and144 above. Inaddition, thestatementsi

n¶166 claimingthat
Valeantwas constrained to price increases of “less than 10%” were materially false and
misleadingbecauseatthetimeValeantwasrelyingontriple-digitpricepercentageincreasesto
driverevenuegrowth, asdiscussedin¶162, above.
168. O nFebruary23, 2015, PearsonandSchillerhostedaconferencecalltodiscuss
Valeant’s 4Q14 and fullyear 2014 financialresults. D uring the call, Schiller highlighted
Valeant’ssourcesofgrowth, includingthat“[r]evenuesforourdermatologybusinesswerevery
strongandincreased70% year-over-year”and:
The outstanding work of our sales teams, implementation of

innovative marketing approaches, great leadership, a portfolio of
great products, and our four new launch products have
contributed to the turnaround and the outstandi
ng resultsin our
dermatologybusinessinQ4 and2014.
58
Core products such as Zyclara, Elidel, and the R AM franchise

continuedtheirstronggrowth. AndSolodyngrew inQ4 andgrew
5% forallof2014, afteratoughyearin2013.
Jubliacontinuesitsrapidgrowthtrajectoryandreportedmorethan
20,000 weekly scriptsforthe lastreported weekly salesreport.
Thisyieldsanannualizedrunrateofgreaterthan$250 millionfor
theproduct.
169 . O nFebruary25, 2015, ValeantfiledwiththeSEC itsannualreportonForm 10-K
fortheyearendedD ecember31, 2014 (“2014 10-K ”). The2014 10-K wassignedbyD efendants
PearsonandSchiller, andtherelevantthirdparties. The2014 10-K :
(a) attributed the source of Valeant’s growth to “our lower risk,
output-focused research and development model, which allows us to advance certain
development programs to drive future commercial growth, whileminimi

zingourresearchand
developmentexpense”;and
(b) claimed “[t]o successfully competeforbusinesswith managed careand
pharmacy benefitsmanagementorganizations, we must often demonstrate that our products
offer notonly medicalbenefitsbutalso cost advantages as compared with other forms of
care[.]”
170. The statements in ¶¶ 168–69 , thatValeant’s organic was attributable to an
“outstanding salesteam,”“portfolio ofgreatproducts,”and otherfactorsthatdid notinclude
dramatic price increases, that Valeant’s “lower risk” research model could “drive future
commercialgrowth,” and thatValeantmustdemonstrate “costadvantages,” were false and
misleadingwhenmadeforthereasonsdiscussedin¶¶139 and144, above.
171. O n M arch 16, 2015, Valeantannounced a$1.45 billion publicoffering of7.3
millionsharesofcommonstockatapriceof$19 9 pershare, theproceedsofwhichwereusedto
fundtheacquisitionofSalixandrelatedcosts(see¶19 5 below). TheM arch2015 StockO ffering
59
wasconductedpursuanttotheM arch2015 StockO fferingM aterials, includingtheR egistration
StatementandProspectusSupplement.
172. TheM arch2015 StockO fferingM aterialsrepresentedthat:
(a) A “key element” ofValeant’s business strategy, which allowed itto
“improve both the growth rate and profitability of the Company”and “enhanceshareholder
value,”wasits“low-risk research and development (‘R&D’) model”;and
(b) Valeant’s dermatology segment and other segments were “attractive
markets” in which Valeant operated because they were “high-growth businesses” with
“sustainable organic growth”wherethe“healthcareprofessionalorpatientisstilltheprimary
decision maker,” and similarly stated thatValeant’s business strategy operated “to ensure
decisionsaremadeclosetothecustomer”andthattherewas“significantopportunitytocreate
valuethroughapplicationoftheValeantmodel.”
173. O nApril29 , 2015, theCompanyissuedapressreleaseannouncingitsfinancial
resultsforthefirstquarter2015 (“1Q15”), aswellasincreasedguidanceforfullyear2015. The
releasereported: “SameStoreSalesO rganicGrowthwas15%, drivenby,”amongotherthings,
“Growth from launch brands, including BioTrue M ultipurpose Soluti

on, BioTrue O NEday
ContactLens, Jublia, Luzu, and Ultra ContactLens,” and “Double digit growth in U.S.
businesses such as Contact Lens, Dermatology, Neurology and Other, Obagi, and Oral
Health.”
174. O n April29 , 2015, Pearson, Schillerand K ellen hosted a conference callto
discussValeant’s1Q15 financialresultswith investorsand analysts. D uring thecallPearson
stated, inpart: “O urUS dermatologybusinesshadanoutstandingquarter. D ermatologyrevenue
60
grew 38% yearonyearandscriptgrowthgrew 37% yearonyear. Jubliascriptsgrew 87% inQ1
versusQ4 oflastyear.”
175. Ananalystasked“ifyoucouldquantifyalittlebithow muchwaspriceversus
volume thatcontributed to growth in 1Q [2015]?And whatdo you factorin yourfull-year
guidancepriceversusvolume?”Pearson responded that, “In termsofpricevolume, actually
volume was greater than price in terms of our growth. O utsidetheUnitedStatesit’sallvolume.
. . . And in the US it’s shifting more to volume than price, andweexpectthattocontinuewith
ourlaunchbrands. A lot of our prices for most of our products are negotiated with managed
care. And there’s only a limited amount of price that we can take.”
176. O nM ay21, 2015, PearsonattendedanR BC InvestorM eetingonbehalfofthe
CompanyandmadenumerousstatementsabouttheCompany’spricing, sourceofgrowth, and
accountingpractices, including:
(a) when asked to discuss pricing in the U.S., Pearson said thatdue to
managed care contracts, Valeantwas“contractually” notallowed to raise pricesbeyond an
averageof“5%,” includinginitsD ermatologybusiness;
(b) in discussingpricing, Pearson said oftheNeurologyand O therbusiness
segment“that’swherewehavethemostabilitytoraiseprice[s]”andraisingprices“isI believe
not, atleastfrom your[aninvestor’s]standpointabadthing.”PearsonsaidValeant’sbaseplan
wasaround5% priceincreasesaddingthatValeanthadraisedpricesmoreincertainareasbut
that“we don’t plan for them, but again if we can take advantage of – during times we’ve had
significant price increases in acquisitions.”
(c) Pearson said they raised the prices ofIsupreland Nitropress because
M arathon leftmoney “on the table” and claimed the drugs were priced much lowerthan
61
competitive products, stating they raised prices “because the drugs were mispriced vs.
comparativeproducts”andadding“thatcancreatelotofvalue[]forshareholders”;and
(d) Pearsonaddedthat“we’vebeen[accused]ofourgrowthbeingpriceand
not[volume]”butclaimedthat“organic growth is more volume than price and will continue to
be.”
177. O n July 23, 2015, the Company hosted a conference callto discussits2Q15
financialresults. D uringthecall, PearsonwasaskedaboutthepriceincreaseonGlumetzaand
the“extenttowhich youenvisionmorepricingpower. . . broadlyspeaking, intheU.S.?”In
response, Pearsonstated:
I thinkmostpharmacompaniesthatI’m awareof, astheproduct

getsintothelaststagesoftheirlife, likeGlumetza-- we’regoing
to loseGl umetzawithin six months-- often price increases are
taken at the end. So that was just consistent with what most
companies do.
O urview on pricing -- across most of our portfolio, we do not

take prices. O utsidetheUS, there’slikezeroprice. I think, D avid,
aswe getmoreand moreinto segmentslikecontactlensesand
consumerproductsandotherdevices, we’renotabletotakeprice.
So we’re opportunistic when it comes to price. But our base
strategy is, how do we grow organically through volume, which
is -- I think this quarter, we once again exhibited our ability to do
so.
178. O nJuly28, 2015, theCompanyfileditsquarterlyreportonForm 10-Q withthe
SEC forits2Q15, endedJune30, 2015 (“2Q15 10-Q”). The2Q15 10-Q wassignedbyPearson
andR osiello. The2Q15 10-Q reportedtheCompany’srevenuesforthesixmonthsendedJune
30, 2015 of$4.9 23 bill

ion. The 2Q15 10-Q included a statementregarding the Company’s
purportedly lower risk business strategy, stating: “The growth of our business is further
augmented through ourlower risk, output-focused research and development model, which
62
allowsustoadvancecertaindevelopmentprogramstodrive future commercial growth, whil

e
minimi
zingourresearchanddevelopmentexpense.”
179 . Thestatementsin¶¶172–78 toutingValeant’svolumeincreases, downplayingthe
rolethatpriceincreasesplayedinValeant’sgrowth, thatcontractuallyValeantcouldnotraise
pricesmorethan5%, andthattheCompanydoesnotplanforpriceincreaseswerematerially
falseandmisleadingwhenmade, asdetailedin¶¶139 , 144, and162. Andthestatementsabout
the “sustainability” ofValeant’sbusinessmodel, Valeant’sorganic volume growth, and the
abilityofValeant’spurportedly“low riskresearchmodel”todrive“commercialgrowth”were
materiallyfalseandmisleadingforthereasonsdiscussedin¶¶139 and144 above. Asdiscussed
above, Valeantrelied on double- and triple-digitpercentage price increases throughoutthe
relevantperiod. Indeed, in response to Pearson’spublic statementto investorsin ¶176 that
“organicgrowthismorevolumethanprice,”Schillersenthim anemailonM ay21, 2015, witha
subject“price/volume,”inwhichhecorrectedPearson: “Lastnight, oneoftheinvestorsasked
aboutprice[versus]volumeforQ1. Excluding[M ]arathon, pricerepresentedabout60% ofour
growth. If you include [M ]arathon, price represents about80%.” D espite Schiller’s email,
Pearsondidnotretracthismisleadingstatementsaboutpriceandvolume, andthestatementshad
theirintendedeffect.O nM ay26, 2015, anR BC CapitalM arkets, LLC (“R BC CapitalM arkets”)
analystreportedthatoneofthekeytakeawaysfrom themeetingswithValeantmanagementand
Pearson, was“volumenotpriceisfuelingorganicgrowth.”
2. Misrepresentations concerning Philidor
180. D efendants created Philidorand a network ofsecretpharmacies to maintain
Valeant’sinflatedpricesbyensuringthatpatientsreceivedValeantprescriptionsratherthanthe
equivalentgenericsandtobypassothercost-controllingsystemsemployedbyPBM sandthird
partypayors. Inordertocontinueitsfraudulentprogram however, theEnterprisehadtoconceal
63
Philidor’stiestoValeant. Inordertodoso, D efendantsissuednumerousfalseandmisleading
statements during the relevantperiod and violated relevantaccounting rules in theirpublic
filings.
(a) Defendants’ incomplete and misleading descriptions of the

Alternate Fulfillment Program
181. Valeant’sso-called AF Program wasnotdesigned to help patients. R ather, it
servedaslittlemorethanthecoverforthefraudulentschemetheEnterprisewasrunningthrough
Philidorand the network ofValeant-controlled pharmacies. Throughoutthe relevantperiod,
however, D efendantschose to speak aboutthe operationsand purported benefitsofthe AF
Program withoutdisclosingthatthewayValeantusedPhilidortoensurepatientswereprescribed
ValeantproductscouldsubjectValeanttoseriousregulatoryandreimbursementrisks.
182. O nFebruary28, 2013, theCompanyissuedareleaseandhostedaconferencecall
regardingValeant’s2012 financialresults. D uringthecall, PearsonandSchillerhighlightedthe
purportedbenefitsoftheirAFstrategybutdidnotdisclosetheassociatedimproperpracticesand
risks. InresponsetoaquestionabouttheAF strategy, Pearsonrepresentedthat“The program is
working actually quite well. We are going to be rolling out a couple new generations of the
program but we’re not going to talk about it on this call.”W hen pressed fordetailson the
“M edicisalternatefulfillmentchannel”and“how thatsortofcontributest
othegrowth,”Pearson
emphasized thatithad i
ncreased salesvolumesbutsimi
larlyrefused to disclosetheimproper
practicesandrisks, stating: “W ehavenevergivendetails. M edicisnevergavedetails. Andthat
wasprobably asmartpractice. W earenotgoing to givedetailsin termsofwhat’sflowing
throughfullalternatefulfillmentandwhat’snot. What we can reiterate is that all of our key
brands in dermatology since our sales force meeting are now growing.”
64
183. O n June 11, 2013, Schiller presented at the Goldman Sachs H ealthcare
Conference. W henaskedabouttheCompany’s“alternativefulfillmentprogram”byaGoldman
Sachsanalyst, Schillerresponded thattheprogram wasincreasing profitsand thatAF wasa
trendin“thewholepharmaceuticalindustry”:
Alternativefulfillment, I thinkacouplethings. One is, to me, the

alternative fulfillments was an example of what the whole
pharmaceutical industry— certainlywhatM ikeandI believeisthe
trend, andthatisthefocusontheprofitablescripts. Therewasa
daywhen you could callon anybody, and almostanyscriptwas
profitable. Those days are gone. So segmenting yourcustomer
baseand reallyfocusingonprofitabilityhasgottobethefuture.
And that’s— alternative fulfillment was the beginning of that
journey, butnottheendpoint.
SoI probablythinkunderM edicis, alternativefulfillmentwasheld

outalittlebittoomuchastheH olyGrail. I reallythinkit’s- it’s
actually the starting points, and in some ways, itwas quite a
clumsy starting point. Itwasn’tthatdifferent, butit’saprocess
wherewehavegeneration two and generation three. But it’s all
trying to focus on profitable scripts, and stay away from those
scripts that are unprofitable, and more judicious use of copay
cards and the rest, and making sure when a customer, a patient
is covered, you get reimbursed for it. . . . Yes, I think— I’m
hoping— we’ve gotgeneration two and generation three, which
I’m hoping sortofturn itinto a pure defense, into more ofan
offensivetoolto allow usto grow profits. And that’sreally the
focus, isgrowingprofits.
184. O nJuly23, 2015, theCompanyalsohostedaconferencecalltodiscussi

ts2Q15
financialresults. D uring thequestion and answerportion ofthecall, aJefferiesLLC analyst
questioned whetherthe numberofprescriptionsforJubliagoing through specialty pharmacy
channelshad improved. In response, K ellen, Valeant’sCompany Group Chairman, concealed
Valeant’scontroloverthePhilidornetwork, and stated: “Yes, the adoption through multiple
specialty pharmacies continues. I think lasttimewesaid Jubliawasaround 50%. Thattrend
continues. Forderm[atology]overall,itvariesbyproduct,butit’saround40%.”
65
185. The statements in ¶¶ 182–84 were false and misleading when made because
D efendants, having chosen to speak, failed to disclose that the AF Program was not a
“multi-stage”program, nordiditinvolve“multiplespecialtypharmacies,”orsimply“focus[ing]
on profitable scripts.” Nordid Valeant’sprogram resemble whatthe “whole pharmaceutical
industry”wasimplementing. R ather, itconsistedalmostentirelyofroutingprescriptionsthrough
a Valeant-controlled pharmacy, Philidor, which used a network of secretpharmacies and
improperandillegalpracticestoobtainreimbursementfordrugsthatotherwisewouldhavebeen
rejected by independentpharmaciesorthird party payors. These practicesinflated Valeant’s
salesfigureswhile posing extreme and undisclosed business, regulatory, and reimbursement
risks— risksthatinfactcametopasswhenValeant’scontrolofPhilidorwasexposed.
(b) Defendants’ misrepresentations and omissions regarding

Philidor prior to the December 2014 purchase option
agreement
186. Asdiscussedaboveat¶¶79 –85, ValeantformedPhilidorinJanuary2013 toserve
as a channelfor Valeantto push it

s high-priced branded drugs on patients by avoiding,
sometimesfraudulently, effortstoswitchpatientstoidenticalgenerics. AspartofD efendants’
schemetoconcealValeant’screationofandcontroloverPhilidor, D efendantsfailedtodisclose
toinvestorsandotherwiseobscuredValeant’srelationshipwithPhi
lidor.
187. O n M ay3, 2013, theCompanyfiled itsquarterlyreporton Form 10-Q forthe
period ended M arch 31, 2013 (“1Q13 10-Q”). The1Q13 10-Q represented that“pricing and
sales volume of certain of our products . . . are distributed by third parties, over which we have
no or limited control.”Valeantincludedidenticalstatementsinitsfinancialfilings, signedby
Valeant’stopexecutives, untilValeant’scontrolofPhilidorwasexposedi
nO ctober2015. This
statementalsoappearedinlaterSEC filings, includingValeant’s: (1) August7, 2014 quarterly
reporton Form 10-Q forthesecond quarterended June30, 2013 (“2Q13 10-Q”), signed by
66
PearsonandSchiller;(2) November1, 2013 quarterlyreportonForm 10-Q forits3Q13 ended
September30, 2013 (“3Q13 10-Q”), signed by Pearson and Schiller; (3) February 28, 2014
annualreportonForm 10-K fortheyearendedD ecember31, 2013 (“2013 10-K ”), signedby
PearsonandSchiller;(4) M ay9 , 2014 quarterlyreportonForm 10-Q forthefirstquarterended
M arch31, 2014 (“1Q14 10-Q”), signedbyPearsonandSchiller;(5) August1, 2014 quarterly
reporton Form 10-Q forthesecond quarterended June30, 2014 (“2Q14 10-Q”), signed by
Pearson and Schiller; and (6) O ctober24, 2014 quarterly reporton Form 10-Q forthethird
quarterendedSeptember30, 2014 (“3Q14 10-Q”), signedbyPearsonandSchiller.
188. Thestatementsin¶187 thatValeanthad“noorlimitedcontrol”overthepricing
and salesvolumeofdrugsin thehandsofthird partieswerematerially falseand misleading,
becauseValeanthadcreatedanetworkofsecretcaptivepharmaciesfortheexpresspurposeof
beingabletocontrolthepricingofitsdrugs. Asdiscussedabove, ValeanthadcreatedPhilidor,
ValeantwasPhilidor’sonlyclient, andmultipleValeantemployeesworkedonsiteatPhil
idor
andsaw PhilidorandValeantasthesameorganization.
189 . Furthermore, each oftheSEC filingsdiscussed in ¶187 contained an M D & A
section. ValeantfailedtodisclosePhilidorasadistinctsaleschannelinanyofthosereports. The
M D & A ineachofeachofthesereports, whichcausedValeantsecuritiestotradeatartificially
inflatedprices, wasmateriallymisleadingandincompletebecause, underSAB Topic13, Valeant
had an obligation to disclosePhilidorasadisti

nctsaleschannelin itsM D & A. Specifically,
ValeantwasrequiredtodisclosePhilidorasa“[c]hangingtrend[]inshipmentsinto. . . asales
channel. . . thatcouldbeexpectedtohaveasignificanteffectonfuturesalesorsalereturns.”By
thethirdquarterof2015, salesthroughPhilidorwereaccountingforatleastapproximately7%
ofValeant’s revenues, and likely more given the substantialdecline in Valeant’s revenue
67
followingPhilidor’sclosure. Thus, ValeantwasrequiredtodisclosePhilidorasachangingtrend
inasaleschannelthatwasexpectedtohaveasignificanteffectonValeant’ssales.
19 0. Inaddition, the2013 10-K wassignedbyPearsonandSchiller. Inthe2013 10-K ,
Valeant, PearsonandSchillerrepresentedthattheauditedfinancialstatementsincludedtherein
were“preparedinaccordancewithU.S. generallyacceptedaccountingprinciples.”InNote2 to
its Consolidated FinancialStatements— entitled “SignificantAccounting Policies”— Valeant,
PearsonandSchillerrepresentedthat,“[t]here were no material arrangements determined to be
variable interest entities.”
19 1. The statements above in ¶ 19 0, which caused Valeantsecurities to t

rade at
artificiallyinflatedprices, weremateriallyfalse, misleadingandincompletebecauseValeantwas
Philidor’sonly clientand operated Philidorto itsbenefitand effectively asadivision ofthe
Company. Thus, even before the purchase option agreement, Philidor was a material
unconsolidated VIE and D efendantsshould havedisclosed itassuch. In addition, D efendants
wererequiredtodisclosecertaininformationaboutPhilidorpursuanttoASC 810. Specifically,
Valeantwasrequiredtodisclose, amongotherthings: (a)quantitativeandqualitativeinformation
aboutValeant’stiestoPhilidor, includingthe“nature, purpose, size, andactivities”ofPhilidor,
andhow Philidorwasfi
nanced;and(b) Valeant’smethodologyforconcludingthatitwasnot
requiredtoconsolidatePhilidor’sfinancialstatementswithitsown, includingdisclosureofkey
factors, assumptionsand significantjudgments used in making the determination. See ASC
810-10-50-5A. M oreover, Valeant was required to disclose information concerning: (a)
significantjudgmentsand assumptionsmadein determining whetheritneeded to consolidate
Philidorand/ordisclosei
nformationaboutitsinvolvementwithPhi
lidor;(b) the“natureof, and
changes in, the risks associated with” Valeant’s involvementwith Philidor; and (c) how
68
Valeant’s involvement with Philidor affected Valeant’s “financial position, financial
performanceandcashflows.”SeeASC 810-10-50-8.
19 2. The2013 10-K wasalsomateriallyfalseandmisleadingbecauseValeantfailedto
consolidate Philidor in its financialstatements. Under ASC 810, Valeantwas required to
consolidateanyVIE forwhichitwastheprimarybeneficiary. AsPhilidor’sonlyclient, Valeant
was the primary beneficiary of Philidor even prior to entering into the purchase option
agreement. Accordingly, ValeantshouldhaveconsolidatedPhilidorinitsfinancialstatements
priorto 2014, anditsfailuretodosorenderedits2013 financialreportsmateriallyfalseand
misleading.
(c) Defendants’ omissions and misstatements regarding Philidor

