ERICOPOLY

Also possible that before July, the shorts gave Reitz a summary of a lot of the misleading practices of Valeant (powerpoint slides that differ from the 10-K). Might have shown him the weird phone numbers, etc... etc... Or leave the shorts out of it... perhaps he suspected it on his own... At that time perhaps Reitz didn't understand that Valeant really effectively owned Philador and didn't understand the consolidation. So he might have been suspecting the channel stuffing short rumors, and not knowing about the consolidation and furthermore perhaps at that time he learned about the misuse of his license. So perhaps he voiced those concerns up the chain and all they were willing to discuss with him was the license issue, because they were still interested in keeping their whole consolidation structure a secret. But that secrecy just fed his paranoia. I don't know... this is the trouble with keeping secrets. Management keeps secrets from shareholders and it leads to distrust. They keep secrets from business partners (like Reitz) and it leads to distrust. Or it could be a more serious thing... time will tell. We've got the R&O lawsuit as well as the independent board inquiry.

This was taken directly from the complaint for declaratory judgement. Makes sense that they have to drag Valeant into it in order to see if they have any involvement in a fraud scheme. The "gee, I don't know who you are" line looks like it was necessary in order to establish an excuse to sue Valeant just to start the discovery into Valeant's involvement -- "stop billing me I don't know who you are, I haven't seen any invoices, and I don't owe you anything... I just have to sue you now because you won't leave me alone". Clever I guess. Couldn't he have sued by saying "I know who you are, but I don't think I owe you anything because my contract is with Isolani and I think you are all engaged in fraud" to get the same effect? That would also drag Valeant into this so you could begin a discovery process but you wouldn't look like a liar. To me, he doesn't look like a liar. That's because I think there is some sort of legal method to his madness. He's not going to get very far if he intends to keep the money and Valeant indeed has been sending invoices, so my brain just throws out that "intends to keep the money" bullshit immediately. He can't seriously be acting like he doesn't know who Valeant is given what goes on these days at R&O -- it's got to be some kind of ploy or legal maneuver. Remember that he starts off this whole episode with a declarative letter from his lawyer stating that he will not be sending any more checks! Funny though, Ackman put a lot of weight on the "I don't know who Valeant is" type of thing -- it's on his slidedeck as evidence that this case is a non-issue.

This was taken directly from the complaint for declaratory judgement. Makes sense that they have to drag Valeant into it in order to see if they have any involvement in a fraud scheme. The "gee, I don't know who you are" line looks like it was necessary in order to establish an excuse to sue Valeant just to start the discovery into Valeant's involvement -- "stop billing me I don't know who you are, I haven't seen any invoices, and I don't owe you anything... I just have to sue you now because you won't leave me alone". Clever I guess.

He reported his worries over a month before he decided to stop making payments. He was not yet "discredited as a money grabber" at that point during that first month. At that time, he was still just the licensed pharmacist entrusted to hundreds of millions of dollars in revenue. It was only after they completely ignored him that he felt his suspicions are confirmed by their silence. That's when he began to stop making payments. So they can't say those refusals to pay are ground for them to not trust him. Have to look at the timeline. They completely ignored their pharmacist in charge, handling hundreds of millions of dollars. That isn't worrisome enough to investigate -- hundreds of millions of dollars in the hands of a credible witness blowing the fraud whistle? Later on they call him a liar, but come on... there was that entire month before the money stopped rolling in before we got to that point. And what, they investigated his claims and refused to tell him?

Here is what LessThanIV just wrote which makes a lot of sense to me, rather than explanations that don't make sense which seem to satisfy many that he's a discredited idiot: The purpose of this action is for R&O to get to the bottom of this, avoid accrual of avoidable damages, if any, and secure an early adjudication without waiting until Valeant sees fit to file suit. Accordingly, R&O seeks a declaratory judgment from this Court that Valeant’s claims are without merit and that R&O owes Valeant nothing. R&O will conduct discovery, including written discovery and depositions, in order to determine Valeant’s involvement, if any, in a scheme to defraud R&O and others.

