December 21, 2017 / 7:17 PM / a year ago

Ex-Valeant CEO must arbitrate case over unpaid stock: U.S. judge

Dec 21 (Reuters) - A U.S. judge has ruled that former Valeant Pharmaceuticals International Inc Chief Executive Officer Michael Pearson must pursue his claim that the drugmaker owes him more than 3 million shares with an arbitrator rather than in court.

U.S. District Judge Brian Martinotti in Trenton, New Jersey, said on Wednesday that Pearson's employment contract, which required him to arbitrate disputes with Valeant, remained in effect despite a subsequent separation agreement in 2016.

"There is no clear and convincing evidence that the parties chose to seek relief in a different forum," Martinotti wrote.

Neither Valeant nor a lawyer for Pearson responded to requests for comment on Thursday.

Valeant's stock price has fallen more than 90 percent since August 2015 following intense criticism and investigations of its drug pricing, accounting practices and ties to a mail-order pharmacy called Philidor Rx Services.

Amid those problems, Valeant announced in March 2016 that Pearson would leave as the company.

In a lawsuit filed in March, Pearson said Valeant had breached his severance agreement by not paying him 580,676 restricted shares and 2,457,926 performance shares.

Based on Valeant's stock price of $20.89 at the close of trading on Wednesday, the unpaid shares would be worth about $63.5 million.

Pearson said in his lawsuit that Valeant also owed him $180,000 in consulting fees.

In November 2016, federal prosecutors in Manhattan accused former Valeant executive Gary Tanner of secretly working with former Philidor CEO Andrew Davenport to promote the pharmacy’s business within the drug company.

The scheme culminated in Valeant's agreeing to pay $100 million for the right to buy now-defunct Philidor. As a result, Davenport earned $40 million, $10 million of which he covertly kicked back to Tanner, prosecutors said.

Tanner and Davenport have pleaded not guilty to wire fraud and other charges and are scheduled to face trial in April.

The case is Pearson v. Valeant Pharmaceuticals International Inc, U.S. District Court, District of New Jersey, No. 17-cv-1995. (Reporting by Nate Raymond in Boston; Editing by Lisa Von Ahn)

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