after the December 2014 purchase option agreement
19 3. In D ecember2014, Valeantentered into the purchase option agreementwith
Philidor, which required Valeantto consolidate Philidor’sfinancials. H owever, Valeantstill
failedtodisclosePhilidorasamaterialconsolidatedVIE priortoO ctober2015.
19 4. Specifically, onFebruary25, 2015, Valeantfiledits2014 10-K . The2014 10-K
wassignedbyPearsonandSchiller. Valeant, PearsonandSchilleragainrepresentedthatthe
auditedfinancialstatementsincludedthereinwere“preparedinaccordancewithU.S. generally
accepted accounting principles.” In Note 2 to itsConsolidated FinancialStatements— titled
“SignificantAccounting Policies”— Valeant, Pearson and Schiller represented that, “[t]he
consolidated financialstatements include the accounts of the Company and those of its
subsidiariesandanyvariableinterestentities(“VIEs”) forwhichtheCompanyistheprimary
beneficiary.” In Note 3 to its Consolidated Financial Statements— titled “Business
Combinations”— Valeant, Pearson and Schillerrepresented that, “[d]uring the year ended
D ecember 31, 2014, the Company completed other smaller acquisitions, including the
69
consolidation of variable interestentities, which are notmaterialindividually or in the
aggregate.”The2014 10-K containednoreferencestoPhilidor.
19 5. O n M arch 16, 2015, Valeantannounced a$1.45 billion publicoffering of7.3
millionsharesofcommonstockatapriceof$19 9 pershare, theproceedsofwhichwereusedto
fund theacquisition ofSalix and related costs. Theofferingmaterialsdiscussed, amongother
things, theCompany’s“O therR ecentAcquisitions,”butagain failed to mention thatValeant
agreedtopaybetween$100 and$300 millionfortheoptiontoacquirePhilidorjustthreemonths
priorto theM arch 2015 Stock O ffering, and claimed thattheCompanywas“not currently a
party to any significant transactions, other than the [Salix merger].”
19 6. O nApril30, 2015, ValeantfileditsquarterlyreportonForm 10-Q withtheSEC
fortheperiodendedM arch31, 2014 (the“1Q2015 10-Q”), whichwassignedbyPearsonand
Schiller. Valeantrepresentedthatthefinancialstatementsreportedtherein“havebeenprepared
bytheCompanyinUnitedStates(‘U.S.’)dollarsandinaccordancewithU.S. generallyaccepted
accountingprinciples(‘U.S. GAAP’) forinterim financialreporting.”H owever, thosefinancial
statementsagaincontainednomentionofPhil
idorasamaterialconsolidatedVIE. Additionally,
the 1Q2015 10-Q included the same untrue statement related to Valeant’s “Business
Combinations”asintheCompany’s2014 10-K , discussedaboveat¶19 4.
19 7. O nJuly28, 2015, ValeantfileditsquarterlyreportonForm 10-Q withtheSEC
fortheperiod ended June30, 2015 (the“2Q2015 10-Q”). Valeantagain represented thatthe
financialstatementsreportedthereinhadbeenpreparedinU.S. dollarsandinaccordancewith
GAAPforinterim financialreporting. H owever, thosefinancialstatementscontainednomention
ofPhilidorasamaterialconsolidatedVIE.
70
19 8. The statements above in ¶¶ 19 4–9 7 were materially false, misleading and
incompletebecauseD efendantshadalreadydeterminedthatPhilidorwasamaterialconsolidated
VIE, afactthatrequiredD efendantstodisclosecertaininformationaboutPhilidorpursuantto
ASC 810. Specifically, Valeantwasrequiredtodisclose, amongotherthings, quantitativeand
qualitativeinformationaboutValeant’stiestoPhilidor, includingthe“nature, purpose, sizeand
activities”ofPhilidor, and how Philidorwasfinanced. SeeASC 810-10-50-5A. Additionally,
ValeantwasrequiredunderGAAP todisclosethefactorsthatresultedintheconsolidationof
Philidor— i.e., the purchase option agreementwith Philidor. See id. M oreover, Valeantwas
requiredtodiscloseinformationconcerning: (a) significantjudgmentsandassumptionsmadein
determining whetheritneeded to consolidate Philidorand/ordisclose i

nformation aboutit
s
involvementwith Phili
dor; (b) the “nature of, and changes in, the risks associated with”
Valeant’sinvolvementwithPhilidor;and(c) how Valeant’sinvolvementwithPhilidoraffected
Valeant’s“financialposition, financialperformanceandcashflows.”SeeASC 810-10-50-8.
19 9 . Furthermore, each ofValeant’s2014 10-K , 1Q2015 10-Q, and 2Q2015 10-Q
contained an M D & A section. H owever, Valeantfailed to disclosePhilidorasadistinctsales
channelinanyofthosereports. TheM D & A ineachofValeant’s2014 10-K , 1Q2015 10-Q, and
2Q2015 10-Q reportswasmateriallymisleadingandincompletebecause, underSAB Topic13,
Valeanthad an obligation to disclose Philidor as a distinctsales channelin its M D & A.
Specifically, Valeantwasrequired to disclosePhilidorasa“[c]hanging trend[]in shipments
into. . . asaleschannel. . . thatcouldbeexpectedtohaveasignificanteffectonfuturesalesor
sale returns.” SAB Topic 13.B. By the third quarterof2015, sales through Philidorwere
accountingforatleastapproximately7% ofValeant’srevenuesandlikelyfarmoregiventhe
substantialdeclines in Valeant’s revenues following Philidor’s closure. Thus, Valeantwas
71
requiredtodiscloseitsuseofPhilidorasachangingtrendinasaleschannelthatwasexpected
tohaveasignificanteffectonValeant’ssales.
3. Misrepresentations Related to the Manipulation of Revenue

Recognition
(a) Valeant Materially Overstates Its Reported Revenue
200. In2014 and2015, Valeantreportedthefollowingrevenues:
SEC Filing Financial Period Reported Revenue
3Q2014 10-Q 3 monthsended September30, $2,022.9 million

2014
2014 10-K 3 monthsended D ecember31, $2,235.5 million
2014
2014 10-K Y earendedD ecember31, 2014 $8,263.5 million
1Q2015 10-Q 3 months ended M arch 31, $2,146.9 million

2015
2Q2015 10-Q 6 monthsendedJune30, 2015 $4,841.9 million
3Q2015 10-Q 9 monthsended September30, $7,59 0.1 million

2015
201. Valeantlateradmitted thatthesereported revenueswerematerially overstated.
Specifically, ValeantexecutedtransactionswithPhilidoroutsidethenormalcourseofbusiness.
Valeant’sabilitytoactuallycollectrevenuefrom thesetransactionswasnotreasonablyassured
atthetimetherevenuewasrecognized, andthereforetherevenuewasimproperlyrecognized.
See SAB Topic 13. According to Valeant’s 2015 annualreport, such transactions included
“fulfillmentofunusually largeorderswith extended paymenttermsand increased pricing, an
emphasison delivering productpriorto theexecution ofthepurchase option agreementand
seeking and filling a substituteorderofequivalentvalue foran unavailableproduct.”These
transactionswereundertaken to artificially increaserevenuebeforeconsolidation ofPhilidor,
afterwhichValeantwouldbeprohibitedfrom recognizingrevenueonanydeliveriesofproduct
toPhilidor. TheprospectsofconsolidatingPhilidor, whichwouldhavedelayedtherecognition
72
of revenues and profits earned through the Philidor transactions, were undesirable to
management. ThatValeantwaspreparingtoacquireSalixbyincurringmassiveamountsofdebt
madeitallthemoreundesirabletodelayrevenuerecognition. Tocompoundtheerror, afterthe
purchase option agreementwasexecuted, Phili

dorrecorded revenue from the salesofthese
productswhen itshipped them to patients, even though Valeanthad already recognized the
revenue when ittransferred the medication to Philidor. Because, atthatpoint, Phi

lidor’s
financials were consolidated with Valeant’s, Valeant double-booked revenue on these
transactions.
202. ValeantadmittedtheoverstatementinaM arch21, 2016 Form 8-K filedwiththe
SEC. Inthedisclosure, theCompanyadmittedthatithadimproperlybookedrevenueleadingup
tothepurchaseoptionagreement,anddoublebookedrevenueforsomesales:
Priortoconsolidation, revenueonsalestoPhilidorwasrecognized
by the Company on a sell-in basis (i.e., recorded when the
Company delivered productto Philidor). In connection with the
workoftheAdH ocCommittee, theCompanyhasdeterminedthat
certainsalestransactionsfordeliveriestoPhilidorin2014 leading
uptotheoptionagreementwerenotexecutedinthenormalcourse
of business and included actions taken by the Company in
contemplationoftheoptionagreement.Asaresultoftheseactions,
revenueforcertaintransactionsshouldhavebeenrecognizedona
sell-throughbasis(i.e., recordrevenuewhenPhilidordispensedthe
productstopatients)priortoentryintotheoptionagreementrather
than incorrectly recognized on the sell-in basis utilized by the
Company.
* * *
Therevenuethatisbeingeliminatedfrom 2014 doesnotresultin

anincreasetorevenuein2015 asaresultoftheCompanyhaving
previouslyalsorecognizedthatrevenuein2015. . . . Now thatthe
Company has determined that certain sales transactions for
deliveriestoPhilidor, leadinguptotheoptionagreement,werenot
executed in the normalcourse ofbusinessand included actions
takenbytheCompanyincontemplationoftheoptionagreement,
therevenuerecordedin2014, priortotheoptionagreement,isnow
beingreversed. H owever, becausethatrevenuewasalsorecorded
73
by Philidor subsequent to consolidation, upon dispensing of

productstopatients, theeliminationoftherevenuein2014, prior
to consolidation, does not result in addit
ional revenue being
recordedin2015.
203. Asdescribed above, Valeantpreviously recognized revenue from the Philidor
transactionsona“sell-in”basis. ThisbasisofaccountingenabledValeanttorecognizerevenue
and related profiton thesetransactionsatthesametimetheproductwaspurportedly sold to
Philidor. This accounting violated ASC 605-15-25 (R evenue R ecognition – Products). This
standard required, among other things, that the price charged to Valeant was fixed or
determinable, aswellasthatthosefeeswereprobableofcollection. ASC 605-15-25-1.
204. Further, GAAP specificallyidentifiesthesetypesoftransactionsasproblematic.
Thatis, GAAP doesnotallow revenue to be recognized on a sell-in basisifthe following
conditionexists, “Thebuyeracquiringtheproductforresalehaseconomicsubstanceapartfrom
thatprovidedbytheseller. Thisconditionrelatesprimarilytobuyersthatexistonpaper, thatis,
buyersthathavelittleornophysicalfacilitiesoremployees. Itpreventsentitiesfrom recognizing
salesrevenue on transactionswith partiesthatthe sellershave established primarily forthe
purposeofrecognizingsuchsalesrevenue.”ASC 605-15-25-1.d.
205. Valeant,however, clearlyfailedtomeetthesecriteria. Asaresult,GAAPrequired
Valeantto deferrevenueand related profituntilPhilidorsubsequently sold theproductto an
actualcustomer.
206. Thereportedrevenuesweremateriallyoverstatedasfollows:
74
Financial Period Reported Revenue Overstated By:
3 monthsendedSeptember30, 2014 $12.9 million
3 monthsendedD ecember31, 2014 $44.6 million
Y earendedD ecember31, 2014 $57.5 million
3 monthsendedM arch31, 2015 $20.8 million
6 monthsendedJune30, 2015 $20.8 million
9 monthsendedSeptember30, 2015 $20.8 million
207. The significance to Valeant’sgrowth and businessmodelofthe revenue and
profitsgeneratedthroughPhilidorcannotbeoverstated. O nO ctober30, 2015, M organStanley
estimated thatPhilidoraccounted 55% ofValeant’sU.S. year-over-yearorganic growth, and
contributed15 percentagepointsofValeant’s27% U.S. year-over-yearorganicgrowth(M organ
StanleyR esearch, O ctober30, 2015). Inparticular, thoughValeantcouldexpecttotransfersome
ofthe prescriptionsfilled through Philidorto other, non-captive pharmacies, itcould notbe
expected to make these sales atthe same unduly high price afforded by controloverthe
pharmacy.
208. M oreover, Valeantwould nothave beaten analysts’estimates forthe fourth
quarterof2014 haditnotimproperlyrecognizedrevenue. AnalystspolledbyThomsonR euters
estimatedearningsof$2.55 persharethatquarter. Valeantreportedcashearningspershareas
$2.58, justbeatinganalysts’projections. The$2.58 cashearnings-per-sharefigurewasbasedon
adjusted netincome of$880.7 million divided by 341.9 million shares. IfValeanthad not
improperly recognized revenuein thefourth quarterof2014, itwould havemissed analysts’
estimates.
75
209 . In addition, M orningstarcommented that“asignificantportion ofthisrevenue
willevaporateasCVS andExpressScriptsslasht
hesespecialtypharmaciesfrom theirnetworks”
(M orningstarEquityR esearch, O ctober30, 2015). M orningstaraddedthatitplannedonreducing
thesesales, causing“amaterial,butnotmajor, shiftin[M orningstar’s]cashflow projections”Id.
M orningstaraddedthat“thelackofaggressivespecialtypharmacyfulfillmentpracticeswillslow
growthevenmorethan[its]initialestimates,”whi
chitalreadyconsidered“conservative.”Id. As
aresult,M orningstarexpectedValeanttoonly“maintainanorganicgrowthrateinthelow single
digitsoverthenext5 years.”Id. IfValeanthadreportedthePhilidortransactionsinaccordance
withGAAP, theselowergrowthexpectationswouldhaveemergedinearlierperiods.
210. Valeant’srevenuesandprofitsgeneratedthroughPhilidorshouldbeviewedinthe
contextofthevery significantdebton Valeant’sbalancesheetand itsprospectsto generate
sufficientcashflowstoserviceit.Valeant’sacquisition-basedbusinessmodelunderPearsonwas
fueledbythisdebt, causingValeanttobecomeveryheavilyleveraged. AsofSeptember2015,
exacerbatedbyitsacquisitionofSali
xinearly2015, Valeant’sbalancesheetwasweigheddown
by$30.7 billionindebtagainstonly$1.4 billionincashandanetdebttoEBITD A ratio“inthe
mid-5s.”Asofyear-end2014, Valeant’sdebttotaled$15.2 billionagainstonly$323 millionof
cash (M orningstarCorporateCreditR esearch, O ctober30, 2015). Asaresult, thesuccessful
generation ofcash flow from its acquisitions was paramountto Valeant’s financialhealth.
M orningstarreportedthatValeantwastargetingareductioninnetdebttoEBITD A tobelow 4,
butthatthe“leveragetargetmaybedifficulttoachieve”giventhelossofitsspecialtypharmacy
sales. Id. M orningstarconcluded thatconcernsoverwrongdoing and weak internalcontrols
resulting from Valeant’srelationship with Philidor, when combined with itshigh debtlevel,
“haveplacedthecompanyunderseverepressure.”Id.
76
211. ThedisclosuresalsocausedM orningstartoplace“[its]creditratingforValeant
under review with negative implications” and to consider a “multinotch downgrade.” Id.
M orningstaralsonotedthatValeant’s“costofcapitalhasclearlyshiftedduetothecompany’s
rapidturninmarketperceptionoverinternalcontrolsandlingeringspecialtypharmacyconcern,”
and asresult, itwasraising thediscountrateitused to valuethecompany. Id. Thischange
negativelyimpactedM orningstar’snewlyestablishedtargetpriceinitiatedatthattime.
212. Investors would have drawn these conclusions had Valeant disclosed the
characteristicsofitssalesthroughPhilidoranditscontrolofthecaptivepharmacybeforeorat
year-end2014.
4. Valeant’s Compliance With GAAP
213. Throughouttherelevantperiod, D efendantsrepresentedinpublicstatementsand
infilingswiththeSEC t
hatValeant’sfinancialstatementsandpublicfilingshadbeenprepared
inaccordancewithGAAP.
214. In the 1Q2013 10-Q, D efendants represented that the financial stat
ements
reportedtherein“havebeenpreparedbytheCompanyinUnitedStates(‘U.S.’) dollarsandin
accordance with U.S. GAAP for interim financial reporting.” D efendants made identical
representationsin the2Q2013, 3Q2013, 2013 10-K , 1Q2014, 2Q2014, 3Q2014 10-Q, and the
2014 10-K ’s.
215. O nM ay21, 2015, PearsonattendedanR BC InvestorM eetingonbehalfofthe
Company. D uring thepresentation Pearson reassured Valeantinvestorsthat“our accounting
practices are fine”and added “[w]e get audited all the time, by the SEC . . . and we have
absolutely no issue from a government standpoint” and that “we never had financial
irregularities.”
77
216. O nO ctober26, 2015, Valeant’sexecutivesanddirectorshostedaconferencecall
toaddresstheallegationssurroundingPhilidor. Inhisopeningremarks, Pearsonstatedthat, “We
operate our business based on the highest standards of ethics and we are committed to
transparency. We follow the law, and we comply with accounting and disclosure rules. These
values are the core of our business model, and if I find examples of violations, I will not
hesitate to take action.”
217. FollowingPearson’sstatements, BobIngram, amemberoftheBoardofD irectors
statedonbehalfoftheBoardthat,“the Company stands by its accounting completely. The audit
committee of the Board and the full Board have reviewed the Company’s accounting, the
Philidor relationship, and have confirmed the appropriateness of the Company’s revenue
recognition and accounting treatment.”
218. In thatsame call, R osiello stated in reference to Valeant’s relationship with
Philidorthat, “The finance and transactions committee, audit and risk committee, and full
Board, all reviewed the transaction. The appropriate accounting treatment was determined by
management and reviewed with the Audit and Risk Committee.”
219 . O nO ctober26, 2015, Valeantfiledits3Q15 10-Q. Inthatfiling, theCompany
repeatedthat“its Audit and Risk Committee and the full Board of Directors have reviewed the
Company’s accounting for its Philidor arrangement and have confirmed the appropriateness
of the Company’s related revenue recognition and accounting treatment.”
220. Thestatementsin ¶¶214–19 werematerially falseand misleading when made
because Valeantcommitted multiple GAAP violationsduring the relevantperiod, including:
(a)failingtoreportPhili
dorasaVIE entitybothbeforeandafterthepurchaseoptionagreement;
78
(b)failingtodisclosePhilidorinValeant’sM D & A section;and(c) bybookingrevenuestwice:
first,whenitsoldtoPhili
dor(i.e., itself), andthenagainwhenPhilidorsoldthesameproduct.
5. Valeant’s Certifications Of Internal Controls
221. In Valeant’sfilingswith the SEC, D efendantsPearson, Schiller, and R osiell

o
attestedtotheeffectivenessofValeant’sinternalcontrolsandthatthefilingsdidnotcontainany
untruestatementofmaterialfactoromittostateamaterialfact. Thesestatementswerefalseand
misleading because Valeant lacked adequate internal controls, compliance and training
programs, and theCompany’sSEC filingscontained numerousuntruestatementsofmaterial
factsand omitted manymaterialfacts. Theseinadequaciesin reporting and misleading filings
were the directresultofan “impropertone atthe top” ofthe organization which created a
corporate culture ofprioritizing shortterm revenue growth overcompliance with applicable
laws, regulations, andcontracts.
222. O n M ay3, 2013, theCompanyfiled itsquarterlyreporton Form 10-Q forthe
period ended M arch 31, 2013 (“1Q13 10-Q”). The 1Q13 10-Q wassigned by Pearson and
Schillerandrepresented thatmanagement’sdisclosurecontrolsandprocedureswereeffective:
“O urmanagement, withtheparticipationofourCEO andChiefFinancialO fficer(‘CFO ’), has
evaluated the effectivenessofourdisclosure controlsand proceduresasofM arch 31, 2013.
Based on this evaluation, our CEO and CFO concluded thatour disclosure controls and
procedureswereeffectiveasofM arch31, 2013”(hereafter, “InternalControlsStatement”).
223. The1Q13 10-Q includedSarbanesO xleyCertificationssignedbyboth Pearson
andSchillerpursuanttoR ules13a-14(a) oftheExchangeAct, whichstated, amongotherthings,
thatthe1Q13 10-Q did notcontain any untrue statementofmaterialfactoromitto state a
materialfact(hereafter, the“SO X Certifications”). Specifically, theSO X Certificationsstated:
79
 thatthefiling“does not contain any untrue statement of a material fact or omit

to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with
respecttotheperiodcoveredbythisreport;”
 that“the financial statements, and other financial information included in this

report, fairly present in all material respects the financial condition, results of
operations and cash flows of the Company as of, and for, the periods presented
in this report;”and
 thatthecertifyingofficersandPearsonhad“[e]valuatedtheeffectivenessofthe
Company’s disclosure controls and procedures” and had presented “our
conclusionsabouttheeffectivenessofthedisclosurecontrolsandprocedures”in
thefiling.
224. The 2013 10-K also stated that, “Based on ourevaluation, ourmanagement,
including the CEO and ChiefFinancialO fficer(“CFO ”), hasconcluded thatourdisclosure
controlsandprocedures(asdefinedinR ules13a-15(e)and15d-15(e)oftheSecuritiesExchange
Actof19 34)asofD ecember31, 2013 areeffective.”
225. ThesameInternalControlsStatementandSO X Certificationssetforthat¶¶222–
23 appeared in the 2Q13 10-Q, signed by Pearson and Schiller, the 3Q13 10-Q, signed by
PearsonandSchiller;the1Q14 10-Q, signedbyPearsonandSchiller;the2Q14 10-Q, signedby
PearsonandSchiller;the3Q14 10-Q, signedbyPearsonandSchiller;the2014 10-K , signedby
PearsonandSchiller;the1Q15 10-Q, signedbyPearsonandSchiller;the2Q15 10-Q, signedby
R osielloandPearson;andthe3Q15 10-Q, signedbyR osielloandPearson.
226. The3Q13 10-Q alsostatedthat: “O urmanagement, withtheparticipationofour
CEO and ChiefFinancialO fficer(“CFO ”), hasevaluated the effectivenessofourdisclosure
controlsandproceduresasofSeptember30, 2013. Basedonthisevaluation, ourCEO andCFO
concludedthatourdisclosurecontrolsandprocedureswereeffectiveasofSeptember30, 2013.”
TheCompanymadesimilarstatementsinthe10-Qsissuedfrom 1Q13 through3Q15.
80
227. Pearson’s, Schiller’s, andR osiello’srepresentationsintheforegoingcertifications
thatValeant’sfilingswiththeSEC werefreefrom materialmisrepresentationswerethemselves
materially falseand misleading when madebecause, assetforth above, each ofthosefilings
containedmaterialmisrepresentations.
228. Further, these D efendants’ certifications and representations that Valeant’s
internalcontrolswereeffectivewerefalseandmisleadingwhenmade. Aftertheestablishmentof
an Ad H oc Committee to review Valeant’s internalcontrols, the new managementteam
representedinthe2015 10-K that,basedonthatreview:
theCompany’sChiefExecutiveO fficerandtheCompany’sChief
FinancialO fficerhaveconcluded thatasofD ecember31, 2015,
duetotheexistenceofthematerialweaknessesintheCompany’s
internal control over financial reporting described below, the
Company’sdisclosurecontrolsandprocedureswerenoteffective
toprovidereasonableassurancethattheinformationrequiredtobe
disclosed by theCompany in thereportsthatitfilesorsubmits
undertheExchangeActisrecorded, processed, summarized and
reportedwithinthetimeperiodsspecifiedintheSEC’srulesand
forms, and that such information is accumulated and
communicated to management as appropriate to allow timely
decisionsregardingrequireddisclosure.
229 . Similarly, as part of the AH C’s review of Valeant’s internal controls, the
Company officially determined thatthe internalcontrolswere noteffective asofM arch 31,
2015, June30, 2015, September30, 2015, andD ecember31, 2014. The2015 10-K alsostated:
Asaresultoftherestatementdescribedabove, management, with

theparticipationoftheCompany’sChiefExecutiveO fficerandthe
Company’s currentChiefFinancialO fficer, has reassessed the
effectivenessoftheCompany’sdisclosurecontrolsandprocedures
asofD ecember31, 2014, M arch 31, 2015, June 30, 2015 and
September30, 2015 and, due to the existence ofthe material
weaknessesin internalcontroloverfinancialreporting described
above (which had not been identified prior to the Ad H oc
Committee’sreview), theChiefExecutiveO fficerandthecurrent
Chief Financial O fficer have determined that such disclosure
controls and procedures were not effective as of such dates.
Similarly, asa resultofthe restatement, management, with the
81
participation ofthe Company’sChiefExecutive O fficerand the