I'm taking him on his word (worded by his lawyer) that more than a month had passed without hearing back from management about any of his concerns. Is it normal to not at least reassure him that a team of investigators is looking into the matter? Why take him at his word when he has said he has never received an invoice from Valeant when we know he received 75 invoices from Valeant and paid them all? Again, that sounds so stupid that I believe he is likely drawing a distinction that Valeant is not Philador until it is proven to him.

Explain the exact lie. His credibility is destroyed? He a licensed pharmacist entrusted to hundreds of millions of dollars of Valeant's revenue. The bizarre denial of who Valeant is and why they are trying to collect on behalf of Isolani/Philador looks like some strategy to force Valeant to CLEARLY EXPLAIN exactly how they are tied to Philador. "Uh, I don't know who the fuck you are". So they have to reply with documents that prove the relationship. Or something like that.

I'm taking him on his word (worded by his lawyer) that more than a month had passed without hearing back from management about any of his concerns. Is it normal to not at least reassure him that a team of investigators is looking into the matter?

Maybe R&O sued Valeant in order to shine the light of day on the relationship between Valeant and Philador for all the world to see. Gets more visibility on his fraud claims -- he might be worried that it's a big coverup. Discovering Valeant's involvement in Philador might have just cemented his paranoia. Bring the board in to investigate the whole Valeant/Philador relationship... you know... exactly what basically played out.

Perhaps they couldn't sue him? Isolani had the direct relationship and did sue him. R&O might legally owe Valeant nothing, they owe Isolani something who owes Philidor something, who owes Valeant something. They only counter sued after they got sued by R&O and had to respond to that claim. R&O is the deadbeat that won't pay up right? Why is he the first of anyone to sue here? I'm just a bit confused. R&O sued Valeant to avoid payment. Doesn't that seem like a money grab? According to bloomberg: EDIT: that isn't really rhetorical - I mean couldn't they have sued them on the improper use of their license (the thing that you say they are really on the hook/liable for?) They don't owe money to Valeant though. They don't! They owe money to Philador. Why is it proper to send the money to Valeant? There might be a legal reason why they want to force Philador back into the dispute without Valeant's presence. I don't know why, but I would start out with the suspicion that R&O is contracted to do business with Philador and not Valeant.

Perhaps they couldn't sue him? Isolani had the direct relationship and did sue him. R&O might legally owe Valeant nothing, they owe Isolani something who owes Philidor something, who owes Valeant something. They only counter sued after they got sued by R&O and had to respond to that claim. R&O is the deadbeat that won't pay up right? Why is he the first of anyone to sue here? I'm just a bit confused. R&O sued Valeant to avoid payment. Doesn't that seem like a money grab? EDIT: that isn't really rhetorical - I mean couldn't they have sued them on the improper use of their license (the thing that you say they are really on the hook/liable for?) It doesn't sound like a money grab and here's why. You don't start out a game of "I never got it and I don't have it" by writing a letter that starts out with "I'm going to stop paying you because of fraud suspicions.". First you admit that you are going to stop paying and this is how you are going to keep the money for yourself? Weird!

So... perhaps he sued Valeant in order to bring full daylight onto the structure if he's suspecting a coverup (after all, nobody investigated his claims). It wasn't until after the court filing of the R&O lawsuit that everyone became aware of it. That would be a motive to sue Valeant. There's nothing financial to gain from suing Valeant, other than more sunk legal fees. He can't keep the money he's withholding, so what's his angle?

Perhaps they couldn't sue him? Isolani had the direct relationship and did sue him. R&O might legally owe Valeant nothing, they owe Isolani something who owes Philidor something, who owes Valeant something. They only counter sued after they got sued by R&O and had to respond to that claim. R&O is the deadbeat that won't pay up right? Why is he the first of anyone to sue here? I'm just a bit confused.

