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A class-action lawsuit brought on behalf of investors against Valeant Pharmaceuticals Inc. will go to trial.
The Quebec Court of Appeal dismissed applications for leave to appeal from the defendants, who asked the court to review a Quebec Superior Court judge’s authorization of the suit.
The class action was brought on behalf of persons who acquired securities of Valeant outside the United States between Feb. 28, 2013 and Oct. 26, 2015 who claim the price of shares purchased was artificially inflated by company misrepresentations.
According to these allegations, Valeant allegedly engaged in misconduct in its commercial activities and in the disclosure of financial information, particularly with respect to his relationship with mail order pharmacy Philidor Rx Services.
The lawsuit points out that Valeant identified significant weaknesses in its internal controls over financial information. As it corrected the errors by restating its results for fiscal years 2014 and 2015, the share price plummeted by as much as 80 per cent, wiping tens of billions of dollars from its market value.
According to Valeant, the source of the problem was sales of $ 58 million to Philidor having been recorded at the wrong time.
The allegations against Valeant have not been proven in a court of law. The company couldn’t be immediately reached for comment.
The company faces a series of other shareholder lawsuits and criminal fraud investigations by U.S. authorities including the Department of Justice and Securities and Exchange Commission.
The defendants in the Canadian class action include Valeant and certain of its past and present directors and officers, its auditors, PricewaterhouseCoopers, and a subscriber group including Goldman Sachs, Barclays Capital, HSBC Securities, Morgan Stanley, RBC Capital Markets, Citigroup Global Markets, CIBC Markets Merrill Lynch, JP Morgan Securities, TD Securities and BMO Capital Markets.
“We are very pleased that this case has passed this initial hurdle and will now be able to move ahead to a determination on its merits,” stated Michael Robb, a partner at Siskinds, one of the consortium of Canadian law firms that brought the suit.
“It is of paramount importance to investors that participants in Canada’s capital markets abide by their disclosure obligations to investors. One of the ways to ensure that happens is by holding them to account in the courts.”