Company’s currentChiefFinancialO fficer, has reassessed the
effectiveness of the Company’s internalcontrolover financial
reportingasofD ecember31, 2014 and, duetotheexistenceofthe
materialweaknesses in internalcontroloverfinancialreporting
describedabove, managementhasdeterminedthatinternalcontrol
overfinancialreportingwasnoteffectiveasofsuchdate.
6. PwC’s 2014 Audit Opinion
230. D efendantPwC is, andatallrelevanttimeswas, Valeant’soutsideauditor. PwC
certified Valeant’s2014 10-K , and included aFebruary25, 2015 AuditR eportrelatingto the
financialstatements, financialstatementsschedule, and theeffectivenessofValeant’scontrol
overfinancialreporting (“2014 AuditR eport”). PwC provided itsconsentto incorporate by
referencethe2014 AuditR eportinValeant’s2014 10-K andrelatedProspectusSupplementfiled
withtheSEC inconnectionwiththeM arch2015 StockO ffering. Foritsservicesrendered to
Valeantin2013, 2014, and2015, PwC waspaidauditfeesof$13.4 million, $12.6 million, and
$20.5 million, respectively.
231. Specifically, inValeant’s2014 10-K , PwC stated:
Inouropinion, theaccompanyingconsolidatedbalancesheetsand
the related consolidated statements of income (loss),
comprehensiveincome(loss), shareholders’equity, andcashflows
presentfairly, in allmaterialrespects, the financialposition of
ValeantPharmaceuticalsInternational,Inc. anditssubsidiaries(the
“Company”) atD ecember31, 2014 andD ecember31, 2013, and
theresultsoftheiroperationsandtheircashflowsforeachofthe
threeyearsintheperiodendedD ecember31, 2014 inconformity
withaccountingprinciplesgenerallyacceptedintheUnitedStates
ofAmerica.
* * *
Also in ouropinion, the Company maintained, in allmaterial

respects, effective internalcontroloverfinancialreporting asof
D ecember 31, 2014, based on criteria established in Internal
Control- IntegratedFramework(2013)issuedbytheCommitteeof
SponsoringO rganizationsoftheTreadwayCommission(CO SO ).
82
* * *
W econductedourauditsinaccordancewiththestandardsofthe
PublicCompanyAccountingO versightBoard(UnitedStates).
232. PwC provided these assurances to Valeant’s investors notwithstanding its
knowledge and review of Valeant’s relationship with Philidor. In interrogatory responses
submitted to the Senate Commit

tee on Aging, Philidor’sattorney represented thatPwC had
evaluatedValeant’srelationshipwithPhilidorpursuanttonormalauditprocedures, subsequent
to Valeantand Philidor entering into the purchase option agreement. The responses also
representedthatPhilidorcommunicatedwithPwC inthecourseofits“day-to-daybusiness”to
“satisfy any and all information requested.” Specifically, Philidor provided “requested
information”in PwC’send oftheyearauditsforfiscalyears2014 and 2015, and forPwC’s
quarterlyauditsfor1Q15 –4Q15.
233. D espiteitsreview ofPhilidorandValeantinanaudit, PwC’s2014 AuditR eport
containedmaterialmisrepresentationsofwhichPwC wasaware, orshouldhavebeenawarehad
PwC conductedtheauditwithreasonablediligence. First, PwC certifiedthatValeant’sfinancial
statements complied with GAAP. PwC, however, had reviewed and passed on Valeant’s
accountingforPhilidor, whichincludeditsfailuretodisclosePhi
lidorasamaterialVIE orinthe
M D & A section, andValeant’simproperrevenuerecognitionrelatedtoPhilidor, adecisionthat
allowed Valeantto book increased revenuein 2014 and meetfinancialtargets. Second, PwC
certified thatValeant’sinternalcontrolswereeffective, despitethefactthat, astheCompany
lateradmitted, they wereineffectiveand theorganization had an “impropertoneatthetop.”
Third, thatPwC’sauditcomplied with PCAO B standards, despite the cleardeficiencies, as
discussedin¶¶228–29 , above.
83
234. These misrepresentations were crucialto the Enterprise’s ability to conceal
Valeant’s true relationship with Philidorfrom investors, payors, patients, and doctors and
thereforetotheoverallschemetoinflateValeant’ssecuritiesprices.
7. Defendants’ Continued Misstatements and Omissions as the

Enterprise’s Criminal Scheme Begins to Unravel
235. Beginning in thefallof2015, thetruth aboutValeant’sbusinessemerged in a
seriesofdisclosures. Asthetruth leaked out, even asD efendantswere forced to shutdown
PhilidoranddiscontinuesomeofValeant’smostegregiouspractices, D efendantscontinuedto
misleadinvestorswithaseriesofmisstatementsandhalf-truthsdesignedtoconcealthetruestate
of Valeant’s business and maintain the Company’s inflated securities prices. Eventually,
however, investorslearned justhow much Valeant’sappearance ofgrowth and profitability
reliedonpricehikes, Philidor, andimproperandunsustainablebusinesspractices.
236. September 28, 2015. ThefirsthintthatsomethingwasamissatValeantemerged
onSeptember28, 2015, whenBloombergreportedthatmembersofCongresswerecallingforan
investigation ofValeant’spricegouging. Bloomberg reported thatallD emocraticmembersof
the H ouse Committee had directed Chairman Chaffetz to subpoena Valeantfordocuments
relatedtomassivepriceincreasesfortwoheartmedications, andthat, accordingtotheH ouse
Committee members, Valeant had failed to “adequately answer” questions and provide
documentsrequested by H ouseCommitteestaffmembersregarding theCompany’sbasisfor
such“skyrocketingprices.”AlsoonSeptember29 , 2015, numerousadditionalnewsreportswere
released detailingthatValeantwasbeingtargeted byCongressfortheCompany’spracticeof
purchasingolderdrugsandthendramaticallyraisingtheirprices.
237. InresponsetothispartialdisclosureregardingtheCompany’srelianceon, andthe
associated risksof, pricegouging, thepriceofValeantstockdroppedmorethan16%, from a
84
closeof$19 9 pershareonFriday, September25, 2015, toaclosingpriceof$166 pershareon
M onday, September28, 2015, onunusuallyhightradingvolume, adeclineofover16%, or$32
pershare. ThepriceofValeant’sdebtsecuritiesalsofell. Valeant’s5.375% notesdueM arch15,
2020 (the “5.375% Notes”) declined 2.5%; Valeant’s5.875% Notesdue M ay 15, 2023 (the
“5.875% Notes”)declined5%;Valeant’s6.125% notesdueApril15, 2025 (the“6.125% Notes”)
declined 5.6%; Valeant’s5.5% notesdueM arch 1, 2023 (the“5.5% Notes”) declined 6.19 %;
Valeant’s7.5% notesdueJuly15, 2021 (the“7.5% Notes”)declined3.1%;andValeant’s6.75%
notesdueonAugust15, 2018 (the“6.75% Notes”)declined.6%.
238. D efendantsimmediately denied thetruth ofthesecriticisms. O n September28,
2015, Valeantfiled a Form 8-K with the SEC thatattached a letterfrom Pearson to the
Company’semployeesto respond to the“two main issuesworryinginvestors,”thatValeant’s
“business model and strategy is dependent upon large price increases in our U.S.
pharmaceutical business”and“[c]oncern around our exposure to U.S. government drug price
reimbursement.”Inhisletter:
(a) Pearsonreferredtotheseconcernsasa“bear thesis,”claimedtheywere
“incorrectonbothaccounts,”anddismissedthedependencyonpriceincreases, stating, “Valeant
is well-positioned for strong organic growth, even assuming little to no price increases. As we
have stated many times, Valeant’s core operating principles include a focus on volume growth
and a concentration on private and cash pay markets that avoid government reimbursement in
the U.S.” and “the majority of our portfolio will continue to deliver strong volume-based
organic growth and is not dependent on price increases”;
(b) Pearsonwentonto“layoutthefacts”noting, inpart, that: (i) growthin
dermatology, ophthalmology, R xanddentistrywasbasedonhaving“deliveredover30% script
85
growth yearto date,” and (ii) they expected “double-digit script growth and corresponding
revenue growth trends to continue”inthe“Salixbusiness”;and
(c) Pearson added: “we expectdouble-digitorganic growth in 2016 and
beyond as we prepare for the launch of Addyi and anticipate other potential product
approvals[.]”
239 . Thestatementsin ¶238 thatcriticismsofValeantwereinaccurateand a“bear
thesis,”thatthe“majorityof[Valeant’s]portfolio”was“notdependentonpriceincreases,”and
thefinancialguidanceissuedtoallayinvestorconcernswerefalseandmisleadingwhenmadefor
thereasonsdiscussedin¶¶139 and144.
240. October 4, 2015. O n Sunday, O ctober 4, 2015, however, additionaldetails
regarding Valeant’s reliance on price gouging were revealed when The New York Times
publishedahighlycriticalarticleconcerningPearson’sSeptember28, 2015 lettertoemployees
andhisclaim thatValeantwaswell-positionedforgrowthevenwithoutanypriceincreases. The
article reported that extraordinary price increases on eight Valeant drugs accounted for
approximately7% oftheCompany’srevenueand13% ofitsearningsbeforetaxesandinterestin
thesecondquarter, andthatValeantraisedthepricesonitsbrandeddrugsnearlyfivetimesas
muchasitsclosestcompetitor. O nthisnews, thepriceofValeantsecuritiesfell. Valeant’sstock
declinedbymorethan10%, fallingfrom acloseof$182 pershareonFriday, O ctober2, 2015 to
acloseof$163 pershareonM onday, O ctober5, 2015, onunusuallyhightradingvolume. The
priceofValeant’sdebtsecuritiesalsofell. The6.375% Notesdeclined.49 %;the5.375% Notes
declined 1%; the5.875% Notesdeclined 1.7%; the5.5% Notesdeclined 1.69 %; the6.125%
Notesdeclined1.8%;andthe6.75% Notesdeclined.3%.
86
241. October 14, 2015. AfterthemarketclosedonO ctober14, 2015, concernsabout
thelegalityoftheCompany’sfinancialassistanceprogramswererevealedwhenValeantissueda
pressreleasedisclosingthatithadreceivedsubpoenasfrom theU.S. Attorney’sO fficesforthe
D istrictofM assachusettsandtheSouthernD istrictofNew Y orkrequestingdocumentsrelated
to, among otherthings, Valeant’sPAPs, financialsupportprovided by Valeantforpatients,
distribution of Valeant’s products, and pricing decisions. Even as Valeant disclosed the
investigation, itsoughttoreassureinvestors, statingthat“All of us at Valeant firmly believe in
maintaining strong regulatory and financial controls and believe we have operated our
business in a fully compliant manner.”Thepressreleasealso noted thattheCompany was
beginning to reach outto hospitalsimpacted by aboveaveragepriceincreasesin responseto
Congressionalinquiries. O nO ctober15, 2015, additionalinformationwasrevealedtothemarket
as news reports detailed Valeant’s failure to be responsive ortransparentwith Congress’s
investigation, andthatdespitebeingservedwithafederalsubpoena, Valeantwasstillrefusingto
provideadequateanswersregardingitspricegougingandimproperpractices. O nthisnews, the
priceofValeantstockdroppedby4.75%, from acloseof$177 pershareonO ctober14, 2015, to
a close of$168 pershare on O ctober15, 2015, on elevated trading volume. The price of
Valeant’sdebtsecuritiesalsofell. The6.375% Notesdeclined1.2%;the5.375% Notesdeclined
1.4%; the 5.875% Notesdeclined 1.5%; the 6.125% Notesdeclined 1.69 %; the 5.5% Notes
declined2.1%;the7.5% Notesdeclined1.68%;andthe6.75% Notesdeclined.4%.
242. October 19, 2015. Furtherinformation aboutValeant’struebusinesspractices
continuedtoemerge. O nO ctober19 , 2015, themarketlearnedmoreaboutValeant’sdependence
onpriceincreases, itscontrollinginterestinPhilidor, andarelatedsecretnetworkofspecialty
pharmacies, when theCompanyreported itsthird quarter2015 (“3Q15”) financialresultsand
87
hosted an earnings conference call(which started before the marketopened). D uring the
conference call, the Company revealed its directrelationship with and reliance on certain
specialty pharmaciesto increasethepriceofValeant’sdrugsand volumeofValeant’ssales,
including Philidor, and Valeant’s option to purchase Philidor. In addition, the Company
disclosedthatpricingaccountedforapproximately60% ofitsgrowthin2014 and2015, thatit
would bemaking drug pricing asmallerpartofgrowth going forward, and thatR & D would
becomeanincreasedareaoffocus. AfterthemarketclosedonO ctober19 , 2015, TheNew York
TimespublishedanarticlethatdescribedPhilidorasnota“typical”specialtypharmacy, noted
thatPhilidor’sapplicati
on fora license in Cali
fornia had been rejected forsubmitting false
statements, andstatedthatValeantwasusingPhilidorasatooltokeepitsdrugpriceshigh.
243. O n thisnews, thepriceofValeantstock declined bynearly8%, falling from a
closeof$177 pershareonFriday, O ctober16, 2015 toacloseof$163 pershareonM onday,
O ctober19 , 2015, on elevated trading volume. The following day, Valeantshares fellan
additional10% tocloseat$146 pershareonO ctober20, 2015, alsoonunusuallyhightrading
volume. Thetotalstockpricedeclineoverthistwo-dayperiodwasover17%, or$30 pershare.
ThepriceofValeant’sdebtsecuritiesalsofell. The5.375% Notesdeclined.07% andthe6.75%
Notesdeclined.09 %.
244. D uringaconferencecallonO ctober19 , 2015, hostedbyPearson, R osiello, and
K ellen, D efendantscontinued to mislead investorsaboutValeant’sbusiness. In reference to
media and governmentscrutiny of Valeant’s pricing practices, Pearson claimed thatsuch
criticism was an industry-wide problem and told investors that Val

eant’s forecast was
appropriatelydiscountedforsuchscrutiny, claiming“it’sclearthatthepharmaceuticalindustry
isbeingaggressivelyattackedforpastpricingactions. Andthat’snotjustValeant,butI thinkit’s
88
allcompanies. I dothinkgiventhatenvironment, the pricing that pharmaceutical companies
will take in the future will be more modest, and we built that into our forecast for next year.”
245. In the slide deck presentation accompanying the earnings conference call,
Valeantincludedalistofanticipated“Questionsfrom Investors,”inspiredbyareportrevealing
Valeant’s ties to Philidor published by the Southern Investigative R eporting Foundation
(“SIR F”). O ne ofthe “anticipated” questions was “H ow does Valeantwork with specialty
pharmaciesandwhatisValeant’srelationshipwithPhilidor”towhichthepresentationnoted:
 W e have viewed our relationship with Philidor and our other specialty
pharmaciesasproprietaryandasoneofourcompetitiveadvantages
 Similar to many pharmaceutical companies in the U.S., an increasing

percentage of our revenue is coming from products dispensed through
multiple specialty pharmacies
 W e find specialty pharmaciesimprove patients’accessto medicinesatan

affordable price and help ensure physicians are able to prescribe the
medicationstheybelievemostappropriatefortheirpatients
* * *
 W eunderstandthatPhilidor:
 Providesservicesunderourprogramsforcommercially insured and

cash-paying claims only. Any claim thatwould be reimbursed in
wholeorinpartbygovernmentinsuranceisnoteligibleforourco-pay
subsidyprograms
 Does not restrict prescriptions it fills to any particular manufacturers

(including Valeant)3
 Dispenses generic products as specified in patient’s prescription or

as requested by patient
246. D uringtheconferencecall,Pearsonrepeatedsomeofthesameclaims, sayingthat
therelationshipwithPhi
lidorhadnotbeendisclosedpreviouslyfor“competitive reasons”and
3
AsD efendantsknew, andasPhil
idoradmi
ttedonNovember25, 2015, Val
eantwasPhil
idor’sonlycust
omer.
89
suggestingValeant’suseofspecialtypharmacieswassimilartoitscompetitorsandresultedin
moreaffordableprices, stating, inpart:
Thetopicofspecialtypharmacieshasnotbeenafocusofourson
pastcallsbecausewebelievethiswasacompetitiveadvantagethat
wedidnotwanttodisclosetoourcompetitors. Butgivenallthe
incorrectassertionsbysome, wewillprovideanupdatetothiscall.
Similar to many pharmaceutical companies in the US, an

increasing percentage ofourrevenue is coming from products
dispensed through multiple specialty pharmacies. W e find
specialtypharmaciesimprovepatients’accessto medicinesatan
affordableprice, andhelpensurephysiciansareabletoprescribe
themedicationstheybelievemostappropriatefortheirpatients. In
almostallcases, ourinventory with specialty pharmaciesin this
channel and the title to our medicine only transfers to the
pharmacywhentheactualprescriptionisfilled.
247. Pearson also claimed that“[s]ince we do not recognize the revenue of our
products [sold through Philidor] until the prescriptions are filled, thisconsolidation hasthe
impactofdelayingrevenuerecognitionascomparedtoproductsthataresoldthroughtraditional
distributionchannels.”
248. W ith regard to a lawsuitthathad been filed by one ofthe pharmaciesin the
Philidornetwork, R & O , whichhadclaimedfraudulentpracticeswerebeingemployed, Pearson
reassuredinvestorsthatthebusinesspracticesofValeantandPhilidorwereproperbyclaiming:
R&O is one of the specialty pharmacies in our network, and

Valeanthasshippedapproximately$69 millionatwholesaleprices
to them. Thisrepresentsapproximately$25 million atnetprices.
AnyproductsR & O dispensedtopatientswererecognizedasour
revenues, and arereflected in ourreceivables. Anyproductsstill
held by R & O are reflected in ourinventory. R & O iscurrently
improperly holding significantamountsitreceivesfrom payers.
W e willrefrain from commenton active litigation, and look
forwardtoshowingincourtthatweareowedthemoney.
249 . Also during theconferencecall, R osiello discussed theincreased guidancethe
Companyreleasedthatday, andaddedthat“[w]eexpectourgrossmarginstoapproach80% in
90
thefourth quarter, driven by continued growth in ourdermatology and Sali

x businesses, the
launch ofAddyi, and decreased salesofXenazine.”H isstatementswereaccompanied bythe
followingchartintheslidepresentation:
Previous New Previous New

Q4 2015 Q42015 full year full year
R evenues $3.2–$3.4B $3.25–$3.45B $10.7–$11.1B $11.0–$11.2B
CashEPS $3.9 8–$4.18 $4.00–$4.20 $11.50–$11.80 $11.67–$11.87

pershare pershare pershare pershare
Adj. Cash NA pershare
NA > $3.2B > $3.35B
Flow From
O perations
250. Tofurtheralleviateinvestorconcern, andbuoythepriceofValeant’ssecurities,
theslidepresentation also revealed thatValeantwas“reaffirming ourexpectationsto exceed
$7.5 [billion]EBITD A in2016.”W henPearsonwasaskedduringtheconferencecallwhether
ValeantcouldstillmeetitsEBITD A guidancein2016 without“thebenefitofpriceincreases,”
hesaid, “In terms of our EBITDA for 2016, I think we’re only going to say today that we feel
very comfortable with the $7.5 billion and we expect our guidance next year will exceed that.”
251. Thestatementsin¶¶244–50, thatValeantwasrunina“compliantmanner,”that
Valeant’s use of specialty pharmacies resembled other pharmaceutical companies, about
Valeant’srelationshipwithPhil
idor, andthatPhilidordoes“notrestrictprescriptionsitfillst
o
any particularmanufacturer,” were materially false and misleading when made because, as
described above, Valeanthad created Philidorto exclusivelyserveValeantand to circumvent
costcontrolsputinplacebypayors, andhadusedPhilidorandit
snetworkofsecretpharmacies
inwaysthatposedundisclosedregulatoryandreimbursementrisks.
91
252. October 21 and 22, 2015. O nO ctober21 and 22, 2015, themarketlearnedof
additional problems regarding Valeant’s secret relationships with specialty and “affiliate”
pharmacies, including Philidorand R & O , and related issuesregarding Valeant’saccounting
practices. O nthatday, Citronpublishedaresearchreportquestioningtherelationshipbetween
ValeantandPhilidorandValeant’sattendantaccountingpractices, andsuggestingthatValeant
had created a network of“phantom” specialty pharmacies forthe purpose ofinflating the
Company’srevenues. The Citron reportalso provided furtherdetailsofthe lawsuitbetween
R & O and Valeant, whereR & O accused Valeantof“conspiring . . . to perpetuateamassive
fraud.”AfterCitron’sreportwaspublished, trading in Valeantshareswastemporarily halted
because ofthe rapid decline in the price ofValeantshares. Specifically, asa resultofthe
informationprovidedtot
hemarketonO ctober21, thepriceofValeantstockdroppedmorethan
19 %, from acloseof$146 pershareon O ctober20, 2015, to acloseof$118 pershareon
O ctober21, 2015, onextraordinarytradingvolume. ThepriceofValeant’sdebtsecuritiesalso
fell.Specifically, asaresultoftheinformationprovidedtothemarketonO ctober21, thepriceof
certainValeantNotesfell.The6.375% Notesdeclined6%;the5.375% Notesdeclined7.1%;the
5.875% Notesdeclined7.8%;the6.125% Notesdeclined7.9 %;the5.5% Notesdeclined8.8%;
the7.5% Notesdeclined8.67%;andthe6.75% Notesdeclined7.0%.
253. M oreover, afterthemarketclosed, Philidorissued apressreleasedisclosingits
contractualrelationshipwith“affiliatedpharmacies,”includingR & O , andthatithadarightto
acquiresuchpharmaciesnow orinthefuturesubjecttoregulatoryapproval. Thefollowingday,
analystsreactedtothetroublingdisclosures. Forexample, beforethemarketopenedonO ctober
22, 2015, BM O issuedareportdowngradingitsratingofValeantandconcludingthatValeant’s
arrangementswithPhilidorwere“notjustaggressive, butquestionable.”
92
254. Asanalystsreacted to the disclosuresand the marketcontinued to digestthe
negative news, the price ofValeantstock continued to decline on O ctober22, falling an
additional7%, tocloseat$109 pershareonunusuallyhightradingvolume. Thetotalstockprice
declineoverthistwo-dayperiodwasover25%, or$36 pershare. ThepriceofValeant’sdebt
securitiesalso fell. The 6.375% Notesdeclined 4.8%; the 5.375% Notesdeclined .5%; the
5.875% Notesdeclined3.1%;the6.125% Notesdeclined1.7%;the5.5% Notesdeclined.4%;
andthe6.75% Notesdeclined1.8%.
255. D espitetheserevelations, D efendantscontinued to insistthattherewasnothing
wrongwith Valeant’saccountingrelated to Phili

dorand in an O ctober21, 2015 pressrelease
again claimed, falsely, that“sales are recorded only when the product is dispensed to the
patient.”
256. October 25 and 26, 2015. O n O ctober25 and O ctober26, 2015, the market
learned ofadditionalissuesconcerning Valeant’simproperrelationship with and reliance on
specialty pharmaciesto increase the pricesofValeantproductsand to boostthe volume of
Valeantsales, andthattheCompanymightbeforcedtoterminatetheseclandestinerelationships.
O nSunday, O ctober25, 2015, TheW allStreetJournalreportedthatformerPhilidoremployees
hadrevealedthatValeantemployeesworkeddirectlyatPhilidorandwereusingfictitiousnames
in orderto concealthe companies’relationship “so itdidn’tappearValeantwasusing the
pharmacytosteerpatients”toValeantproducts. BeforethemarketopenedonO ctober26, 2015,
Valeantfiledits3Q15 10-Q, whichacknowledgedthattheCompanyhadthe“powertodirect”
Philidor’sactivities, andthattheCompanywasconductinganinvestigation, throughanadhoc
Boardcommittee, intoitsrelationshipwithPhilidor.
93
257. D espitebeing forced to admitthatValeantcould “directPhilidor’sactivities,”
D efendantsstilldid notfullydisclosethestateofValeant’sbusinessand itsrelationship wit

h
Philidor, andD efendantscontinuedtoprovidemisinformationtothemarket. Thoughthe3Q15
10-Q disclosedforthefirsttimethatValeanthadthe“powertodirectPhilidor’sactivities,”it
also stated thatValeant’s entire board ofdirectors had reviewed Valeant’s accounting for
Philidorandhadconfirmeditsappropriateness. Specifically, the3Q15 10-Q stated:
D uring the year ended D ecember 31, 2014, the Company

