The multiple investigations involving Valeant Pharmaceuticals International, Inc. VRX will go on for a long time and continue to dog the stock, according to John Gavin of Probes Reporter, the research firm that broke Monday's news of a new investigation into the Canadien pharmaceuticals compay.
Gavin joined Benzinga's PreMarket Prep show Tuesday morning to discuss this new development. According to his resarch, the SEC is "investigating something pertaining to conduct, transactions or disclosures." On top of that, he said he's certain Canadian authorities have already stared their own investigation.
"Back in October when this story broke there was references to Quebec’s securities regulator having not yet started a formal investigation, but watching the situation very seriously," he said. "I am certain that the Quebec authorities have begun their own investigation by now as well. And the SEC and the Canadian authorities cooperate."
Gavin believes this newly disclosed investigation began back in October or November, but the fact that company officials kept it hidden significantly damages their credibility.
"The problem, and this is where investors need to worry, is this management judged that it wasn’t material. Even though it's formal and involves subpoenas, they judged that it wasn't material until they were essentially forced to disclose it yesterday. They were planning to just burry it in the 10-K. Now by waiting, waiting, waiting and having us put the pressure that ultimately caused them to disclose this, their credibility is badly damaged."
He went on to add that, though some will continue to look for a positive outlook, there's little reason to have belief in Valeant.
"This has all the feeling of a management that’s hunkered down. their attitude is ‘There ain’t nothing wrong here until you can prove it.’ And they’re not going to help you with it. I think the sell side, God bless them, will look for reasons to get positive, although I’m sure a lot of them are very frustrated right now. But this could get worse before it gets better."
When asked whether Valeant could end up going down the same road as Enron, which Gavin also had a hand in disclosing, he added "that's not unreasonable to ask about."
"When federal prosecutors and U.S. attorneys are investigating you, those are criminal probes. So this company is facing both civil investigations from the SEC certainly and criminal exposure on an array of matters. We don’t know what they are in detail but yes, criminal charges could result from this."
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