What makes you believe that Reitz fully understood that Valeant is the controller of the Philador network? Was that in his contract, clearly spelled out? They worked damned hard to conceal their ownership. It's a meaningless side show -- the fraud allegations were made (and not investigated) before it got to this point. It's sort of a judgement call (like I think Pearson not-divulging the extent of it can be interpreted). R&O's lawyer Kaufman was referring to them in emails as "Valeant/Isolani/Philidor." I see how the covert nature of the organization can cause reasonable minds to doubt. I agree with you on the side show comment -it's kind of fun to speculate and interesting as hell but the window to look forthcoming and "get it all out" has come and passed. But suppose you are Valeant: you know the guy is saying he won't pay you because he doesn't want to implicate himself any further in your fraud. So why keep asking? It's possible Reitz' lawyer advised him to say that he doesn't recognize Valeant as his business partner. I'm not sure that a brief introduction by email "Hi, I'm Valeant but I'm also your real master" is all that is required to make Reitz recognize you as a legal agent of who you are contracted with. Anyways, Reitz is suing them so it's not like he fled to a foreign country to hide with bags of cash. Why would he do that? Why would refuse to pay yet not run off with the money, instead turn around and sue Valeant?

Plus, if you are Reitz then you don't want to sent any money to Valeant (or anyone for that matter) for the same reason that you previously stated. In other words, "if I send this money I am an agent of your fraud", or however he phrased it. So why would Valeant just keep trying and trying the same approach. Let's say Valeant is right -- why didn't Valeant sue him? I'm just genuinely curious. Not as curious though as to why they didn't investigate the fraud claims. They knew why he didn't want to pay, but they didn't want to investigate. Instead, they just demanded that he'd pay knowing that he won't pay because of his stated reasons?

What makes you believe that Reitz fully understood that Valeant is the controller of the Philador network? Was that in his contract, clearly spelled out? They worked damned hard to conceal their ownership. The shareholders didn't know about it. It's a meaningless side show -- the fraud allegations were made (and not investigated) before it got to this point.

If it were a movie, we'd learn that the reason for Valeants apparent inaction is that they've referred the matter to the FBI.

The CEO is responsible to uphold the reputation of the company. You can't ignore a fraud report from someone who is at the epicenter of hundreds of millions of dollars of your revenue -- if there is a fraud, you need to stamp that out! What if the fraud keeps going and grows out of control! So you must at minimum investigate such claims, or you're being damned irresponsible. And so when such claims come up, if have not in fact investigated them, it's "left, right, left, right, left, right..." IMO.

Thing is, Reitz is your captive pharmacist in charge. Not a short seller just trying to drive the stock down. And he's stopped sending you checks... at some point you have to say... okay, what is your suspicion of fraud based upon??? You could at least ignore Left because he doesn't send you checks, he's not a business partner of yours. This other guy Reitz... he must have a very high reputation if you went into business with him right? "Oh, don't worry about the initial fraud claim from Reitz, we already know that guy is a lowlife". Yeah right! They just inked the deal with him eight months earlier! Somebody who is actually an insider that is trying to report a fraud, that you do hundreds of millions of dollars in volume through, is very different from an outsider that you don't even do business with.

That's why I'm still interested in the story. It's not just that I look great in Nancy Drew's panties.

Curious why the class period doesn't include the day that management presented the issue as a "Standard Collections Dispute". I guess there will have to be another class organized to cover those individuals should this turn out, as I strongly suspect, to be anything but a standard dispute: http://finance.yahoo.com/news/shareholder-alert-brower-piven-encourages-222500030.html

Perhaps the real story is that long term contact with too much foot cream packaging turns you into a lunatic and that's the real story they don't want people to know... That would be "product related" but there's that SEC gag on Left.

I know that people prefer a manager to have ownership so that they have a vested interest in looking out for shareholder value. However it might also mean that they have a vested interest in hiding something from investors and making misleading statements to boost the stock. It's not all positives and it's not all negatives. Bernie Ebbers at WorldCom was more than 100% long, with margin loans. He sure was looking out for shareholder value though -- terrified that the truth would take down the stock.

Perhaps there is a footnote about material risks such as "doing business with a crazy man PIC" somewhere in the 10-Q. I haven't looked.

That raises the question: If you have consolidated the financials of R&O... Shouldn't you be concerned that those financials depend on the accounts of a "liar"?