completed othersmalleracquisitions, including theconsolidation
ofvariableinterestentities, whichwerenotmaterialindividuallyor
intheaggregate. Theseacquisitionsareincludedintheaggregated
amounts presented below. Beginning in D ecember 2014, the
CompanyhasconsolidatedPhilidorR xServices, LLC (“Philidor”)
pharmacy network, which includes R & O Pharmacy, LLC. The
Companydeterminedthatbasedonitsrights, includingitsoption
toacquirePhilidor, Phili dorisavariableinterestentityforwhich
theCompanyistheprimarybeneficiary, givenitspowertodirect
Philidor’sactivitiesand itsobligation to absorb theirlossesand
rightstoreceivetheirbenefits. Asaresult, sinceD ecember2014,
theCompanyhasincludedtheassetsandliabiliti esandresultsof
operationsofPhilidorinitsconsolidatedfinancialstatements. Net
salesrecognizedthroughPhilidorrepresentapproximately7% and
6% of the Company’s total consolidated net revenue for the
three-month and nine-month periodsended September30, 2015,
respectively, andthetotalassetsofPhilidorrepresentlessthan1%
ofthe Company’stotalconsolidated assetsasofSeptember30,
2015. The impactof Philidor as a consolidated entity on the
Company’snetrevenuesfor2014 wasnominal.
* * *
On October 26, 2015, the Company also announced that its Audit
and Risk Committee and the full Board of Directors have
reviewed the Company’s accounting for its Philidor arrangement
and have confirmed the appropriateness of the Company’s
related revenue recognition and accounting treatment.
* * *
Asiscustomaryinthepharmaceuticalindustry, ourgrossproduct
salesaresubjecttoavarietyofdeductionsinarrivingatreported
netproductsales. Provisions forthese deductions are recorded
94
concurrently with therecognition ofgrossproductsalesrevenue

and include cash discounts and allowances, chargebacks, and
distribution fees, which are paid to directcustomers, aswellas
rebatesandreturns, whichcanbepaidtobothdirectandindirect
customers. . . . Gross product sales for products dispensed
through Philidor Rx Services, LLC (“Philidor”) pharmacy
network (which is consolidated as a variable interest entity within
our consolidated financial statements) are recognized when a
prescription is dispensed to a patient. Net sales recognized
throughthePhilidorpharmacynetworkrepresents7% and6% of
ourtotalconsolidated netrevenueforthethreemonthsand nine
monthsendedSeptember30, 2015, respectively.
258. AlsoonO ctober26, 2015, theCompanyhostedaconferencecallwithinvestors
with an accompanying presentation. Pearson, Schiller, R osiello, Ingram, Provencio,
M elas-K yriazi,Stevenson, Carro, andK ellenattendedonbehalfoftheCompany.
259 . The presentation disclosed that“[o]urspecialty pharmacy strategy originated
from the M edicisAlternate FulfillmentProgram.” Among otherthings, the presentation also
statedthat:
(a) “Prescriptions through Philidor are less profitable than traditional
channels due to lower copay rates, lower cash pay rates and more cash pay scripts in Philidor
than in retail and other channels”;
(b) “We do not own or control Philidor . . .”and“Philidor employees do not
report to Valeant . . .”;
(c) “Philidor is independent . . .”;and
(d) “Unless and until Valeant exercises the option to acquire Philidor,
Philidor remains independent and Valeant has no rights to remove CEO or management.”
260. Pearson assured investors there was no improper practices involving
Philidor, stating:
95
(a) “[T]he sensational claims made by the short seller Andrew Left, through
his entity Citron, are completely untrue. H ismot

ivationisthesameassomeonewhorunsintoa
crowdedtheatertofalselyyellfire. H ewantedpeopletorun”;
(b) “afterwesaw thefalsereportfrom Citron, wepromptlycoordinatedwith
ouroutsideregulatorycounselfrom CahilltomakearequestthattheSEC investigateM r. Left
andCitron”;
(c) “W estillbelievethatthestrategyofworkingwithspecialtypharmaciesis
soundandit’sgoodforpatientsandphysicians. There have been no issues with regards to the
accounting or revenue recognition of the business”;and
(d) “We have been working with outside counsel and we have found no
evidence of illegal activity whatsoeverat Philidor.”
261. Ingram, Valeant’slead independentdirector, speaking on behalfofthe entire
boardofdirectors, reaffirmedthesestatementssaying:
Thankyou, M ike[Pearson]. AsM ikestated, the Company stands

by its accounting completely. The audit committee of the Board
and the full Board have reviewed the Company’s accounting, the
Philidor relationship, and have confirmed the appropriateness of
the Company’s revenue recognition and accounting treatment.
262. R osielloreinforcedthestatementsbyPearsonandIngram adding:
(a) “Valeantconsolidatesfinancialswith Philidorand thePhilidornetwork,
ensuringthatrevenuerecognitionandfinancialstatementpresentationisappropriate”;
(b) “Valeant recognizes revenue only when products are dispensed to
patients, and Valeant records this at net realized price”;
(c) “There is simply no way to stuff the channel of consolidated variable
interest entities, or VIEs, since all inventory remains on Valeant’s consolidated balance sheet
until dispensed to patients”;and
96
(d) “Philidor was considered a VIE prior to the purchase option agreement,
but since Valeant was not determined to be the primary beneficiary, consolidation was not
appropriate. A purchaseoption agreementforPhilidorwasexecuted in D ecember2014. The
financeandtransactionscommittee, auditandriskcommittee, andfullBoard, allreviewedthe
transaction. Theappropriateaccountingtreatmentwasdeterminedbymanagementandreviewed
withtheAuditandR iskCommittee.”
263. Valeant’scorporatecontroller, CarroalsodefendedValeant’saccountingandlack
ofpriordisclosureregardingPhilidor. Specifically:
(a) Carroclaimedthat, asofyear-end2014, “Philidor is not considered to be
material to Valeant’s business for reporting purposes”becausethe“GAAP requirementfor
disclosing sales to large customers is 10% ofrevenue” and in D ecember2014 Philidor’s
year-to-datenetsaleswere$111 million;and
(b) Carro claimed thatforthefirsttwo quartersof2015 “Philidor was not
specifically mentioned in our disclosures because it had not been material to the consolidated
financial statements,”because“[i]t represented 1% or less of total assets and 7% or less of
consolidated net revenues since the fourth quarter of 2014.”
264. SchillerreassuredinvestorsthattherewasnoevidenceofwrongdoingbyPearson,
stating“if I had any concerns whatsoever about Valeant or Mike, I would not have stayed on
the Board. It’sassimpleasthat. W henweannouncedthatI wasleaving, andM ikeandI hada
bitofourlovefest, I don’twanttorepeatallthewordsbutI meantthem intermsofM ikeis
professional,hisethics, hisworkethic, hiscommitmenttodoingtherightthing.”
265. To mitigate the impactof the negative news, Pearson reaffirmed Valeant’s
recentlyincreased2015 guidance, stating: “Giventhecontinuedhealthygrowthindermatology,
97
Salix, eyehealth, andtherecentAddyilaunch, weexpecttomeetorexceedourfourth-quarter
projections, excluding the one-time expensesassociated with recentevents.” H e added, “we
continue to be very comfortable with our 2016 EBITDA expectation of greater than $7.5
billion.”
266. Thestatementsin ¶¶257–64 aboutPhil

idor’scompliancewith laws, aboutthe
timing of revenue recognition, about Philidor’s status as a VIE, and about Philidor’s
independence from Valeantwere materially false and misleading when made. Indeed, as
discussed above, Valeant created and controlled Philidor solely for Valeant’s benefit, as
demonstratedbyValeant’sannouncement, justafew dayslaterthatPhilidorwouldbeclosing
afterValeantcutties. Andasdiscussedfurtherbelow, Valeant’sstatementsthatithadproperly
recordedrevenueswerefalsewhenmade, asdemonstratedwhenValeantwasforcedtorestateits
financesinM arch2015 andtoadmitthatithadbeendouble-bookingrevenueonsalesthrough
Philidor. Thestatementsin ¶265 aboutValeant’sability to stillhittheCompany’sguidance
targets were false and misleading when made, as the ValeantD efendants were aware that
Valeantrelied heavily on Philidorand price-gouging to drive revenues across its product
portfolio, asdiscussedat¶¶69 –85.
267. Laterthatday, Bloomberg reported thattheremarkson thecall“leftinvestors
skeptical,failingtoanswercriticalquestionsonValeant’scontinuingrelationshipwithPhilidor.”
Asaresultofthisnews, thepriceofValeantstockdroppedmorethan5%, from acloseof$116
pershareon Friday, O ctober23, 2015, to acloseof$110 pershareon M onday, O ctober26,
2015, on unusuallyhigh trading volume. ThepriceofValeant’sdebtsecuritiesalso fell. The
6.375% Notesdeclined 1.9 %; the 5.375% Notesdeclined 3.9 %; the 5.875% Notesdeclined
98
4.2%;the6.125% Notesdeclined2.5%;the5.5% Notesdeclined3.5%;the7.5% Notesdeclined
1.07%;andthe6.75% Notesdeclined1.2%.
268. October 28 and 29, 2015. Still,informationconti

nuedtoleakout.O nO ctober28
and 29 , 2015, further information was revealed to the marketregarding Valeant’s secret
relationshipwithandrelianceonspecialtypharmacies, includingPhilidor, toincreasetheprices
ofValeantproductsandboostthevolumeofValeant’ssales. O nthatday, Bloombergreported
thatPhilidorused“backdoor”tacticstoincreasepaymentsand“instructedemployeestosubmit
claimsunderdifferentpharmacyidentificationnumbersifaninsurerrejectedPhilidor’sclaim—
to essentially shop around forone thatwould be accepted.” Then, on O ctober29 , 2015,
Bloomberg Businessweek reported on additional improper business practices at Philidor,
includingthatPhilidorwasfalsifyingprescriptionstoboostValeantsales, basedontheaccounts
offormerPhilidoremployeesand internalcompany documents. Additionally, during market
hoursonO ctober29 , 2015, reportssurfacedthatCVS Caremarkhadterminateditsrelationship
withPhilidorfollowinganauditofPhilidor’spractices.
269 . O nthisnews, thepriceofValeantsharesdeclined$5.50 ashare, or4.7%, from a
closeof$117 pershareonO ctober28, 2015 toaclose111.50 pershareonO ctober29 , 2015.
ThepriceofValeantdebtsecuritiesalsodeclined. The6.375% Notesdeclined.5%;the6.125%
Notesdeclined.5%;the5.5% Notesdeclined1.9 %;andthe5.875% Notesdeclined1.5%.
270. Afterthemarketclosed on O ctober29 , 2015, thenation’sotherlargestPBM s,
ExpressScriptsandO ptumR x, announcedthatt

heytoohadterminatedtheirrelationshipswith
Philidor— highlightingtoinvestorsforthefirsttimethepayorriskposedbyValeant’sPhilidor
strategy, ariskthattheValeantD efendantsknew of(orrecklesslydisregarded), butconcealed,
from theverybeginning. BeforethemarketopenedonO ctober30, 2015, theCompanyissueda
99
pressreleasestatingthatitwouldbeterminatingitsrelationshipwithPhi
lidor, whichwouldbe
ceasingoperationsassoonaspossible.
271. O nthisnews, Valeantsharesfellbynearly16%, from acloseof$111 pershare
onO ctober29 , 2015, toacloseof$9 3 pershareonO ctober30, 2015, onunusuallyhightrading
volume. The price ofValeantdebtsecuritiesalso fell. The 5.5% Notesdeclined .44%; the
5.875% Notesdeclined2.8%;the6.75% Notesdeclined1%;the7.5% Notesdeclined2.7%;and
the6.125% Notesdeclined2.5%.
272. November 4, 2015. O nNovember4, 2015, beforethemarketopened, theSenate
SpecialCommitteeon Aging announced thatithad formally launched aprobeand requested
documentsandinformationfrom Valeantregardingitsskyrocketingdrugprices. Thatsameday,
also before the marketopened, Bloomberg reported thatjustweekspriorto the Company’s
announcementthatitwascuttingtieswith Philidor, Valeanthad planned to expand itsuseof
Philidor, which furthercalled into question the viability ofthe Company’s recently issued
financialguidance. Afterthe marketclosed on November4, 2015, The W allStreetJournal
reported thatValeant’slargestshareholder, Pershing Square, wasconsidering liquidating its
entire$3.8 billion stakein theCompany and had demanded thatValeantmanagement“come
clean”aboutPhilidor.
273. O nthisnews, thepriceofValeantstockdroppedbyapproximately6%, from a
closeof$9 7 pershareonNovember3, 2015, toacloseof$9 1 pershareonNovember4, 2015,
on elevated tradingvolume. Valeantsharescontinued to declinethefollowingday, fallingby
morethan14%, tocloseat$78 pershareonNovember5, 2015, onextraordinarytradingvolume.
Thetotalstockpricedeclineoverthistwodayperiodwas19 .5%, or$19 pershare. Thepriceof
Valeant’sdebtsecuritiesalsofell. The6.375% Notesdeclined3.6%;the5.875% Notesdeclined
100
4.5%; the 5.375% Notesdeclined 4.2%; the 6.125% Notesdeclined 3.5%; the 7.5% Notes
declined1.6%;andthe6.75% Notesdeclined3.4%.
274. November 10, 2015. O nNovember10, 2015, beforethemarketopened, Pearson,
R osiello, Carro, andK ellenhostedabusinessupdatecallanddisclosedthe“significant”negative
financialimpactthatPhilidor’sclosingand theGovernment’sspiraling probesinto itspricing
practiceswere having on the Company, including with respectto itsfinancialguidance. In
particular, Valeantdisclosed thatthere would be a significantshort-term disruption to the
Company’sdermatology division, including itst

op-selling drugs, Jubliaand Solodyn, thatthe
Companywasseeingshort-term pressureinitsneurologybusiness, andthattheCompanywas
“working to quantify the potentialshort-term impact” on 4Q15 of the termination of its
relationship with Phil

idor. TheCompany also acknowledged thatfilling prescriptionsforfree
would “obviously”havean impacton therestofthequarterand thatifValeant’spricing is
“viewedasaggressive, wearegoingtohavetolistentothat.”
275. UndoubtedlythisdisruptiontothedermatologydivisionwasrelatedtoValeant’s
inability to continue employing the Philidorstrategy to obtain reimbursementforJublia and
Solodyn.
276. D uring the call, Pearson stillattempted to portray Valeant’srelationship with
Philidoraslegitimate. Pearsonstated, inrelevantpart:
We began working with Philidor because we believed a strong

relationship with one specialty pharmacy would deliver better,
faster customer service for doctors and patients. W ewerealso
looking for a pharmacy which would be willing to process
prescriptionsbefore adjudicating the claims, which would allow
us, ratherthan thepatient, to assumetherisk ifthecommercial
payerdeniedtheclaim.
277. InaquestiontoPearson, ananalystnotedthattherewere“twokind[s]ofmajor
accusationsaimedatthe. . . Company,”oneregardingpricingandtheotherregardingPhilidor,
101
andnotedthatValeant“decidedtolimityourpricinggoingforward”and“cutoperationswith
Philidor.”W ithregardtoPhilidor, Pearsonrespondedinpart:
W ellPhilidorwasveryspecific. First, therewastheCitronreport

whichclaimedfinancialfraudandotherthings. They quickly came
out and there was no financial fraud in terms of Valeant had to
do. Butthenotherallegationsweremadeintermsofthepractices
ofPhilidor. Andwefelt, bothmanagementandtheBoardfeltthat
given these allegations, given whatwashappening to ourstock
priceandgivenwhatmanyofourmajorshareholderswereasking
ustodothatthebestthingtodowastosever.
278. Thestatementsin¶¶276–77 thatValeantworkedwithPhilidorbecauseValeant
believeditwouldhelppatientsanddoctors, thatt
herewasnofinancialfraudinitsdealingswith
Philidor, andthatPhilidorwasnotmentionedbecauseitwas“notmaterial”weremateriallyfalse
andmisleadingwhen made. Asdescribedindetailabove, Valeanthid Philidorfrom investors
becausesecrecy wascentralto theEnterprise’sschemeto artificially inflatepricesand sales
throughValeant’ssecretpharmacychannel,aschemewhichwasdesignedtobenefitD efendants,
withoutregard forthe consequences to patients orinvestors. O n this news, Valeantstock
dropped2%, from acloseof$85 pershareonNovember9 , 2015, toacloseof$83 pershareon
November10, 2015, onunusuallyhightradingvolume.
279 . November 11, 2015. Afterthe marketclosed on November10, 2015, itwas
reportedthattheSequoiaFund, Valeant’sbiggestshareholder, hadpaidandwasofferingtopay
formerPhilidoremployeesinordertoobtaininformationregardingValeant’spractices. Thenext
day, beforethemarketopened, BloombergreportedthatValeant’screditorswere“[s]pooked”by
apossible“[r]evenue[s]queeze”and concern was“growing thatdisruption to Valeant’scash
flow couldheightentheriskofthecompanyviolatinglenderlimitsonitsdebtburden.”D uring
markethoursonNovember11, 2015, analystsatNomuracuttheirValeantpricetarget. O nthis
102
news, thepriceofValeantstockcontinuedtodecline, fallingbyover5%, tocloseat$78 per
shareonNovember11, 2015.
280. November 12, 2015. O n November 12, 2015, before the market opened,
BloombergpublishedanotherarticleregardingValeant’srelationshipwithPhilidor, andmultiple
mediaoutletsreportedthatanalystsatseveralfirmshadloweredtheirpricetargetsforValeant.
O nthisnews, Valeant’sstockpricedroppedanadditional6.5%, tocloseat$73 pershare. The
totalstockpricedeclinefrom November10 throughNovember12, 2015 wasover11%, or$9 .9 1
pershare. ThepriceofValeant’sdebtsecuritiesalsofell. The5.875% Notesdeclined2.6%;and
the6.75% Notesdeclined1.3%.
281. November 16, 2015. O n November16, 2015, duringmarkethours, Bloomberg
reported thatCongressman Elijah Cummingswrote Pearson requesting thathe make certain
Valeantemployeesavailableforinterviews. Afterthemarketclosedthatday, TheW ashington
PostreportedthattheH ouseO versightCommitt

eeannounceditwouldholdahearinginearly
2016 onprescriptiondrugpricing, andthatithadcontactedValeanttogatherinformation. The
articlealso disclosed thatmembersoftheH ouseO versightCommitteewereurging Valeant’s
executivestotestifyatthehearingandforValeanttobesubpoenaed. O nthisnews, thepriceof
Valeantstockdroppedbynearly3%, from acloseof$75 pershareonNovember13, 2015, toa
closeof$73 pershareonNovember16, 2015, onunusuallyhighvolume. ThepriceofValeant
stockcontinuedtodeclineonNovember17, 2015, droppinganadditional4% tocloseat$70 on
hightradingvolume. ThepriceofValeant’sdebtsecuritiesalsofell. The6.75% Notesdeclined
.5%;the6.125% Notesdeclined.45%;the5.5% Notesdeclined.61%;the7.5% Notesdeclined
1.1%.
103
282. D espite D efendants’ insistence thatValeant was well-positioned for growth
withoutprice increases, and theirreaffirmance ofguidance for2016, Valeantadmitted in
D ecember2015 thatitsearlierprojectionswereinflated. O nD ecember16, 2015, itsanalystday,
Valeantissuedareleaseformallywithdrawingtheinflatedguidanceiti
ssuedanddefendedon
O ctober 19 , 2015. In an attempt to offset the disappointing revised 2016 guidance and
notwithstandingthefinancialimpactofitslostsalesthroughPhilidorandincreasedscrutinyby
PBM sandprivatepayorsforitsproducts, Valeant’sD ecember16, 2015 releaseprojectedrobust
2016 growthwithrevenueof$12.5–$12.7 billion, CashEPS of$13.25–$13.75, andEBITD A of
$6.9 –$7.1 billion.
283. O nthatsameday, theCompanyhostedaconferencecall. Pearson, R osiello, Jorn,
and K ellen participated on behalfoftheCompany. R osiello repeated the2016 guidanceand
Pearson stated the guidance was conservative, noting: “I feelvery comfortable [with the]
guidance. Buteachlittlepieces[sic], I feellittlelesscomfortablethisyearjustgiven--so we put
an extra dose of conservatism in.”
284. The statement in ¶ 283, that the new guidance had an “extra dose of
conservatism”wasfalseandmisleadingwhenmade. Atthetimeofissuingincreasedguidance,
D efendants were aware that the disclosure of Valeant’s relationship with Philidor and
investigationsintoValeantandPhilidor’sprice-basedbusinessmodelwouldresultindecreased
sales, revenue, andearnings. D efendantsthereforehadnoreasonablebasistobelieveand, infact
did notbelieve, thatValeantcould achieve the financialforecaststhatD efendantsissued in
O ctober2015, ortherevisedforecaststheyissuedinD ecember2015.
285. December 17, 2015. O nD ecember17, 2015, beforethemarketopened, M izuho
cutitsratingonValeantstockto“neutral”from “buy.”TheM izuhoanalystcitedalackofclarity
104
regarding Valeant’sagreementwith W algreens, and stated thatValeantmanagementhad “not
done a good job in articulating the details” and that“[w]e stil

ldon’tunderstand how this
partnershipwillimprovefilledprescriptionsifpayerrestrictionspersist.”D uringmarkethours
thatday, BloombergpublishedanarticlereportingontheM izuhodowngrade. O nthisnews, the
priceofValeantstockdeclinednearly6%, falling$7 from aclosingpriceof$118 onD ecember
16, 2015 tocloseat$111 onD ecember17, 2015. Inaddition, the 6.125% Notesdeclined.8%.
286. February 19, 2016. O n February 19 , 2016, mediaoutletsreported on aW ells
Fargo analystreportissued the priorday thatincluded an in-depth analysison Valeantand
questioned whetherthe Company had been truthfulaboutPhilidor. In particular, the report
questioned whether the Company had been truthful regarding Philidor and Valeant’s
relationship, including the adverse consequencesto Valeantofterminating thatrelationship,
management’scredibility, andirregularitieswiththeCompany’saccounting. Theanalysisnoted
thatValeant’s“new guidanceisnotcompatiblewith thedatapresented byValeant”and “the
reduction in guidancedoesnotmatch theimpact[ofPhilidor], asdescribed byValeant.”The
reportstressedthat“theslideinValeant’ssharesisdirectlyrelatedtodecisionsthattheboard
andmanagementhavemade”including“theboardreview andapprovalofarelationshipwith
Philidor.”ThereportfurthernotedthatValeant’saccountingwasmisalignedwithitspurported
performance, andsuggestedthatthedramaticriseinValeant’saccountsreceivablescouldbean
indication ofValeant’s“improperlytimed recognition ofrevenue.”O n thisnews, thepriceof
Valeantstockdroppedbynearly10%, fallingfrom acloseof$9 4 pershareonFebruary18, 2016
toacloseof$84 pershareonFebruary19 , 2016, onelevatedtradingvolume.
287. February 22, 2016. O n February 22, 2016, aW ellsFargo analystreleased an
updatednoteregardingValeantthatincludedtwoadditionalvaluationmodelsanda$62 price
105
target. Also on February22, 2016, CVS announced itwould restricttheuseofJublia, oneof
Philidor’smostheavily distributed drugs, by requiring patientsto firsttry a lessexpensive
genericdrug. AfterthemarketclosedonFebruary22, 2016, TheW allStreetJournalreported
thatValeantwaslikelytorestateits2014 and2015 earningsfollowinganinternalreview ofits
financials. Laterthatevening, theCompanyconfirmedinareleasethatitwouldberestatingits
2014 earningsbyatleast$58 mill

ion, whichwouldreduce2014 GAAP EPS byapproximately
$0.10. TheCompanydisclosedthat,contrarytoD efendantsearlierexplicitrepresentations, ithad
beenimproperlyrecognizingrevenueuponthedeliveryofproductstoPhilidor, insteadofwhen
theproductsweredispensedtopatients. TheCompanyalsoannounceditwoulddelayfilingits
2015 10-K pending completion ofrelated accounting matters. Schillercommented thatthe
Companywouldbe“improvingreportingprocedures, internalcontrolsandtransparencyforour
investors.”O nthisnews, thepriceofValeantstockdroppedbyover10%, from acloseof$84
pershareonFebruary19 , 2016 toacloseof$75 pershareonFebruary22, 2016, thenexttrading
day, onunusuallyhightradingvolume. Valeantsharescontinuedfallinginafter-hourstradingon
February22, 2016 asnewsoftheimpendingrestatementhitthemarket, droppingaslow as$68
pershare. ThepriceofValeantD ebtsecuritiesalso fell. Specifically, the5.375% Notesfell
2.7%;the5.875% Notesfell2.4%;the6.125% Notesfell7.8%;the6.75% Notesfell1.1%;and
the7.5% Notesfell1.2%.
288. O n Sunday, February 28, 2016, Valeantissued a press release announcing
Pearson’simmediatereturnasCEO , Ingram’sappointmentasChairmanoftheBoard, andthe
cancellation of a conference callsetfor February 29 , 2016 concerning preliminary 4Q15
financialresults and updated guidance for2016. The press release also disclosed thatthe
Companywaswithdrawingitspriorfinancialguidance, andconfirmedthatitwoulddelayfiling
106
its2015 10-K pendingcompletionofthereview ofaccountingmattersbytheadhoccommittee
“and the Company’s ongoing assessmentofthe impacton financialreporting and internal
controls.”Numerousmediaoutletsreportedonthesedisclosurespriortot
hemarket’sopeningon
February 29 , 2016. Also during markethours, M oody’splaced Valeantratingson review for
potentialdowngradeon concernsthattheCompany’soperatingperformancewasweakerthan
expectations, potentiallyimpedingdeleveragingplans. Asthedayprogressed, additionalreports
surfaced, and theCompany ultimately confirmed thatValeantwasunderinvestigation by the
SEC andhadreceivedasubpoenaduring4Q15.
289 . O nthisnews, thepriceofValeantstockdroppedbymorethan18%, from aclose
of$80 pershareonFebruary26, 2016 toacloseof$65 pershareonFebruary29 , 2016, thenext
tradingday, onunusuallyhightradingvolume. ThepriceofValeant’sdebtsecuritiesalsofell.
The5.375% Notesfell3.9 %; the5.875% Notesfell7.3%; the6.125% Notesfell6.8%; the
6.75% Notesfell3.6%;andthe7.5% Notesfell6.7%.
29 0. March 15, 2016. O nM arch15, 2016, beforethemarketopened, Valeantissued
itspreliminaryunaudited4Q15 financialresultsandheldamuchanticipatedconferencecall.The
Company revealed thatitwasreducing itsfinancialguidancefor2016, and provided certain
unaudited financialinformation concerning its4Q15 performance. In particular, theCompany
slashedits2016 revenueguidancefrom $12.5–12.7 billionto$11–11.2 bill

ion;reduceditsCash
EPS guidancefrom $13.25–13.75 to$9 .50–10.50;andcutitsEBITD A guidancefrom $6.7–$7.1
billion to $5.6–$5.8 billion. The Company cited asreasons forthese substantialdownward
revisions“reducedrevenueassumptionsforcertainbusinesses, new managedcarecontractsand
increased investmentin key functions, such as financialreporting, public and government
relationsandcompliance, aswellastheimpactoftheweakfirstquarterof2016.”TheCompany
107
alsoreported$51.3 millionin“winddowncosts”forPhilidor, including“write-downsoffixed
assetsandbaddebtexpenses,”anda$79 millionimpairmentchargerelatedtoPhilidor. Asto
priceincreases, Pearsonstatedthatallincreasesgoingforward“willbemoremodestandinline
with industry practicesand managed-care contracts.” D uring the conference call, D efendants
disclosedthateventheCompany’sreleasefrom earlierthatmorningwasinaccuratebecauseits
reportingforecastedadjustedEBITD A forthenextfourquartersof$6.2 to$6.6 billion, whenthe
figure should have been only $6.0 billion. Thatsame day, M oody’s further downgraded
Valeant’screditratings, aswellasthoseofitssubsidiaries.
29 1. O nthisnews, thepriceofValeantstockplummetedbymorethan50%, from a
closeof$69 pershareonM arch14, 2016 toacloseof$33 pershareonM arch15, 2016, on
extremelyhightradingvolume. ThepriceofValeantdebtsecuritiesalsofell. The5.375% Notes
fell10.6%;the5.875% Notesfell11.8%;the6.125% Notesfell12.27%;the6.75% Notesfell
7.5%;andthe7.5% Notesfell12.1%.
29 2. March 28, 2016. D uringtradinghoursonM arch28, 2016, newssourcesreported
thatValeantCEO Pearsonwascalledtotestifyinfrontofasenatepanelinvestigatingthecostof
prescription drugs. O n thisnews, thepriceofValeantcommon stock fell7.17%, or$2.23 a
share, from acloseof$31.09 onFriday, M arch24, 2016 toacloseof$28.86 onM arch28, 2016,
onhightradingvolume.
29 3. April 27–29, 2016. Aft

erthemarketsclosed on April27, 2016, newssources
reported thatValeantexpected to name fournew directors and five board members were
steppingdown. D uringtradinghoursonApril28, 2016, D efendantPearsontestifiedbeforethe
SenateSpecialCommitt
eeon Aging hearing. Beforethemarketsclosed on April29 , 2016,
108
Valeantfiled its Form 10-K forthe yearended D ecember31, 2015, and included restated
statements.
29 4. O nthisnews, Valeant’scommonstockdropped$1.89 ashare, or5.36%, from a
closeof$35.25 on April28, 2016 to acloseof$33.36 on April29 , 2016, on heavy trading
volume.
29 5. In the following months, more facts aboutValeant’suse ofPhilidorand the
source ofrevenue growth were publicly disclosed. O n June 7, 2016, Valeantissued a press
release and hosted a conference callregarding the Company’s long-delayed 1Q16 financial
results. TheCompany reported aGAAP losspershareof$1.08 and significantly lowered its
2016 guidance, and revealed thatthepoorfinancialresultsand outlook werecaused, in large
part, by the lossofPhilidor. Forexample, R osiello stated thatsalesvolume declineswere
“exacerbatedbythelossofrefillsfollowingtheshutdownattheendofJanuaryofourprevious
specialtypharmacyrelationship.”
29 6. Joseph Papa (“Papa”), the Company’s new CEO , added thatwith respectto
dermatology, “a significant portion of our W algreens prescriptions have profitability
significantly below our internal projections and meaningfully below non-W algreens
prescriptions”andthat“[i]nsomeinstances, theseprescriptionsactuallyhaveanegativeaverage
sellingprice.”
VI. THE SCHEME’S CONNECTIONS TO NEW JERSEY
29 7. Assetforthherein, theEnterprise’sschemehadsubstantialcontactswitht
hestate
ofNew Jersey, whereValeant’sU.S. headquartersislocated.
29 8. Numerous D efendants and Enterprise members were employed or regularly
conductedbusinessoutofValeant’sofficesinNew Jersey.
109
29 9 . Substantial elements of the illegal scheme, including deliberation and
implementation ofgrowth-by-acquisition model, price gouging strategies and Valeant’s AF
program, wereorchestratedfrom Valeant’sNew JerseyofficeswheremanyofValeant’ssenior
executiveswerelocated.
300. M oreover, conduct undertaken to conceal the fraudulent scheme, including
preparationoffalseandmisleadingfinancialstatementsandothermisrepresentationsoninvestor
andearningscallsoriginatedfrom Valeant’sNew Jerseyoffices.
301. Finally, theschemehadnumerous, significant, foreseeable, andintendedadverse
effectsinNew Jersey.
VII. SUMMARY OF DEFENDANTS’ SCIENTER
302. Plaintiffsrepeatandreallegeeachandeveryparagraphcontainedaboveasifset
forthherein.
303. TheIndividualD efendantsactedwithscienterwithrespecttothemateriallyfalse
andmisleadingstatementsandomissionsofmaterialfactsetforthabovebecausetheyknew, or
attheveryleastrecklesslydisregarded, thatthosestatementsweremateriallyfalseormisleading
when made. AsseniorexecutivesofValeantduring therelevanttimeperiod, theirscienteris
imputabletoValeant.
304. Asdiscussed above, theEnterpriseengaged in amulti-yearschemeto defraud
investorsbyissuingfalseandmisleadingstatementsaboutValeant’sbusinessstrategy, practices,
andprospectswhilesecretlypursuingawrongfulcourseofbusinesstoartificiallyinflatesales
thatrequired defrauding PBM s and payors in the prescription drug market. The Individual
D efendantswerepersonally awareof, designed, implemented, and/orapproved thedeceptive
practicesdetailedinthisComplaint.BecauseoftheirdefactocontroloverPhilidor, theirrightto
review itsrecordsand policies, and theirclose monitoring ofthe pharmacy, the Individual
110
D efendants were personally aware of, orwere severely reckless in di

sregarding, Philidor’s
improperanddeceptivepractices.
A. The Individual Defendants’ Role in Valeant’s Unsustainable Business Model
305. PearsonfirstdevelopedValeant’snon-traditionalbusinessstrategyasaconsultant
atM cK insey, andbroughtthattemplatetoValeant— acquirecompanies, slashR & D , andjackup
prices— andhehand-pickedexecutiveswhowouldhelphim pursuethatstrategy. Together, the
IndividualD efendantsorchestratedValeant’smanyacquisitionsanddramaticpriceincreasesand
other deceptive practices. Pearson and the IndividualD efendants understood the role that
price-increasesplayed in Valeant’sgrowth from theirdesign and closemonitoring ofbudgets
within each businessunit— Pearson even personally setand approved the price increasesof
individualdrugstomeetbudgettargets.
306. Pearson’spresenceatValeantloomedlarge. H isintimateknowledgeofValeant’s
operationsflowed from areported practiceof“micromanaging”thebusiness, an attention to
detailthatwasexpectedofalloftheIndividualD efendants. FormeremployeestoldBloomberg
BusinessweekthatPearson“hadhisfingersineverything, from operationstomakingdecisions
aboutthe salaries of individualemployees.” O ther former employees told Forbes thathe
“micromanaged things he deemed important.” Pearson himselfconfirmed during a hearing
beforetheSenatethatwasinvolved in minutedetailsofValeant’sdrug priceprogram, even
readingindividualreportsofpatientcomplaintsrelatedtodrugpricing, statingthat“wedotrack
everypatientthatcallsandmakesurethatit’sruntoground”and“I readthereports.”
307. ButPearson also worked closelywith theotherIndividualD efendants. Pearson
heldweeklycallswiththeleadersofValeant’sbusinessgroupsonTuesdaysat11:00 am, during
which Valeantseniormanagementwould assessthebusiness, addressdeveloping issues, and
ensurethattherewerenosurprisesfacingtheCompanyateachquarterend. A Forbesarticlealso
111
described the executives around Pearson as “cronies,” and according to a former Valeant
executive, Pearson“wantedtowinatallcostsandsurroundedhimselfwithpeoplewhowould
basicallydowhateverhetoldthem todo.”ThesecloseassociatesincludedhisformerM cK insey
partnerR obertR osiello, his brother-in-law R obertBrabandt, and R yan W eldon, the son of
Pearson’sformerclient,Johnson& JohnsonCEO BillW eldon.
308. ValeantdocumentsuncoveredbynewsreportsandaSenateinvestigationconfirm
thatPearsonandtheIndividualD efendantsweredirectlyinvolvedintheCompany’sstrategyto
grow throughpriceincreases. TheSenateR eportonD rugPricingdetailshow, whenValeant’s
NeurologyandO therbusinessunitwasnotmeetingbudgettargets, Valeant’sseniorleadership
determinedtoimplementan“O rphanD rugPricingStrategy”toturnthebusinessaround. The
plan, which leadership began developing in late 2012, called fortransforming the unitinto
Valeant’snumberone revenue generatorby implementing steep price increases. The Senate
R eportincludesdocumentsfrom anApril20, 2013 presentationtoPearsonandSchilleroutlining
thisapproach. Pearsonadmittedinadeposi
tiont
hataslidefrom thepresentation“capturesthe
unit’splan ofmaking up fordeclining revenueby implementing majorpriceincreases.”The
documentsalsoshow thatPearsondrovethistransformation. TheSenateR eportalsodetailshow
theplanwasreviewedbyK ornwasserandotherexecutives, andhow, astheunitimplemented
repeatedandsteeppriceincreases, theunit’sleadershippresentednew forecastsreflectingthese
changesto Pearson, Schiller, and K ornwasser. An April25, 2013 emailfrom JeffStrausst

o
K ornwasserpresentedanorphanpricingmodelintendedto“gettotheprojectednumberthisyear
thatM ike [Pearson]had in hishead.” According to the Senate R eport, the attached model
proposed aseriesofpricehikesin thesecond halfof2013 thatwould cumulativelyraisethe
price ofSyprine 500% and Cuprimine 100%. Pearson and the IndividualD efendants went
112
further: In aJuly2015 meeting, Pearson metwith R osiello, Carro, and othersand decided to
raise the price ofCuprimine by 400%, from approximately $6,500 for100 capsulesto over
$26,000.
309 . Similarly, the Senate R eport provides details, based on internal Valeant
documentsandtestimonyfrom Valeant’sexecutives, abouthow, inlate2014, theacquisitionof
Isupreland Nitropresswasinternally justified by Valeant’sability to raise the drugs’prices
dramatically. Thisprice-focused acquisition modelforM arathon wasdeveloped by Pearson,
Schiller, D avis, andotherexecutives, andwaspresentedtoValeant’sauditorsatD eloitte. Indeed,
the W allStreetJournalreported thatata meeting to discuss pricing attended by Pearson,
Schiller, K ornwasser, Andrew D avis, Steve Sembler, and Sandeep Lalilt, the group
recommended smallerpriceincreasesovertime, butPearson pushed to dramatically increase
price. AttheSenatehearing, Schillerconfirmedthat“M r. Pearsonmadeadecisiontogowiththe
higherprice.”Thus, whilePearsonandtheIndividualD efendantspubliclyinsistedthatValeant’s
growth wasbased on volume, notprice, thatValeantdid not“plan”forpriceincreases; that
Valeanthadasustainablebusinessmodel, andthatcontractually, Valeantcouldnotraiseprices
more than single-digitpercentages, they were intimately involved in a price-based business
strategythatwascontrarytoeverythingtheyhadrepresentedtoinvestors.
310. Further, throughout the relevant period, the Individual D efendants held
themselves outto investors as the persons mostknowledgeable aboutValeant’s business,
operating model, strategies, acquisitions, organic growth, internal controls, compliance
programs, andthesalesvolume, pricing, andperformanceofValeant’sproducts. Forexample,
withregardstoValeant’smanyacquisitions, SchillerstatedinaM ay2014 conferencecallwith
investorsthatheand Pearson “religiously track each dealon aquarterly basis. O urBoard of
113
D irectorsgetareporteveryquarteroneachdeal. W egobackeveryquarterandaskhow arewe
doing, we are ourown biggestcritics.” Laterthatday, ata Sanford C. Bernstein Strategic
D ecisionsConference, Pearsonstated, “we’retrackingeveryproductaroundtheworld.”
311. Furtherconfirming these statementsand examples, the IndividualD efendants’
rolesatValeantandthenatureofthefrauditselfalsosupportastronginferenceofscienter. As
describedin partabove, asseniorexecutiveofficersduringtherelevantperiod, theIndividual
D efendants were privy to confidentialand proprietary, non-public information concerning
Valeant’soperations, finances, financialcondition, and presentand futurebusinessprospects.
Andtheongoingfraudrequirednotonlytheinterplayofmanagementandindividualbusiness
units, butalsoacquisitionsofandrelationshipswithotherbusinessenti
ties— includingdecisions
requiring board-levelapproval, such as approving budgets and budget-based compensation
targets and entering the purchase option agreementwith Philidor. Thi

s complex, carefully
designed fraud could nothave been perpetrated withoutthe knowledge orrecklessnessand
complicityofemployeesatthehighestlevelsofValeant,includingtheIndividualD efendants.
312. M oreover, Pearson, Schiller, andR osielloundertooktheaffirmativeobligationto
obtaintherequisiteknowledgetoensuretheCompany’sdisclosurestothemarketweretrueby
executingSO X certifications. Pearson, Schiller, R osiello, andCarroparticipatedinthedrafting,
preparation, and/orapprovalofthevariousSEC filings, releases, andotherpublicstatementsthat
appearhereinandbecauseoftheirpositionshadcontrolovertheinformationthatwasdisclosed.
B. Individual Defendants’ Control of Philidor
313. TheIndividualD efendantswerepersonallyawareofValeant’suseofandcontrol
overPhilidoranditsnet
workofpharmacies, from Valeant’screationofPhilidorin2013 through
the IndividualD efendants’ decision to cutties with the pharmacy in O ctober 2015. The
IndividualD efendantswereinvolvedintheacquisitionofM edicis, andchosetoadoptM edicis’
114
AF strategyandhireformerM edicisemployeeTannertojoinValeantforthesolepurposeof
running theAF program, which entailed creating Philidoron January 2, 2013. Thenextday
ValeantannouncedthatithadhiredK ornwasser, whowouldsuperviseTannerandreportdirectly
toPearson. K ornwasser’spositionandcompensation— $8.8 milliontotalin2013— demonstrate
Philidor’simportancetoValeant.
314. Pearson, Schiller, R osielloandseniormanagementsignedValeant’sagreements
withPhil
idor, andPearsonandotherexecutiveofficersoftentoutedValeant’snew “alternative
fulfillmentprogram.”TheIndividualD efendantsknew thatseveralValeantemployeeshelpedto
createPhilidor, andthatmanyworkedatPhilidorasValeantemployeesbeforebeingtransferred
theretooverseeValeant’splantousedeceptivepracticestoartificiallyboostsalesofValeant’s
overpriced drugs. Two high-level Valeant employees— Tanner and K ornwasser— were
intimatelyawareofPhilidor’soperations, andotherValeantemployees, suchasBijalPateland
AlisonPritchetthelpedtosetupandrunPhilidor.
315. Pearson and the IndividualD efendants received regularupdates on Valeant’s
business with Phi

lidor. Forexample, Gary Tannersentan emailto AriK ellen and Laizer
K ornwasseronJanuary17, 2014, discussingalternativearrangementshewaspursuingincase
“Philidorcouldnotbescaledquicklyenough,”towhichK ellenreplied, “Fullyunderstandand
agree[.]”Theclosemonitoringcontinuedthroughouttherelevantperiod. Forinstance, onM arch
9 , 2015, K ellensentPearsonanemailfollowinguponanearlierconversationstating, “M etwith
D eb[Jorn]. . . . SuggestedwegetalltheD M s[D istrictM anagers]inforaday. . . goaltogo
overthepracticesineachdistrictwherePhilidorisworkingwellandidentifynext10 practices
whereweshould push harderto build itoutthatwillhelp fuelgrowth.”Pearson responded,
“Goodstuff.”Philidor’smanagerswereinvitedtomeetwithValeant’sboardinJuly2015.
115
316. W ellbeforethepurchaseoptionagreement, Philidorwasprovidingmonthlydata
toValeant, andValeanthadacontractualrighttoinspectPhilidor’sbooks, records, andfacilities
forcompliance— though such formalaccesswashardly necessary with theirown employee,
Tanner, effectively managing itsoperations. And priorto entering into the purchase option
agreement, Pearson, Schiller, and Valeant’s Board of D irectors performed due diligence,
including multiplesitevisits. In fact, theentire Auditand R isk Committeetoured Philidor’s
facility in Pennsylvania prior to the transaction. Philidor also provided data to Valeant’s
accountant, D eloitte, anditsexternalauditor, PwC, throughmuchoftherelevantperiod. Valeant
includedPhilidorinitsinternalcontroltestingandinternalauditprogram for2015.
317. D efendantsalso monitored the secretnetwork ofpharmaciesPhilidorused to
routeprescriptions. Forexample, Valeantmadeapproximately75 shipmentstoR & O between
Januaryand August2015 and received millionsofdollarsin paymentsdirectlyfrom R & O in
return. O nSeptember4, 2015, afterR & O becamesuspiciousofthefraudandbeganwithholding
paymentsfrom Valeant, Valeant’sgeneralcounselsenta letterto R & O seeking “immediate
payment”toValeant, furtherhighlightingthelackofseparationbetweenthecompanies. Inthe
O ctober19 , 2015 conference call, Pearson told investors thatR & O was partofValeant’s
specialtypharmacyprogram.
318. W ith this levelof access, contact, and scrutiny, D efendants knew, or were
reckless in notknowing, aboutPhilidor’s deceptive practices. As Philidoremployees have
confirmed, the deceptive practices were widely known, discussed, and even documented in
Philidor’strainingmanuals.
319 . As the truth aboutPhilidor began to emerge, in O ctober 2015 D efendants
continuedtoactivelymisrepresenttherelationshipbetweenValeantandPhilidor, andtoclaim to
116
beinvestigating therelationship and describing theinvestigation in termsthatsuggested that,
ratherthanPhilidorbeingthecreationofValeantmanagement, theywerelearningthingsforthe
firsttime. O nO ctober19 , 2015, D efendantspresentedinvestorswithalistoffactsthatValeant
purportedly“understood”aboutPhilidor, andPearson, ataconferenceattendedbyR osielloand
K ellen, defended Philidor and the decision to concealthe relationship as “a competitive
advantagethatwedidnotwanttodisclosetoourcompetitors.”
320. O n O ctober26, 2015, ata conference attended by Schiller, R osiello, Ingram,
Provencio, M elas-K yriazi, Stevenson, Carro, and K ellen, Pearson continued to claim that
Philidorwas“independent”andrepeatedthatPhilidorwasconcealedfor“competitive”reasons.
PearsonalsoassuredinvestorsthatValeanthadbeen“workingwithoutsidecounsel”andhave
found “no evidence of illegalactivity whatsoever atPhilidor.” Atthatsame conference,
D efendantspresentedinvestorswithanotherpresentationthatclaimed, amongotherthings, that
PhilidorwasindependentandValeanthadnocontrolovermanagement. Then, onO ctober30,
2015, justa few dayslaterand a little overa week since Philidorbecame public, Valeant
announced thatitwould beclosing Philidor. ThatD efendants’decision to shutterPhi

lidorso
quickly, ratherthaninvestigatetheseriousallegationsinvolved, furtherconfirmsthattheywere
alreadywellawareofPhilidor’sdeceptivepractices. ItalsohighlightsthecontroloverPhilidor
thatValeantforcefullydeniedhavingjustfourdaysearlier.
321. Further, whenCitron’sreportquestionedValeant’saccountingthroughPhilidor,
D efendants allpublicly defended the accounting. In the O ctober26, 2015 presentation to
investors, R osiello— flanked bytheBoard ofD irectors— represented thattheyhad determined
“theappropriateaccountingtreatment”forPhilidor. Ingram alsoreiteratedthattheentireBoard
andtheauditcommitteehadreviewedandsignedoffontheaccountingtreatment.
117
322. Indoingso, D efendantsknowinglyorrecklesslydisregardedtherequirementsof
ASC 810 and SAB Topic13, which required them to disclosethe“nature, purpose, sizeand
activities”ofPhilidor, how Philidorwasfinanced, significantjudgmentsandassumptionsmade
indeterminingwhetherValeantneededtoconsolidatePhilidorand/ordiscloseinformationabout
itsinvolvementwithPhi
lidor, the“natureof, andchangesin, therisksassociatedwith”Valeant’s
involvementwith Philidor, and how Valeant’sinvolvementwith Philidoraffected Valeant’s
“financialposition, financialperformance and cash flows.” See ASC 810-10-50-5A; ASC
810-10-50-8. Valeantwasalso required to disclosePhilidorasadistinctsaleschannelin the
M D & A inValeant’speriodicfilingswiththeSEC. SeeSAB Topic13.B.
323. R osiello’s assertion in t

he O ctober26, 2015 presentation thatthey were not
requiredtodisclosePhilidorbecauseValeant’ssalestoPhilidordidnotaccountformorethan
10% ofitsrevenueswasacoverfortheirrecklessdisregardoftheaccountingrules. Philidorwas
notacustomerofValeant;itwaseffectivelyoperatingasadivisionofValeant. O ncePhilidor’s
financialswereconsolidatedwithValeant,thenoti
onthatPhil
idorhadtomeetthe10% customer
salesthresholdfordisclosureisrenderedevenmoreabsurdbecauseatthatpointevenValeant
consideredPhilidortobeapartofValeantandnotacustomer.
324. D efendants knew thatthe illegitimate sales channelthey created was highly
materialtoValeant’sbusiness. Indeed, theirclaim thatPhilidorwasnotmaterialtoValeantis
beliedbytheadversefinancialimpactthatPhilidor’sclosurehadonValeantandbythemarket’s
negativereactiontotheseveraldisclosuresaboutPhilidorfrom O ctober19 , 2015 andintothe
middleof2016.
325. The reason thatD efendants intentionally concealed Philidoris apparent. The
concealmentofValeant’srelationshipwithPhilidorwasessentialtotheEnterprisebeingableto
118
channelsalesthroughPhilidor. SolongasthePBM shadnoideaabouttheconnectionbetween
Philidorand Valeant, they had no reason to know aboutthe improperrelationship between
ValeantandPhilidor. O fcourse, whentheyeventuallyfoundoutaboutValeant’sdeceptiveuse
ofPhilidorto moveValeantproducts, thethreemajorPBM s— which accountfor80% ofthe
market— immediatelycuttieswithPhil
idor.
326. D efendants knew, or atthe very leastrecklessly disregarded, thatValeant’s
revenuerecognitionwasbeingmanipulatedbytherecordingoffictitioussaleswhereValeant’s
ability to collectwas notreasonably assured because the transactions occurred outside the
normalcourseofbusiness, thatValeantdouble-bookedthisrevenuein2015, andthatValeantdid
nothaveeffectivedisclosurecontrolsoverfinancialreportingoreffectivedisclosurecontrolsor
proceduresinplacein2014 and2015.
327. W hentheadhoccommitteerevealedtheresultsoftheirreview ofPhilidorand
Valeant’saccounting, theyblamedPearson, Schiller, andCarro. Inannouncingtherestatement
of Valeant’s financials, the ad hoc committee accused Schiller and Carro of “improper
conduct” that “resulted in the provision of incorrect information to [the board’s Audit and
Risk Committee] and the company’s auditors.”Theadhoccommitteealsofoundthat“thetone
atthetop oftheorganization and theperformance-based environmentatthecompany, where
challengingtargetsweresetandachievingthosetargetswasakeyperformanceexpectation, may
have been contributing factors resulting in the company’s improperrevenue recognition[.]”
Thus, Pearsonencouragedthemanipulationofrevenuerecognitionbyrequiringhisemployeesto
meetaggressiverevenuetargets. Indoingso, herecklesslydisregardedthathehadestablisheda
corporateculturethatfacilitatedchannelstuffing.
119
C. Valeant’s Refusal to Pursue Remedies Against Wrongdoers
328. Valeant’sfailuretopursueremediesagainstPearson, Schiller, R osiel

lo, Philidor,
andPhilidorexecutivessupportsaninferencethatthedeceptivebusinesspracticesallegedherein
werefullyapproved. Valeantcouldnotpursuesuchremediesforthewrongdoingitcondoned,
andthuswaslimitedtofiringthewrongdoersandshuttingdownPhilidor.
329 . In2014, Valeantinstitutedaclawbackpolicy, allowingtheCompanytorecover
incentivecompensationfrom managementifarestatementisrequiredwithinthreeyearsofthe
relevantperiodandanexecutiveisfoundtohaveparticipatedinfraudulentorillegalconduct.
H owever, as Ingram noted, the Board approved the accounting for Philidor and thus,
notwithstanding Valeant’srightto aclawback, Valeant’sBoard hastaken no publicaction to
recoverpaymentstoPearson, Schiller, ortheotherexecutives.
330. Tothecontrary, amonthafterannouncingthatPearsonwouldbereplacedasthe
CEO , theCompanyretroactivelymodifiedhisemploymentagreementtoprovidehim witha$2
millionsalaryfor2016, alongwithotherfinancialbenefits, althoughPearsonwassupposedto
receiveaperformancebonusbutnosalaryfor2016. Valeanthassinceprovidedhim a$9 million
severance.
331. Similarly, Valeant’s purchase option agreementwith Philidorprovides broad
indemnification rightsto theCompany, including thatPhilidor“shallindemnify, defend, and
hold harmless”Valeant“from and againstany and allLosses”to Valeant“asaresultofthe
operation ofthePharmacy ortheperformanceby thePharmacy ofitsduties.”H owever, the
purchaseoptionagreementfurtherprovidesthatsuchliability“shallbereducedbytheextent. . .
thatsuch Lossesarecausedbyorariseoutof(a) thenegligenceorintentionalmisconductof
M anufacturer. . . .”R atherthanpursueitsclaimsagainstPhilidor, Valeantenteredintoamutual
releasewithPhilidor, effectiveasofNovember1, 2015.
120
332. The allegationsabove make clearwhy Valeanthasbeen unwilling to pursue
claimsagainstitsexecuti
vesorPhilidor— theimproperactionsthattheyengagedinwerecentral
toValeant’simproperandunsustainablebusinessstrategy, andweredesignedandimplemented
atthehighestlevelsoftheCompany.
D. Executive Departures
333. W idespread executive and director departures, including the Individual
D efendantsandmanyEnterprisemembers, inclosetemporalproximitytorevelationsregarding
thedeceptivepracticesbyValeantandPhilidor, furthersupportaninferenceofscienter.
334. O nApril29 , 2015, justafew monthsbeforethescandalwouldreachthepublic
andjustafterthefalse2014 financialstatementswereissued, ValeantannouncedthatSchiller
wouldbeleavinghispositionasCFO onceasuccessorwasappointed.
335. K ornwasserleftthe Company in July 2015. CNBC subsequently attempted to
contactK ornwasser, butreceivedacallfrom Valeant’scrisismanagementdepartmentwhosaid
K ornwasserwasnotinterested in discussing ValeantorPhilidor. R epresentative Cummings
noted K ornwasserwas nevermade available when the H ouse O versightCommittee asked
Valeanttoproducehim foraninterview.
336. O n or about M arch 2, 2016, it was reported that Jorn, head of the U.S.
GastrointestinalandD ermatologydivisionswasleavingthecompany“effectiveimmediately.”
Jorn wasresponsibleforsomeofValeant’stop sellingdrugs, including Jubl

ia, adermatology
drugwhichwassoldinmassivequantitiesthroughPhilidor.
337. O nM arch21, 2016, Valeantissuedapressreleaseregardingtherestatementand
materialweaknessesofitsinternalcontrols. Italso confirmed Pearson would beleaving the
Company. M oreover, the Company admitted thatSchillerand Carro engaged in “improper
conduct”andprovidedinaccurateinformationtotheAdH ocCommitteeinvestigatingthefalse
121
revenues. Schillerwasaskedtoresignfrom theBoard. Carrowasreplacedascontroller. Thus,
the Ad H oc Committee review resulted in Pearson, Schiller, and Carro being forced outof
Valeant.
338. O nApril29 , 2016, Valeantannouncedthatsevenofitsboardmemberswouldnot
bestanding forre-election. Thisincluded Pearson and Schiller, aswellasM ason M orfit(of
ValueAct), Provencio (chairofthe AuditCommittee), Goggins, Farmer, and M elas-K yriazi
(memberoftheAuditCommittee). Notably, Provencio, Goggins, andM orfitwerealsomembers
oftheAdH ocCommittee.
339 . O nM ay20, 2016, ValeantstatedinafilingwiththeSEC thatStolzhadresigned
asSeniorVicePresidentofNeurology, D entistryandGenerics. Stolzhadbeeninvolvedinboth
thepriceincreasesandthepricingdiscountsPearsonpromisedCongressbutfailedtodeliver.
E. Executive Compensation
340. Valeant’sunusualcompensationstructureprovidedincrediblyrichcompensation
packagesbasedonachievingincreasinglychallengingperformancegoals, backedbythethreatof
termination. Thisemphasisonresultsoverethicsledtoacultureof, andmotivetoengagein,
fraudulentpractices.
341. Forexample, ataM ay28, 2014 conference, Pearsonstated“there’sbeenalotof
turnoverattheseniorranks;butthathasbeen, byandlarge, ourdecision, nottheirdecisions, as
wecontinuetoupgradetalent.”Pearsonbluntlyacknowledged“[t]here’snotenureatValeant.
It’s up and out. . . . It’s more like a professionalservices firm than a sortoftraditional
pharmaceuticalcompany.”Pearsonalsoadmittedthatthecompensationsystem atValeantwas
entirelydependentonincreasingthestockprice, stating: “So, ourCompanyseniormanagement
and the Board -- we -- there’s only one metric thatreally counts, and it’s totalreturn t
o
shareholders. That’show we’repaid. W ehaveauniquepaymodel,thatatleastwe-- atleast-- if
122
we don’tatleastachieve a 15% totalreturn to shareholderseach year, compounded annual
growthrate, thatbasicallytheequitywereceiveintermsofourstockgrabsisworthnothing.”
342. A D ecember12, 2013 BoardofD irectorspresentationregardingValeant’s2014
budgetreflectedtheseaggressivetargets. Thepresentationnotedthat“[b]udgetreflectsstretched
targetsforallbusinessunits,”and therewould be“[n]o bonusesto bepaid forperformance
<9 0% ofbasebudget.”
343. W hile missing budgets was punished with forfeiture of bonuses or worse,
Valeant’shighestrankingexecutivesreceivedmillionsofdollarsforachievingtheincreasingly
aggressivefinancialtargets. Forexample, in2014, Pearson’sbasecompensationwas$2 million
andSchiller’swas$1 million. H owever, underthebonusprogram theycouldearnmultiplesof
their base salary. That year, Pearson received an $8 million bonus, four times his base
compensation, andSchillerreceiveda$2.4 millionbonus, 2.4 timeshisbasecompensation.
344. Thelavishsalariesandbonusespaledincomparisontotherewardsforinflating
Valeant’sstock priceashigh aspossibleuntil2017. Industry observersnoted thatValeant’s
compensation schemepaid Pearson “likeahedgefund manager.”Forexample, on April22,
2014, theCompanyfiledaproxystatementwiththeSEC disclosingthatthevalueofPearson’s
sharesonM arch31, 2014 wasapproximately$1.3 billion.
345. The compensation program provided Pearson the opportunity to become a
billionaireand obtain wealth farbeyond even atypicalhighlypaid CEO . Italso incentivized
Pearson and otherValeantexecutivesto useany meansnecessary to increasethestock price
through2017 attheexpenseofthelong-term healthoftheCompanyandshareholderinterests.
346. M oreover, Pearson wasallowed to effectively cash outaportion ofhisstock,
pledgingitascollateralfor$100 millionloanedtohim byGoldmanSachsin2014.
123
347. W ith such powerfulincentives, Pearson madestatementsto driveup thestock
price, includinginanO ctober27, 2014 letterPearsonwrotetoAllergan’sBoardofD irectors,
whichwaspubliclydisclosedbytheCompany. Init, Pearsonstated: “W ebelieveourstockis
tradingatartificiallylow levels.”
348. O nJanuary13, 2015, theCompanyfiledaForm 8-K withtheSEC announcingit
hadenteredintoanamendedandrestatedemploymentagreementwithPearson. Pearsonstopped
earninganannualbasesalary, buthis“targetbonusopportunity”wasincreasedfrom $6 million
to$10 mill
ion. Again, aslargeasitwas, thecashbonuspaledincomparisontothehundredsof
millionsofdollarsin compensation Pearson would receiveifhesuccessfullydroveValeant’s
sharepricehigher.
349 . D uring the relevant period, millions of dollars of Schiller’s executive
compensation hinged on meeting challenging share price increases. O n top oftheirextreme
compensation, PearsonandSchillerwerepermittedpersonaluseofValeant’s$60 mil

lionfleetof
privatejetswhichwereusedbythem toflyfriendsandfamilyforvacations.
350. O nM arch21, 2016, theCompanyadmittedthatitsaggressivecompensationand
performancegoalpracticescontributedtothewrongdoingstating: “theCompanyhasdetermined
thatthe tone atthe top ofthe organization and the performance-based environmentatthe
Company, wherechallengingtargetsweresetandachievingthosetargetswasakeyperformance
expectation, mayhavebeencontributingfactorsresultingintheCompany’simproperrevenue
recognition” and othermisconductdetailed in t

he pressrelease. This“tone” wascreated by
Pearson, amongothers, whorecklesslydisregardedthatbyimposingaggressiverevenuetargets,
he had created a corporate culture thatencouraged manipulation ofrevenue recognition and
facilitatedchannelstuffing.
124
351. The“toneatthetop”materialweaknessfurthersupportsaninferenceofscienter
asaccountingandinternalcontrolguidancemakescleartheimportance“topmanagement”has
insettinganappropriatetone. SeeSEC StaffAccountingBulletinNo. 9 9 . AsCEO duringthe
relevantperiod, Pearson had ultimateresponsibility forValeant’sinternalcontrolsystem and
setting the “tone at the top” to prioritize ethical business and accounting practices and
compliance overpersonalfinancialcompensation, which he recklessly failed to do. As the
CO SO Framework states, “[t

]he influence ofthe CEO on an entire organization cannotbe
overstated.”CO SO Frameworkat84.
F. Inflating Valeant’s Stock Price To Facilitate Acquisitions
352. In addition to personalcompensation, theIndividualD efendantshad motiveto
concealtheirfraudulentbusinesspracticesdescribedhereintoartificiallyinflateValeant’sstock
pricetomorecheaplyacquireothercompaniesandcontinueitsacquisitionstrategy.
353. Forexample, inM ay2014, ValeantofferedcashandsharesofValeantstockin
exchangeforAllergansharesofstock. Thus, D efendantshadanincentivetoincreasethepriceof
Valeantsharestohitorexceedtheir$46 billionoffertoAllergan, whichwastobesubstantially
fundedwithValeantshares.
354. Valeantalso took advantageoftheartificially inflated priceofitssecuritiesto
conductnumerousdebtand equity offeringsduring therelevantperiod, including oneofthe
largesthigh-yielddebtofferingsinhistory, whichgeneratedintheaggregatenearly$15 billion
ofcash fortheCompany from theinvesting publicatartificiallyinflated prices. Valeantalso
used proceedsfrom an approximately$10.1 billion offeringofseniornotesin M arch 2015 to
acquireSalix, andproceedsfrom a$3.2 billionofferingofseniornotesinJuly2013 toacquire
Bausch& Lomb.
125
G. Internal Valeant Communications and Congressional Testimony
355. Pearson and Schiller knew, or atthe very leastrecklessly disregarded, that
betweenJanuary1, 2013 andSeptember30, 2015, Valeant’ssteeprevenuegrowthwasdriven
notby organic volume increases, butratherprimarily by Valeant’sunsustainablepractice of
acquiringmedicationsanddrasticallyincreasingtheirprices. IndeedbothPearsonandSchiller
havesinceadmittedthatValeant’sgrowthwastheresultofpriceincreases, andnotwhatwas
previouslyrepresentedtothemarket.
356. InreactiontoAllergan’spublicchallengestoValeant’sbusinessmodel, Pearson
repeatedlyledinvestorstobelievethatValeantdidnotrelyheavilyonpriceincreasestodrive
revenuegrowth. Afteroneinstance, whenPearsontoldinvestorsonM ay21, 2015 that“organic
growthismorevolumethanpriceandwillcontinuetobe,”Schillersenthim anemailwiththe
subjectline“price/volume”in which he corrected Pearson: “Lastnight, oneoftheinvestors
askedaboutpriceversusvolumeforQ1. Excluding[M ]arathon, pricerepresentedabout60% of
ourgrowth. Ifyouinclude[M ]arathon, pricerepresentsabout80%.”D espitethisclearinternal
awarenessthatpricewasthedominantdriverofrevenue, Pearsonneverretractedhisstatement.
Indeed, hecontinuedtomakemisleadingstatementsabouttheroleofpriceinrevenuegrowth.
Forexample, on July23, 2015, heclaimed thatValeant’s“basestrategyis, how do wegrow
organicallythroughvolume[.]”
357. O nApril27, 2016, PearsonappearedbeforeCongress. Inhispreparedremarks,
PearsonconfessedthatValeanthad“mademistakes”andthathewastooaggressiveinseeking
priceincreasestodriverevenue: “[T]hecompanywastooaggressive–andI, asitsleader, was
tooaggressive–inpursuingpriceincreasesoncertaindrugs. Letmestateplainlythatitwasa
mistaketopursue, andinhindsightI regretpursuing, transactionswhereacentralpremisewas
plannedincreaseinthepricesofthemedicines. . . .”
126
358. Schillerlaterconfirmedthat80% ofValeant’sgrowthinthefirstquarterof2015
wastheresultofpriceincreasesinhisFebruary4, 2016 testimonybeforeCongress.
359 . D uringthathearing, PearsonwasquestionedbySenatorM cCaskillaboutwhether
growthwasdrivenbypriceratherthanvolumebetweenthefirstquarterof2013 andthethird
quarterof2015 forallbutonequarter. In response, Pearson admitted that, “Y es, pricing has
drivenmoregrowththanvolume.”
360. Indeed, asdiscussed in ¶¶69 –78, Valeant’spracticeofdrivingrevenuegrowth
throughpriceincreaseswasdevisedinlate2012 byPearson, Schiller, andothertopexecutives,
andformedthecoreofitsoperations. R atherthanfollow thetraditionalmodelofdevelopingnew
drugsbyinvestinginR & D , PearsonandSchillerimplementedastrategyofacquiringalready
developed drugsand increasing revenuesthrough pricehikes. Pearson and Schillerwerethus
wellaware thatorganic volume increaseswere notthe primary driverofValeant’srevenue
growth.
VIII. RELIANCE
361. D uring the relevant period, Plaintiffs reasonably relied on the material
misstatementsallegedhereinwhenpurchasingValeantsecurities.
362. Thereisapresumptionofrelianceestablishedbythefraud-on-the-marketdoctrine
because, amongotherthings:
(a) The D efendants made public misrepresentations or failed to disclose
materialfactsduringtherelevantperiod;
(b) Themisrepresentationsandomissionswerematerial;
(c) TheCompany’ssecuritiestradedinefficientmarkets;
(d) Themisrepresentationsandomissionsallegedwouldinduceareasonable
investortomisjudgethevalueoftheCompany’ssecurities;and
127
(e) Plaintiffs purchased Valeant securities between the time D efendants
misrepresented orfailed to disclosematerialfacts, and thetimethetruefactsweredisclosed
withoutknowledgeofthemisrepresentedoromittedfacts.
363. Atallrelevanttimes, the marketforValeant’ssecuritieswasefficientforthe
followingreasons, amongothers:
(a) Valeant’scommonstockmettherequirementsforlisting, andwaslisted
andactivelytradedontheNew Y orkStockExchangeandtheTorontoStockExchange, highly
efficientandautomatedmarkets;
(b) Asaregulatedissuer, ValeantfiledperiodicreportswiththeSEC andthe
New Y orkStockExchange;
(c) Valeantregularly communicated with public investors via established
marketcommunicationmechanisms, includingthroughregulardisseminationsofpressreleases
on the nationalcircuits ofmajornewswire services and through otherwide-ranging public
disclosures, suchascommunicationswiththefinancialpressandothersimilarreportingservices;
and
(d) Valeantwascoveredbythefollowinganalystsduringtherelevantperiod:
PiperJaffray; D eutsche Bank M arketsR esearch; W ellsFargo Securities; J.P. M organ; R BC
CapitalM arkets;TD SecuritiesInc.;Scotiabank EquityR esearch;M organStanley;Canaccord
Genuity; BM O CapitalM arkets; SadifAnalytics; BTIG LLC; M orningstarEquity R esearch;
Guggenheim; Evercore ISI; CIBC W orld M arkets; M inkabu; R odman & R enshaw; M oody’s
InvestorServices;andW rightInvestorServices.
364. Asaresultoftheforegoing, themarketforValeant’ssecuritiespromptlydigested
currentinformation regarding Valeantfrom allpublicly available sourcesand reflected such
128
information in the price ofValeantsecurities. Underthese circumstances, allpurchasersof
Valeantsecuritiesduring therelevantperiod suffered similarinjurythrough theirpurchaseof
Valeantsecuritiesatartificiallyinflatedprices, andapresumptionofrelianceapplies.
365. Plaintiffs are also entitled to a presumption ofreliance underAffiliat

ed U te
CitizensofU tah v. U ni
ted States, 406 U.S. 128 (19 72), because the claimsasserted herein
againstD efendantsareprimarilypredicateduponomissionsofmaterialfactforwhichtherewas
adutytodisclose.
366. In addition, Plaintiffs directly relied on D efendants’ false and misleading
statementsallegedhereinwhendecidingtopurchaseValeantsecurities.
367. For example, during the relevantperiod, Plaintiffs engaged Jackson Square
Partners, LLC (“InvestmentM anager”) astheirinvestmentmanagertomanagetheirinvestment
portfoliosand to make investmentdecisionson behalfofPlaintiffs. Throughouttherelevant
period, on behalfofPlaintiffs, the InvestmentM anagerundertook rigorous, security-specific
research to identify companiesthathavesuperiorbusinessmodels, strong cash flowsand the
opportunitytogenerateconsistent,long-term growthofintrinsicbusinessvalue.
368. The InvestmentM anageremployed an analytical, research-based approach to
determinewhethertobuy, sell,and/orholdsecuritiesonbehalfofPlaintiffs. Consistentwiththis
approach, in making investment decisions regarding Valeant on behalf of Plaintiffs, the
InvestmentM anagerreliedonnumeroussourcesofinformation, including: (a) Valeant’spublic
statements, plans, andpressreleases;(b) Valeant’scorporatewebsiteandmaterialspostedonits
website; (c) analystreports and earnings conference calls involving Valeant; (d) Valeant’s
periodic securitiesfilingswith the SEC and the NY SE, including itsForms10-K ; (e) other
129
regulatory filingsand reportsregarding Valeant; and (f) industry conferencesand conference
transcriptsinvolvingValeant.
369 . TheInvestmentM anagercontinuallymonitored thesesourcesofinformation as
they becameavailableto themarket, and incorporated any new relevantinformation into its
valuationoftheCompanyanditssecurities. TheInvestmentM anagerusedthisvaluationasa
key consideration to determinewhetherto purchase, hold, orsellValeantcommon stock on
Plaintiffs’behalf.
370. Forexample, priortomakingthedecisiontopurchaseValeantcommonstockon
behalfofPlaintiffs, theInvestmentM anagerfollowedaprocessbywhichitreadandreviewed
Valeant’spriorSEC filings.
371. Aspartofthisprocess, priortopurchasingValeantcommonstockonbehalfof
Plaintiffs, theInvestmentM anagerread, reviewed, andreliedonValeant’s2013 10-K , including
D efendants’statementsthatthefinancialstatementsthereinwere“preparedinaccordancewith
U.S. generally accepted accounting principles” and that management had performed an
evaluation ofValeant’sinternalcontrolsoverfinancialreporting and ofValeant’sdisclosure
controlsandprocedures, andhadconcludedthatsuchinternalcontrolsoverfinancialreporting
anddisclosurecontrolsandprocedureswereeffectiveasofD ecember31, 2013.
372. The InvestmentM anagercontinued to read and review Valeant’sSEC filings
throughouttheperiodinwhichitpurchasedValeantcommonstockonbehalfofPlaintiffs, and
reliedonthesefilingsinmakingitsdecisionstobuyandholdValeantsecurities. Forexample,
prior to making purchases of Valeantcommon stock on behalf Plaintiffs, the Investment
M anagerread, reviewed, andreasonablyrelieduponValeant’s3Q2014 10-Q, including(a) that
the financialstatements therein were prepared in accordance with U.S. generally accepted
130
accountingprinciples;(b) Valeant’sreportedrevenues;and(c) thattherewerenochangessince
the2013 10-K thatwould havematerially affected Valeant’sinternalcontrolsoverfinancial
reporting.
373. Similarly, the InvestmentM anagerread, reviewed, and reasonably relied upon
Valeant’s2014 10-K inmakingthedecisiontoholdValeantcommonstockandbuyadditional
Valeantcommon stock, including: (a) D efendants’statements thatthe financialstatements
therein were “prepared in accordance with U.S. generally accepted accounting principles”;
(b)Valeant’s reported revenues; and (c) statements that management had performed an
evaluation ofValeant’sinternalcontrolsoverfinancialreporting and ofValeant’sdisclosure
controlsandprocedures, andhadconcludedthatsuchinternalcontrolsoverfinancialreporting
anddisclosurecontrolsandprocedureswereeffectiveasofD ecember31, 2014.
374. Similarly, the InvestmentM anagerread, reviewed, and reasonably relied upon
Valeant’s1Q2015 10-Q, 2Q2015 10-Q, and 3Q2015 10-Q, including thefinancialstatements
contained therein, D efendants’statements thatmanagementhad conducted an evaluation of
Valeant’sdisclosurecontrolsandprocedures, thatsuchdisclosurecontrolsandprocedureswere
effectiveasoftheendoftheapplicableperiod, andthattherehadbeennochangesinValeant’s
internalcontrols over financialreporting that occurred during the applicable period. The
InvestmentM anagercontinued to purchase additionalValeantcommon stock on behalfof
Plaintiffsinrelianceuponthesestatements.
375. The above referenced statements were relevantto the InvestmentM anager’s
decisionsto purchaseValeantcommon stock on Plaintiffs’behalf. Forexample, D efendants’
statements concerning the preparation ofValeant’s financialstatements in accordance with
GAAP wererelevanttotheInvestmentM anager’sdecisionstopurchaseValeantcommonstock
131
onbehalfofPlaintiffs. ThepreparationoffinancialstatementsinaccordancewithGAAPensures
thatthose financialstatements are accurate. Similarly, D efendants’assurances thatValeant
maintained effectiveinternalcontrols, including overfinancialreporting, wererelevantto the
InvestmentM anager’sanalysis, asalackofadequateinternalcontrolswouldhavebeenviewed
asaredflag.
IX. LOSS CAUSATION
376. D uringtherelevantperiod, asdetailedherein, D efendantsengagedinacourseof
conductthatartificiallyinflatedthepriceofValeantsecuritiesandoperatedasafraudordeceit
onthePlaintiffsbymakingthemateriallyfalseandmisleadingstatementsandomissionsrecited
above.
377. D efendants’falseand misleading statementsand materialomissionscaused, or
wereasubstantialcontributingfactor, incausingValeantsecuritiestotradeatartificiallyinflated
pricesbetween January 10, 2015 and M arch 23, 2016, when Plaint
iffs’investmentmanagers
purchased the Valeantsecuritieson theirbehalf. Asa seriesofpartialdisclosurescorrected
D efendants’ statements, the artificial inflation was removed from the price of Valeant’s
securitiesandthepriceofValeantsecuritiesdeclined, causingsubstantialdamagetoPlaintiffs.
378. Each ofthedeclinesdiscussed abovein thepriceoftheValeantsecuritieswas
statisticallysignificantatahighlevelaftertakingintoaccountchangesonthesamedaysinthe
overallsecuritiesmarketandinrelevantindustryindices. Furthermore, assetforthabove, each
ofthe price declines in Valeant’s securities is attributable to the di

sclosure ofpreviously
concealedinformationrelatingtothemateriallyfalseandmisleadingstatementsandomissions
alleged herein. Thetiming and magnitudeofthepricedeclinesnegateany inferencethatthe
lossessufferedbyPlaintiffswerecausedbyotherchangedmarketconditions, macroeconomicor
industryfactors, orCompany-specificfactsunrelatedtotheallegedfraudulentconduct. Asthe
132
truthaboutthefraudwasrevealed, thepriceofValeantsecuritiesdeclined, theartificialinflation
wasremoved, andPlaintiffssuffereddamages.
X. NO SAFE HARBOR
379 . Thestatutorysafeharborprovidedforforward-lookingstatementsundercertain
circumstancesdoesnotapplytoanyoftheallegedlyfalsestatementspleadedinthisComplaint.
Thespecificstatementspleaded herein werenot“forward-looking statements”norwerethey
identifiedas“forward-lookingstatements”whenmade. Norwasitstatedwithrespecttoanyof
thestatementsforming thebasisofthisComplaintthatactualresults“could differmaterially
from thoseprojected.”Totheextenttherewereanyforward-lookingstatements, therewereno
meaningfulcautionarystatementsidentifyingimportantfactorsthatcouldcauseactualresultsto
differmateriallyfrom thoseinthepurportedlyforward-lookingstatements. Alternatively, tothe
extentthatthe statutory safe harbordoes apply to any forward-looking statements pleaded
herein, D efendantsareliableforthosefalseforward-lookingstatementsbecauseatthetimeeach
ofthoseforward-lookingstatementswasmade, theparticularspeakerknew thattheparticular
forward-looking statementwas false, and/or the forward-looking statementwas authorized
and/orapprovedbyanexecutiveofficerofValeantwhoknew thatthosestatementswerefalse
whenmade.
XI. DAMAGES
380. Asdescribed herein, D efendantsengaged in theEnterpriseto personally enrich
individualmembersand to artificially inflatethepriceofValeantsecurities. Pursuantto that
scheme, D efendantsmadenumerousfalseandmisleadingstatementsandomissionsconcerning
materialinformationaboutValeant,Philidor, andothermembersoftheEnterprise. Thisunlawful
courseofconduct, andspecificallytheEnterprise’smisinformationcampaign, hadtheeffectof
133
artificiallyinflatingthepriceofValeantsecuritiesandcausingValeantNotesandcommonstock
totradeatinflatedvaluesatallrelevanttimespriortoexposureoftheEnterpriseanditsscheme.
381. D efendants’ materially false and misleading statements and omissions in
furtheranceoftheEnterprise’sschemewerehighlymaterialtoinvestorsinValeantsecurities.
382. Specifically, the Enterprise executed a misinformation campaign, which
purposely concealed Valeant’s fundamentalbusiness modeland falsely attributed Valeant
performance to having a valuable portfolio ofdrugs, increased sales volume, and superior
marketing capabilitiesratherthan discloseValeant’struebusinessmodel, which consisted of
acquisitionsofdrugs, price-gougingofthosedrugs, andthendeceptiveandillegalsalespractices
toensuresalesofthosedrugs. ThesematterswerematerialtoinvestorsbecauseValeant’strue
businessmodelwasinfactinherentlyflawed, unsustainable, andrepugnant.
383. D efendants’ unlawfulcourse of conductunder the Enterprise’s scheme, and
specificallythemisinformationcampaign, areparticularlyegregiousbecauseValeantinvestors
necessarilyexperienceaninformationdeficitconcerningtheinternalworkingsofValeant, and
they musttherefore depend upon Valeantand its agents to fully and truthfully represent
information aboutthecompany, itsoperations, and otherfactorsthatimpactthevalueofit

s
securities. PlaintiffsplacedsubstantialtrustinValeantandothermembersoftheEnterpriseto
perform theirroles in good faith, and D efendants’breaches ofPlaintiffs’trustthrough the
Enterprise’smisinformation campaign and otherunlawfulconductarethushighly materialto
investors.
384. The materiality ofD efendants’misinformation campaign is evidenced by the
inflatedpriceatwhichValeantsecuritiesweretradingduringthemisinformationcampaign, as
comparedwiththemassivelyreducedpricesthatValeantsecuritiestradedforaftertheEnterprise
134
wasexposed, andthemarketreactedtotherevelationofValeant’struebusinessmodel, itsprice
gouging, anddeceptiveandillegalsalespractices.
385. AsaresultoftheD efendants’participationintheEnterprise’sfraudulentscheme,
and the misinformation campaign executed in connection therewith, atallrelevanttimes,
Plaintiffs, and allotherValeantinvestors, invested in Valeantsecuritiesatpriceswhich were
artificiallyinflated. Valeantsecuritieswouldnothavetradedattheinflatedpricesthattheydidif
D efendantshad disclosed to investorsthe true nature ofValeant’sbusinessmodel. Thus, i

n
relianceon D efendants’and theEnterprise’smaterially misleading misinformation campaign,
PlaintiffspurchasedValeantsecuritiesatsignificantlyhigherpricesthantheactualvalueofthose
securities.
386. H ad Plaintiffsknown thetruth hidden by theD efendants’and theEnterprise’s
misinformationcampaign, theywouldnothavepurchasedValeantsecuritiesatthepricesthey
did. Indeed, Plaintiffsmay nothave invested in Valeantatallin the face ofthe inherently
unsustainableandriskybusinessmodelonwhichValeantwastrulyoperating.
387. W hen the Enterprise’sfraudulentscheme wasexposed, and the true nature of
Valeant’sunsustainableandriskybusinessmodelwasexposed, thevalueofValeantsecurities
plummeted over9 0%, wiping outtensofbil

lionsofdollarsin value, and causing enormous
lossestoPlaintiffsandotherValeantinvestors.
388. Accordingly, D efendants’participationintheEnterprise’sfraudulentscheme, and
themisinformationcampaign, materialmisrepresentations, andomissionsexecutedinconnection
therewith, weretheproximatecausesofthedamagesPlaintiffshavesustainedinconnectionwith
itsinvestmentsinValeantsecurities.
135
XII. CAUSES OF ACTION
COUNT I
RACKETEERING IN VIOLATION OF N.J. STAT. ANN. 2C:41-2(c)

(Against all Defendants)
389 . Plaintiffsrestateeachandeveryallegationof¶¶1–388 asiffullysetforthherein.
39 0. D efendantsarepersonswithinthemeaningofN.J. STAT. A NN. 2C:41-1(b).
39 1. D efendants comprise an association, associations and or/are associated-in-fact
Enterprise asthose termsare defined in N.J. STAT. A NN. 2C:41-1(c). The Enterprise hasan
existencebeyond thatwhich ismerely necessary to commitpredicateactsand, among other
things, oversaw and coordinated the commission ofnumerouspredicate actson an on-going
basisinfurtheranceoftheschemeandeffortstoconcealthescheme, eachofwhichcauseddirect
injury to Plaintiffs. TheEnterprisewasoperated, managed, and controlled by, among others,
Valeant,Pearson, Schiller, R osiello, Carro, Philidor, Andrew D avenport,andPwC.
39 2. D uringtherelevantperiod, D efendantsagreedtoconductandparticipatein, and
conductedandparticipatedin, theEnterprise’sschemethroughapatternofracketeeringactivity
withinthemeaningofN.J. STAT. A NN. 2C:41-1(d). D efendants’conductinvolvedmorethantwo
incidentsofracketeering conduct, and thereforeconstituted a pattern ofracketeering activity
within the meaning ofN.J. STAT. A NN. 2C:41-1(d)(1). This pattern consisted ofrepeated,
continuousincidentsofracketeering activity thathad the same orsimilarpurposes, results,
participants, victims, or methods of commission, and are interrelated by distinguishing
characteristics rather than isolated incidents within the meaning of N.J. STAT. A NN.
2C:41-1(d)(2).
39 3. It was the purpose of the Enterprise to create and disseminate false and
misleadingstatementsandinformationconcerningValeantanditsoperations, withtheobjective
136
ofmisleadinginvestors, includingPlaintiffs, and profitingbythatconductthrough thesaleof
publicly-traded Valeantsecurities, which were inflated to unjustifiable prices. Thisextensive
market-manipulation scheme was intended to, and did, provide substantial profits to the
Enterprise’smembersandcausedenormousharm toPlaintiffs. TheEnterpriseoperatedbythe
D efendantsachievedtheseobjectivesbytheconductofracketeeringactivity, including, among
otherconduct:
(a) astronomicalpricegouging;
(b) creating anationwidenetwork ofsecretcaptivepharmaciesdesigned to
concealtheEnterprise’seffortstoensuresalesofValeant’sprice-gougeddrugs;
(c) employingdeceptiveandillegalpracticesinthefillingofprescriptionsand
seekingofreimbursementsfrom insurerstoensuresalesof, andreimbursementsfor, Valeant’s
price-gougeddrugs;
(d) misleadingpatients, doctors, insurersandotherendpayorstoensuresales
ofValeant’sprice-gougeddrugs;
(e) misleading the investing public asto the nature ofValeant’sbusiness
model,itscurrentoperations, anditsfutureprospects;and
(f) committingaccountingfraudandotherviolationsofGAAP andGAAS in
furtheranceoftheEnterprise’scommongoalofinflatingthepriceofValeantsecurities.
39 4. TheD efendantsknowingly and intentionally participated in theconductofthe
Enterprise, andtheentitiesandenterprisesassociatedwiththeEnterprise, directlyandindirectly
throughapatternofracketeeringactivity, includingbycommitting, amongothers, thefollowing
predicateacts:
137
(a) fraudintheoffering, sale, andpurchaseofsecuritiesinviolationofN.J.
STAT. A NN. 49 :3-71 and 15 U.S.C. §§ 78jand 78ff, and 17 C.F.R . § 240.10b-5, which are
incorporatedasracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(1)(p);
(b) useofthewiresinUnitedStatesorforeigncommercetocommitafraudin
violationof18 U.S.C. §1343, whichisincorporatedas“racketeeringactivity”undertheNew
JerseyR ICO statutepursuanttoN.J. STAT. A NN. 2C:41-1(a)(2);
(c) useofthemailsintheUnitedStatestocommitafraudinviolationof18
U.S.C. § 1341, which is incorporated as “racketeering activity” under N.J. STAT. A NN.
2C:41-1(a)(2);
(d) fraudulent concealment of racketeering activity and other fraudulent
practices, includingnumerousfalseandmisleadingstatementsandomissionsforthepurposeof
promotingthesaleofsecuritiesinviolationofN.J. STAT. A NN. 2C:21-7(i), whichisincorporated
asracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(1)(o);
(e) use, control,andoperationofValeantandPhilidor, amongothercorporate
entitiesin furtherance and promotion ofcriminalobjectivesin violation ofN.J. STAT. A NN.
2C:21-9 (c), which is incorporated as racketeering activity under N.J. STAT. A NN.
2C:41-1(a)(1)(o);
(f) perpetrationofanillegalkickbackschemeinviolationofN.J. STAT. A NN.
2C:21-10, whichisincorporatedasracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(1)(o);
(g) money laundering in violation ofN.J. STAT. A NN. 2C:21-25, which is
incorporatedasracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(1)(o), andinviolationof
18 U.S.C. § 19 56, whi

ch is incorporated as racketeering activity under N.J. STAT. A NN.
2C:41-1(a)(2);
138
(h) interstatetravelortransportationinaidoftheEnterpriseinviolationof18
U.S.C.A. § 19 52, which is incorporated as racketeering activity under N.J. STAT. A NN.
2C:41-1(a)(2);and
(i) illegalmonetarytransactionsin violation of18 U.S.C. § 19 57, which is
incorporatedasracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(2).
39 5. Assetforthherein, beginningatleastasearlyasJanuary2013, aspartoftheir
patternofracketeeringactivitiesandinfurtheranceofandtoassisttheirmanipulativescheme,
each of the D efendants knowingly, willfully, and unlawfully made misrepresentations or
omissionsofmaterialfactforthepurposeofimproperlyinflatingthepriceofValeantsecurities
by misleading Plaintiffs and the investing public concerning Valeant’s business modeland
sustainability, engaging in massive, improperprice-gouging and deceptive and illegalsales
practices, misleadingpatients, doctors, andinsurersandotherendpayorstoensuresalesofand
reimbursementforValeantproducts, creatinganddisseminatingfalseandmisleadingreportsand
information concerning Valeant’s performance, including by committing accounting fraud,
amongotherfraudulentconduct, allfortheunlawfulpurposeofinducinginvestorstobuyand
ownValeantsecuritiesatever-risingprices. Suchactionswereintendedto, anddid, constitute
falsestatementsofmaterialfactand/oromissionsofmaterialfact,onwhichD efendantsintended
forPlaintiffsandtheinvestingpublictorely, andonwhichPlaintiffsandtheinvestingpublic
reasonablyreliedinelectingtopurchaseandownValeantsecurities, whichtheywouldnothave
donebutforD efendants’fraudulentconduct. Suchmisrepresentationsandomissions, constitute
securitiesfraud in violation ofN.J. STAT. A NN. 49 :3-70 and N.J. STAT. A NN. 2C:2-6, which
conductindependently constitutes violations of15 U.S.C. §§ 78jand 78ff, and 17 C.F.R .
§240.10b-5.
139
39 6. As setforth herein, in furtherance ofand forthe purpose ofexecuting and
attemptingtoexecutetheEnterprise’sscheme, eachoftheD efendants, onnumerousoccasions,
used and caused to beused wirecommunicationsin interstateand foreign commerceand the
U.S. mailsbybothmakingandcausingtobemadewirecommunicationsandmailings. These
wirecommunicationsand mailingswere made, among otherreasons, forthepurposesof(i)
communicating with one another to effectuate the dissemination of false and misleading
statementsandinformationnecessarytoperpetratetheEnterprise’sschemetoimproperlyinflate
thepriceofValeantsecurities, and harm Plaintiffs, among otherinvestors, (ii)disseminating
falseandmisleadingstatementsandinformationconcerningtheValeantbusinessmodelandthe
correspondingvalueofValeantsecurities;and(iii)coordinatingtheirmanipulationofthemarket
forValeantsecurities. These false wire communications caused directinjury to Plaintiffs’
businessesandproperty.
39 7. Each use of a wire communication and/or mailing as described herein in
connection with the Enterprise’sscheme constitutesa separate and distinctviolation ofN.J.
STAT. A NN. 2C:41-1(a)(2), by virtue of violating the incorporated federal predicate acts
proscribed by 18 U.S.C. §§ 1341 and/or1343. The D efendantsused the wiresand mailsto
perpetrate their fraudulent scheme and to disseminate the fraudulent statements and
misinformation concerning Valeant’sbusinessmodeland thevalueofValeantsecurities, and
eachcauseddirectinjurytoPlaintiffs’businessandproperty.
39 8. D efendants also spoke on the phone and used electronic mailand U.S. mail
regularlytoconducttheactivitiesoftheEnterprise, causingdirectinjurytoPlaintiffs. Thetotal
numberofphonecalls, e-mails, and mailings, isnotyetknown, noraretheidentitiesofall
140
Enterprisemembers, buteachsuchcall,e-mail,andU.S. mailingasdescribedhereinconstitutes
aseparatemailorwirecommunicationinfurtheranceoftheEnterprise’sfraudulentscheme.
39 9 . Assetforthherein, throughoutthedurationoftheEnterprise’sfraudulentscheme,
from receiptofthefirstill-gottenproceedsoftheEnterprise, D efendantshavetransportedand/or
possessed property they knew orreasonably should have believed to be derived from their
criminalactivity. In furtheranceoftheEnterprise, D efendantsengaged in myriad transactions
involvingtheproceedsoftheirfraudulentscheme, propertythatD efendantsknew orreasonably
should havebelieved to bederived from criminalactivity, with theintentto facilitateand/or
promotethecriminalactivityunderlyingtheEnterpriseandwithknowledgethatthetransactions
weredesignedinwholeorinparttoconcealordisguisethenature, location, source, ownership
orcontrolofsuch proceedsand/orto avoid reporting requirementsunderlaw. In addition to
participating directly in this misconduct, D efendants directed, organized, financed, planned,
managed, supervised, and/orcontrolledsuchconduct.Thisconductconstitutesmoneylaundering
inviolationofN.J. STAT. A NN. 2C:21-25, whichisincorporatedasracketeeringactivityunder
N.J. STAT. A NN. 2C:41-1(a)(1)(o), andinviolationof18 U.S.C.A. §19 56, whichisincorporated
asracketeeringactivityunderN.J. STAT. A NN. 2C:41-1(a)(2).
400. D efendantsmadenumerousfalseandmisleadingwrittenstatementsintheform of
pressreleases, proxystatements, annualreports, andsecurityfilingswithregulatoryagencies, for
thepurposeofpromotingthesaleofsecurities, andomittedinformationrequiredbylaw tobe
disclosedinwrittendocumentsrelatingtothosesecurities. Thisconductconstitutesfraudulent
concealmentofracketeeringactivityandotherfraudulentpractices, includingthemakingoffalse
andmisleadingstatementsandomissionsforthepurposeofpromotingthesaleofsecuritiesin
141
violationofN.J. STAT. A NN. 2C:21-7(i), whichisincorporatedasracketeeringactivityunderN.J.
STAT. A NN. 2C:41-1(a)(1)(o)and(p).
401. InfurtheranceoftheEnterprise, D efendantstraveledininterstateand/orforeign
commerceandusedthemailandotherfacilitiesininterstateorforeigncommercetopromote,
manage, establish, carryon, orfacilitatethepromotion, management, establishment, orcarrying
on, oftheunlawfulactivitiesunderlyingtheEnterprise, assetforthherein. Specifically, asset
forth above, D efendantstravelled between Valeant’sheadquartersin New Jerseyto Philidor’s
officesin Pennsylvania, among otherstatesin the United Statesto facilitate acquisitionsof
pharmaceuticalcompaniesand/orpharmaciestofacilitateandexpandtheEnterprise’sfraudulent
scheme. Likewise, as setforth above, D efendants employed the mailin furtherance ofthe
Enterprise’sfraudulentscheme. Thisconductconstitutesinterstatetravelortransportationinaid
ofthe Enterprise in violation of18 U.S.C.A. § 19 52, which isincorporated asracketeering
activityunderN.J. STAT. A NN. 2C:41-1(a)(2).
402. D efendantshave knowingly engaged and/orattempted to engage in monetary
transactionsincriminallyderivedproperty, includingtheproceedsoftheEnterprise’sfraudulent
scheme, ofavaluegreaterthan$10,000 withintheUnitedStates, whichwasderivedfrom the
unlawfulactivitiessetforth herein. Thisconductconstitutesillegalmonetary transactionsin
violationof18 U.S.C. §19 57, whichisincorporatedasracketeeringactivityunderN.J. STAT.
A NN. 2C:41-1(a)(2).
403. Each ofthepredicateactsreferred to in thepreceding paragraphswasforthe
purpose of executing the Enterprise’s fraudulent scheme, and D efendants and Enterprise
membersengagedinsuchactswiththespecifici
ntentoffurtheringthatscheme, willfullyand
142
with knowledge ofits illegaland fraudulentnature. Each ofthe D efendants performed or
participatedintheperformanceofatleasttwoofthepredicateactssetforthherein.
404. Theconductandactionssetforthhereinwererelatedtoeachotherbyvirtueof
common participants, common victims, common methods, and the common purpose and
commonresultofaconcertedcampaignofmisinformationconcerningValeant’struebusiness
model, growthstrategy, andsalespracticestoartificiallyinflatethevalueofValeantsecurities
andenrichthemembersoftheEnterprisetotheharm anddetrimentofPlaintiffs, amongother
investors. TheD efendants’activitieswereinterrelated, notisolated, and involved acalculated
seriesofrepeated violationsofthelaw in orderto conduct, conceal, and promotefraudulent
activity. TheEnterpriseexistedwiththemembersidentifiedhereinandothersyetunknownsince
atleast2008, andtheconductandactivitiescontinuedthroughatleastO ctober2015.
405. The D efendants’willfuland knowing directand indirectparticipation in the
Enterprise’saffairsthroughthepatternofracketeeringandactivitydescribedhereinconstitutesa
violationofN.J. STAT. A NN. 2C:41-2(c).
406. TheseviolationsofN.J. STAT. A NN. 2C:41-2(c) causedPlaintiffstosufferdirect
injury to theirbusinessand property through massivelossesin investmentopportunitiesand
gains, and feesand expenses, caused by the Enterprise’swrongfulactionsdescribed herein.
Plaintiffs, therefore, areentitledtorecoverfrom theD efendantstheamountinwhichtheyhave
been damaged, to be trebled in accordance with N.J. STAT. A NN. 2C:41-4(c), togetherwith
interestandthecostsofthissuit,includingreasonableattorneys’fees.
COUNT II
RACKETEERING IN VIOLATION OF N.J. STAT. ANN. 2C:41-2(d)

407. Plaintiffsrestateeachandeveryallegationof¶¶1–388 asiffullysetforthherein.
143
408. Beginning as early as January 2013, the D efendants and allmembers ofthe
Enterprise agreed to facilitatetheschemedescribed herein to manage, operate, conduct, and
participateintheconductoftheaffairsoftheEnterpriseandconspiredtodothesamewithinthe
meaningofN.J. STAT. A NN. 2C:5-2 throughapatternofracketeeringactivitywithinthemeaning
ofN.J. STAT. A NN. 2C:41-2(d).
409 . EachoftheD efendantsandenterprisemembersbeingpersonsintimatelyinvolved
inthetransactionscarriedonbyandtheaffairsoftheEnterprise— whichwasengagedin, andthe
activities of which affected, trade and commerce— unlawfully and willfully conspired,
confederated, and agreed with each otherto vi

olate N.J. STAT. A NN. 2C:41-2(c), thatis, to
conductandparticipate, directlyandindirectly, intheconductoftheaffairsoftheEnterprise,
throughapatternofracketeeringactivity, allinviolationofN.J. STAT. A NN. 2C:41-2(d).
410. PartoftheconspiracywasthateachD efendantpersonallycommittedoragreedto
committwo ormore fraudulentand illegalracketeering acts and conducted and agreed to
conducttheaffairsoftheEnterprisethroughthepatternofracketeeringinviolationofN.J. STAT.
A NN. 2C:41-2(c)describedabove.
411. TheseviolationsofN.J. STAT. A NN. 2C:41-2(c) causedPlaintiffstosufferdirect
injury to theirbusinessand property through massivelossesin investmentopportunitiesand
gains, and feesand expenses, caused by the Enterprise’swrongfulactionsdescribed herein.
Plaintiffs, therefore, areentitledtorecoverfrom theD efendantstheamountinwhichtheyhave
been damaged, to be trebled in accordance with N.J. STAT. A NN. 2C:41-4(c), togetherwith
interestandthecostsofthissuit,includingreasonableattorneys’fees.
144
COUNT III
AIDING AND ABETTING RACKETEERING IN VIOLATION OF

N.J. STAT. ANN. 2C:41-2(c) AND (d)
413. D efendantsaided and abetted theEnterprisein executing itsfraudulentscheme
and racketeeringactsin violation ofN.J. STAT. A NN. 2C:41-2(c) and (d) alleged herein. PwC
pursuedacommonplananddesign, andactivelyparticipatedin, aidedandencouragedtheother
EnterprisemembersinexecutingapatternofracketeeringactivityasdefinedinN.J. STAT. A NN.
2C:41-1 andinviolatingnumerousprovisionsoftheNew JerseyR ICO Actasallegedherein.
414. D efendantswillingly, andsubstantiallyparticipatedintheEnterprise’sfraudulent
scheme with knowledge ofthe numerous violations ofthe New Jersey R ICO Actand the
underlyingpatternofracketeeringactivityperpetratedbytheEnterprise.
415. PlaintiffswereinjuredasadirectandproximateresultofD efendant’saidingand
abettingtheEnterprise’sviolationsoftheNew JerseyR ICO Actallegedherein.
COUNT IV
VIOLATIONS OF SECTION 10(b) OF THE SECURITIES EXCHANGE ACT OF 1934

AND RULE 10b-5
417. Thisclaim isbroughtbyPlaintiffsagainstallD efendantsforviolationsofSection
10(b)oftheExchangeAct,15 U.S.C. §78j(b), andR ule10b-5 promulgatedthereunder.
418. D uringtherelevantperiod, D efendantsdisseminatedorapprovedthematerially
falseandmisleadingstatementsspecifiedabove, whichtheyknew orrecklesslydisregardedwere
misleadinginthattheymisrepresentedoromittedmaterialfactsnecessaryinordertomakethe
statementsmade, inlightofthecircumstancesunderwhichtheyweremade, notmisleading.
145
419 . D efendantsviolated Section 10(b) oftheExchangeActand R ule10b-5 in that
they: (a) employed devices, schemesand artificesto defraud; (b) made untruestatementsof
materialfactsoromittedtostatematerialfactsnecessaryinordertomakethestatementsmade,
inlightofthecircumstancesunderwhichtheyweremade, notmisleading;or(c)engagedinacts,
practicesandacourseofbusinessthatoperatedasafraudordeceituponPlaintiffsrelatedtothe
purchaseand/oracquisitionofValeantsecurities.
420. In addition to thedutiesoffulldisclosureimposed on theD efendantsby their
affirmativefalseand misleading statementsto thepublic, D efendantshad aduty underSEC
R egulationsS-X (17 C.F.R . §210.1, etseq.) andS-K (17 C.F.R . §229 .10, etseq.) topromptly
disseminate truthfulinformation with respectto Valeant’s operations and performance that
would bematerialto investorsin compliancewith theintegrated disclosureprovisionsofthe
SEC, includingwithrespecttotheCompany’srevenueandearningstrends, sothatthemarket
prices of the Company’s securities would be based on truthful, complete, and accurate
information.
421. As a directand proximate cause ofD efendants’wrongfulconduct, Plaintiffs
suffered damagesin connection with theirpurchasesand acquisitionsofValeantsecuritiesin
domestic transactionsduring the relevantperiod. In reliance on the integrity ofthe market,
PlaintiffspaidartificiallyinflatedpricesforValeantsecuritiesandexperiencedlosseswhenthe
artificialinflation was removed from the securities as a resultofthe revelations and price
declinesdetailedherein. PlaintiffswouldnothavepurchasedoracquiredValeantsecuritiesatthe
pricesthey paid, oratall, ifthey had been awarethatthosepriceshad been inflated by the
ValeantD efendants’misleadingstatementsandomissions.
146
422. Byvirtueoftheconductalleged herein, D efendantshaveeach violated Section
10(b)oftheExchangeActandR ule10b-5 promulgatedthereunder, andareliabletoPlaintiffs.
COUNT V
VIOLATIONS OF SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934

(Against Defendants Valeant, Pearson, Schiller, and Rosiello)
423. Plaintiffsrepeatand reallege each and every allegation contained in ¶¶ 1–388
above as ifsetforth herein. As to this Cause ofAction, Plaintiffs expressly disclaim any
allegationoffraudorintentionalmisconduct.
424. Asalleged above, D efendantsValeant, Pearson, Schiller, and R osiello filed or
caused to befiled with theSEC documentsregarding Valeantthatcontained misrepresented
materialfactsandomittedmaterialfactsnecessaryinordertomakethest
atementsmade, inlight
ofthecircumstancesunderwhichtheyweremade, notmisleading.
425. Asalleged herein, D efendantsValeant, Pearson, and Schillercaused (atleast
negligently) statementsto bemadein Valeant’s2013 10-K , including statementsconcerning
preparationoffinancialstatementsinaccordancewithGAAP, whichstatementswere, atthetime
andinlightofthecircumstancesunderwhichtheyweremade, falseormisleading.
426. Asalleged herein, D efendantsValeant, Pearson, and Schillercaused (atleast
negligently) statementsto bemadein Valeant’s2014 10-K , including statementsconcerning
preparation offinancialstatementsin accordance with GAAP, the revenuesreported forthe
quarterandyearendedD ecember31, 2014, andtheeffectivenessofValeant’sinternalcontrols
overfinancialreportingandofValeant’sdisclosurecontrolsandprocedures, whichstatements
were, atthe time and in lightofthe circumstances underwhich they were made, false or
misleading.
147
427. Asalleged herein, D efendantsnamed in thiscountcaused (atleastnegligently)
statementstobemadeinValeant’s3Q2014 10-Q, 1Q2015 10-Q, 2Q2015 10-Q and/or3Q2015
10-Q, including statementsconcerning thelack ofchangesin Valeant’sinternalcontrolsover
financialreportingandtheeffectivenessofValeant’sdisclosurecontrolsandprocedures, which
statementswere, attheti
meandinl
ightofthecircumstancesunderwhichtheyweremade, false
ormisleading.
428. In purchasing Valeant’s securities, Plaintiffs’ investment managers read,
reviewed, andreliedonValeant’s2013 10-K , 2014 10-K , 3Q2014 10-Q, 1Q2015 10-Q, 2Q2015
10-Q and3Q2015 10-Q.
429 . Specifically, Plaintiffs’ InvestmentM anager read, reviewed, and relied upon
information contained in Valeant’s 2013 10-K , 2014 10-K , 3Q2014 10-Q, 1Q2015 10-Q,
2Q2015 10-Q and3Q2015 10-Q (totheextenteachsuchdocumentwasonfilewiththeSEC at
thetime)inmakingeachpurchaseonbehalfofPlaintiffs, asdescribedabovein¶¶366–75.
430. H adtheyknownthetruefacts, PlaintiffswouldnothavepurchasedtheValeant
securitiesand/orwouldnothavepurchasedthem attheinflatedpricestheypaid.
431. Upon disclosureofthetruefacts, thepriceofValeantsecuritiesdropped, and
Plaintiffssuffereddamagesinanamounttobeprovenattrial.
432. Byreasonoftheforegoing, D efendantsValeant, Pearson, Schiller, andR osiello
areliabletoPlaintiffsforviolationsofSection18 oftheExchangeAct,15 U.S.C. §78r.
COUNT VI
VIOLATIONS OF SECTION 20(a) OF THE SECURITIES EXCHANGE ACT OF 1934

(Against Defendants Pearson, Schiller, and Rosiello)
433. Plaintiffsrepeatandreallegeeachand everyallegationin¶¶1–388 aboveasif
fullysetforthherein.
148
434. This claim is broughtby Plaintiffs againstD efendants Pearson, Schiller, and
R osielloforviolationofSection20(a)oftheExchangeAct,15 U.S.C. §78t(a).
435. D uringtheirtenuresasofficersand/ordirectorsofValeant, Pearson, Schiller, and
R osiello were controlling persons of Valeantwithin the meaning of Section 20(a) of the
ExchangeAct.Byreasonoftheirpositionsofcontrolandauthorityasofficersand/ordirectorsof
Valeant,theseD efendantshadthepowerandauthoritytocauseValeanttoengageintheconduct
complainedofherein. TheseD efendantswereableto, anddid, control, directlyandindirectly,
the decision-making ofValeant, including the contentand dissemination ofValeant’spublic
statementsandfilingsdescribedherein, therebycausingthedisseminationofthemateriallyfalse
andmisleadingstatementsandomissionsasallegedherein.
436. Intheircapacitiesasseniorcorporateofficersand/ordirectorsofValeant, andas
morefullydescribedherein, Pearson, Schiller, andR osielloparticipatedinthemisstatementsand
omissionssetforth above. These D efendantshad directand supervisory involvementin the
day-to-day operationsofthe Company, and had accessto non-public information regarding
Valeant’sdeceptiveandriskybusinesspractices. Pearson, Schiller, andR osiellohadtheability
to influence and directand did so influence and directthe activitiesofeach ofthe Valeant
D efendantsintheirviolationsofSection10(b)oftheExchangeActandR ule10b-5.
437. Asa result, Pearson, Schiller, and R osiello indi

vidually and asa group, were
controlpersonswithinthemeaningofSection20(a)oftheExchangeAct.
438. Assetforthabove, ValeantviolatedSection10(b) oftheExchangeAct. Byvirtue
oftheirpositionsascontrollingpersons, andasaresultoftheiraforesaidconductandculpable
participation, Pearson, Schiller, andR osielloareliablepursuanttoSection20(a)oftheExchange
Act,jointlyandseverallywith, andtothesameextentasValeantisliabletoPlaintiffs.
149
439 . By reason ofthe foregoing, Valeant, Pearson, Schiller, and R osiello violated
Section20(a)oftheExchangeAct,15 U.S.C. §78t(a), andareliabletoPlaintiffs.
COUNT VII
COMMON LAW FRAUD / FRAUDULENT INDUCEMENT

440. Plaintiffsrestateand reallegeeach allegation in ¶¶1–388 aboveasiffully set
forthherein.
441. ThiscountisagainsttheValeantD efendantsforpurchasesofValeantsecurities.
442. EachoftheD efendantsmade, authorized, orcausedtherepresentationsatissue,
whichareidentifiedandsummarizedabove.
443. The materialrepresentationssetforth above were fraudulent, and D efendants’
representationsfraudulentlyomittedmaterialstatementsoffact.
444. EachoftheD efendantsknew orrecklesslydisregardedthattheirrepresentations
and omissions were false and/ormisleading atthe time they were made. Each made the
misleadingstatementswithanintenttodefraudPlaintiffs.
445. The D efendantshad reason to expectthatPlaintiffswere among the classof
personswhowouldreceiveandrelyonsuchrepresentations, andintendedthattheirmisleading
statementswouldinducePlaintiffstopurchaseValeantsecurities.
446. Plaintiffs justifiably relied on the D efendants’ false representations and
misleadingomissionsinpurchasingValeantsecurities.
447. H ad Plaintiffs known t

he true facts regarding Valeant’s business as setforth
above, theywouldnothavepurchasedValeantsecuritiesatthepricestheyhad.
448. Asaresultoftheforegoing, Plaintiffshavesuffereddamagesinanamounttobe
provenattrial.
150
COUNT VIII
NEGLIGENT MISREPRESENTATION
(Against the Valeant Defendants)
449 . Plaintiffsrepeatand reallege each and every allegation contained in ¶¶ 1–388
above as ifsetforth herein. As to this Cause ofAction, Plaintiffs expressly disclaim any
allegationoffraudorintentionalmisconduct.
450. ThiscountisagainsttheValeantD efendantsforpurchasesofValeantsecurities.
451. The Valeant D efendants authorized or caused the representations and/or
omissionssetforthabove.
452. TheValeantD efendantssuppliedfalseinformationforusebyPlaintiffsinmaking
aninvestmentdecision.
453. TheValeantD efendantsmademisrepresentationsthattheyknew, orshouldhave
known, tobefalseinordertoinducePlaintiffstopurchaseValeantsecurities.
454. TheValeantD efendantsbreachedtheirdutytoexercisereasonablecareinmaking
thesemisrepresentationstoPlaintiffs.
455. M oreover, the ValeantD efendantshad a duty to disclose certain information
concerning Philidor. The ValeantD efendantsbreached thatduty by failing to disclose such
information.
456. PlaintiffsreasonablyreliedontheinformationtheValeantD efendantsprovided
and weredamaged asaresultofthesemisrepresentationsand omissions. Plaintiffswould not
havepurchasedValeantsecuritiesatall, orattheinflatedpricestheypaid, hadtheyknownthe
truefactsregarding, interalia, Valeant’sreportedrevenues, andtheeffectivenessofValeant’s
internalcontrolsoverfinancialreportinganditsdisclosurecontrolsandprocedures.
151
457. By reason oftheforegoing, theValeantD efendantsareliableto Plaintiffsfor
negligentmisrepresentation.
458. As a direct and proximate result of the Valeant D efendants’ negligent
misrepresentations, Plaintiffshavesuffereddamagesinanamounttobeprovenattrial.
XIII. PRAYER FOR RELIEF
W H ER EFO R E, Plaintiffsprayforreliefandjudgmentasfollows:
A. AwardingPlaintiffscompensatorydamagesinanamounttobeprovenattrialfor
allinjuries sustained as a resultof D efendants’ wrongdoing, including pre-judgmentand
post- judgmentinterest,andtrebledasallowedbylaw;
B. Awarding Plaintiffsextraordinary, injunctive and/orequitable relief, including
rescission, as appropriate, in addition to any otherreliefthatis justand properunderthe
circumstances;
C. Awarding Plaintiffstheirreasonablecostsand expensesincurred in thisaction,
includingcounselfeesandexpertfees;and
D. AwardingsuchotherreliefasthisCourtmaydeem justandproper.
XIV. JURY DEMAND
Plaintiffsherebydemandatrialbyjuryforallissuessotriable.
152
D ated: September28, 2017 R espectfullysubmitted,
KASOWITZ BENSON TORRES LLP LABATON SUCHAROW LLP
s/StephenW . Tountas s/SerenaP. H allowell
StephenW . Tountas SerenaP. H allowell(prohacviceforthcoming)

O neGatewayCenter JonathanGardner(prohacviceforthcoming)
Suite2600 EricJ. Belfi(prohacviceforthcoming)
Newark, NJ07102 ThomasW . W atson(prohacviceforthcoming)
Tel: (9 73)645-9 462 140 Broadway
Fax: (9 73)643-2030 New Y ork, NY 10005
stountas@ kasowitz.com Tel: (212)9 07-0700
Fax: (212)818-0477
LocalCounselforPlainti
ffs jgardner@ labaton.com
shallowell@ labaton.com
ebelfi@ labaton.com
twatson@ labaton.com
CounselforPlaintif
fs
153

Cefort Cefort Cefort Cefort: United States District Court District of New Jersey

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Case 3:17-cv-07636-MAS-LHG Document 1 Filed 09/28/17 Page 1 of 158 PageID: 1

StephenW . Tountas SerenaP. H allowell(prohacviceforthcoming)

UNITED STATES DISTRICT COURT

II. JUR ISD ICTIO N AND VENUE ......................................................................................... 6

III. PAR TIES ............................................................................................................................ 6

IV. TH E ENTER PR ISE ............................................................................................................ 9

A. Valeant’sD eceptiveBusinessM odel................................................................... 21

4. TheEnterpriseEnsuresSalesO fPrice-GougedD rugsBy

5. ThroughPhilidor, TheEnterpriseCreatesA NationalNetworkO f

C. TheEnterprise’sM aterialM isrepresentationsAndO missions............................ 47

1. TheEnterpriseFalselyAttributedValeant’sR apidR evenue

3. M isrepresentationsR elatedtotheM anipulationofR evenue

(a) ValeantM ateriallyO verstatesItsR eportedR evenue................... 72

6. PwC’s2014 AuditO pini

7. D efendants’ContinuedM isstatementsandO missionsasthe

VI. TH E SCH EM E’S CO NNECTIO NS TO NEW JER SEY ............................................... 109

VII. SUM M AR Y O FD EFEND ANTS’SCIENTER ............................................................. 110

A. TheIndividualD efendants’R oleinValeant’sUnsustainableBusinessM odel. 111

B. IndividualD efendants’ControlofPhilidor........................................................ 114

C. Valeant’sR efusaltoPursueR emediesAgainstW rongdoers............................. 120

D. ExecutiveD epartures.......................................................................................... 121

VIII. R ELIANCE ..................................................................................................................... 127

IX. LO SS CAUSATIO N....................................................................................................... 132

X. NO SAFE H AR BO R ...................................................................................................... 133

XI. D AM AGES..................................................................................................................... 133

XII. CAUSES O FACTIO N ................................................................................................... 136

CO UNT I R ACK ETEER ING IN VIO LATIO N O FN.J. STAT. ANN.

CO UNT II R ACK ETEER ING IN VIO LATIO N O FN.J. STAT. ANN.

CO UNT IVVIO LATIO NS O FSECTIO N 10(b)O FTH E SECUR ITIES

CO UNT VVIO LATIO NS O FSECTIO N 18 O FTH E SECUR ITIES

CO UNT VI VIO LATIO NS O FSECTIO N 20(a)O FTH E SECUR ITIES

CO UNT VIII NEGLIGENT M ISR EPR ESENTATIO N (AgainsttheValeant

XIII. PR AY ER FO R R ELIEF................................................................................................. 152

XIV. JUR Y D EM AND ............................................................................................................ 152

Plaintiffs, as defined below, through theirundersigned counsel, allege the following

based upon the investigation ofcounseland personalknowledge as to plaintiffs and their

purchaseofsecuritiesofValeantPharmaceuticalsInternational, Inc. (“Valeant”or“VR X”orthe

“Company”).1 The investigation included, butwasnotlimited to, a review and analysisof:

pressreleasesissued by Valeant; transcriptsofValeant’spublic earningscallsand investor

conferences; media reports concerning Valeant; pleadings in civil litigations, regulatory

and documentssubmitted to theU.S. SenateSpecialCommitteeon Aging;and otherpublicly

1. Thisactionarisesfrom amassive, fraudulentschemeperpetratedbyValeant, its

seniorexecutives, auditors, andthoseworkinginconcertwiththem toartificiallyinflatetheprice

of Valeant’s securities through a clandestine pharmacy network, deceptive pricing and

manufacturing and marketing of branded and generic drugs. Traditional pharmaceutical

medicationsto treatand curediseases. New drugsenjoyaperiod ofexclusivityduringwhich

timegenericequivalentsareexcludedfrom themarkettoallow thepharmaceuticalcompanyto

recoupitsR & D costsandgenerateaprofit.

3. By contrast, Valeant implemented a growth-by-acquisition model, whereby

Valeant acquired already-established pharmaceuticals from other companies, massively

In furtherance ofthis objective, Valeanttargeted “orphan drugs” which treatrare medical

conditionsandfacelittleornogenericcompetition. Forexample, in2014, Valeantidentifiedtwo

Company believed had pricing “flexibility by multipleordersofmagnitude.”Two daysafter

4. The mastermind behind Valeant’s growth-by-acquisition and price-gouging

strategieswasitsformerChairmanandChiefExecutiveO fficer(“CEO ”), M ichaelPearson. A

formerM cK inseyconsultant, withnobackgroundinmedicineorpharmaceuticals, Pearson, who

joinedValeantin2008, believedR & D investmenttoprovidelow returnsbecauseitoftenfailed

toresultinmarketabledrugs. Accordingly, underPearson’stenure, Valeant’sR & D costswere

scaledbackto3% ofrevenue. Insteadofinvestinginresearch, between2008 and2015, Valeant

completed over100 acquisitionsatacostofover$40 billion, which theCompany financed

workinginconcertwithhim soughttoconvinceinvestorsofthelong-term valueoftheirstrategy

Valeantand itsseniorexecutivesconsistentlyrepresented to investorsthatValeant’sdramatic