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`ACRUX DDS PTY LTD. et al.
`
`EXHIBIT 1559
`
`IPR Petition for
`
`U.S. Patent No. 7,214,506
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`
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`Valeant Ex-CEO, Ex-CFO Are a Focus of U.S. Criminal Probe - Bloomberg https://www.bloomberg.com/news/articles/2016-10-31/valeant-ex-ceo-ex...
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`said, adding that Philidor
`executives could also be charged.
`
`•we are in frequent contact and
`continue to cooperate" with u.s.
`authorities, Valeant said in a
`written statement. "We do not
`comment on rumors about
`investigations, and cannot
`comment on or speculate about
`the possible course of any
`ongoing investigation. Valeant takes these matters seriously and intends to
`uphold the highest standards of ethical conduct.•
`
`J. Michael Pearson Pbotographer: ScottBellaiBioombeJB
`
`A Pearson lawyer. Bruce Yannett, declined to comment. DanK. Webb, a lawyer
`for Schiller, didn't Immediately comment. Spokesmen for the FBI and Preet
`Bharara, the U.S. attorney in Manhattan, declined to comment. Jonathan Rosen,
`a lawyer for Philidor. didn't respond to requests for comment.
`
`No charging decisions have been
`made and the case remains fluid,
`the people said. Among the
`possibilities, the U.S. Justice
`Department could settle with the
`company and later take action
`against individuals, one person
`said.
`
`Howard Schiller Photugrapber. Andrew Hmer/Bioambezg
`
`Valeant shares dropped more
`than 1.2 percent to $17.84 in New
`York, the lowest closing pricing since June 2010. The company's most actively
`traded debt, $3.25 billion of 6.125 percent notes due in 2025, dropped 2 cents to 77
`cents at 4:09p.m. in New York according to Trace. the bond price reporting
`system of the Financial Industry Regulatory Authority.
`
`For a Bloomberg Intelligence primer on Valeant Pharmaceuticals. click here.
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`Valeant Ex-CEO, Ex-CFO Are a Focus of U.S. Criminal Probe - Bloomberg https://www.bloomberg.com/news/articles/2016-10-31/valeant-ex-ceo-ex...
`
`Prosecution of top corporate executives over accounting fraud allegations is a
`rare step, and the complexity of such cases can make them hard to bring. In the
`early and mid-2000s, the U.S. won a series of accounting-related convictions
`against chief executives at companies including Enron Corp .• Cendant Corp. and
`WorldCom Inc.
`
`More recently, enforcement efforts shifted toward Wall Street in the wake of the
`financial crisis. Top officials at the U.S. Securities and Exchange Commission,
`where many accounting fraud investigations begin, have called for
`<https://www.sec.gov/News/PressRelease/Detail/PressRelease/1365171624975> a
`renewed focus on corporate accounting improprieties over the past few years.
`but so far few cases involving companies as large as Valeant have emerged.
`
`ScrutinyofValeant
`
`Laval, Quebec-based Valeant, once a darling of Wall Street, has drawn scrutiny in
`recent years for its practice of acquiring drugs and dramatically increasing their
`prices. While the precise contours of the government's case against Valeant
`aren't clear, allegations of questionable company practices have emerged in the
`last year as lawsuits and government investigations mounted.
`
`Pearson, the former CEO, was a key architect ofValeant's growth over the years.
`He stepped down from his role last spring and continues to work as a consultant
`to the company from a Valeant office near his home, according to the people
`familiar with the matter. A person close to the company said that Pearson no
`longer makes business decisions on behalf ofValeant.
`
`Schiller was blamed by Valeant for "improper conduct" that led the company to
`restate its earnings for 2014 and 2015, an assertion disputed by Schiller. He
`stepped down as CFO in 2015 and left the company board this year.
`
`U.S. prosecutors in Boston and Philadelphia are also said to be conducting
`separate inquiries of Valeant. Boston's investigation, according to a person
`familiar with the matter, focuses on Valeant's payments to charities that then
`helped patients make co-payments for the soaring cost ofValeant drugs, some of
`the most expensive on the market. The Philadelphia case is examining Valeant's
`billing of government health care programs for the company's drugs, another
`person said.
`
`The U.S. attorney's office in Boston didn't respond to a request for comment.
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`Michele Mucellin, a spokeswoman for the U.S. attorney in Philadelphia, declined
`to comment.
`
`Valeant said in October 2015 that federal prosecutors in New York had issued
`subpoenas <http://www.bloomberg.com/news/articles/2015-10-15/valeant(cid:173)
`receives-subpoenas-from-u-s-prosecutors-on-drug-pricing> seeking information
`on the company's drug distribution and pricing decisions. It later disclosed
`<http://www.bloomberg.com/news/articles/2016-02-29/valeant-is-under(cid:173)
`investigation-by-sec-drugmaker-says> an investigation by the SEC. Judy Burns,
`an SEC spokeswoman, declined to comment.
`
`Sales Incentives
`
`Short-sellers first raised questions about Valeant's accounting practices and
`relationship with Philidor a year ago. As it turned out, Valeant had offered
`Philidor executives tens of millions of dollars in incentives to sell its products at
`a time when the relationship between the companies was still secret, according
`to hundreds of pages of evidence released by U.S. Senate investigators this year.
`
`Though they were nominally separate companies, Valeant was Philidor's only
`client, a class-action lawsuit in New Jersey alleges. Valeant ultimately
`acknowledged its financial control of Philidor. In February, Valeant restated its
`results for 2014 and 2015, disclosing it recorded $58 million in revenue from
`Philidor earlier than it should have.
`
`Valeant's restatement dealt with its booking of revenue at the time its products
`were delivered to Philidor, even though the products had not yet been sold -- a
`practice known as channel stuffing. The restatement acknowledged that because
`Valeant was in the process of taking control ofPhilidor, the movement of
`product amounted to shifting inventory from one arm of the company to
`another and therefore wasn't revenue.
`
`Philidor, founded in 2013, used tactics to increase insurance reimbursements for
`Valeant medicines, including submitting claims using other pharmacies'
`identification numbers and altering codes on some doctors' prescriptions,
`Bloomberg News reported <http://www.bloomberg.com/news/articles/2015-10-29
`/philidor-said -to-modify-prescriptions-to-boost -valeant -sales> last fall.
`
`Philidor Deal
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`Valeant Ex-CEO, Ex-CFO Are a Focus of U.S. Criminal Probe - Bloomberg https://www.bloomberg.com/news/articles/2016-10-31/valeant-ex-ceo-ex...
`
`In late 2014 Valeant paid $100 million for an option to acquire Philidor, in a
`transaction that required no further payments to take control of the company.
`After the relationship between the two became known
`<http://www.bloomberg.com/news/articles/2015-10-21/valeant -shares-plummet(cid:173)
`as-citron-examines-specialty-pharmacy> • Valeant acknowledged that it had
`incorrectly recorded shipments to Philidor as revenue. Valeant said last year that
`it would shutter Philidor after benefits managers questioned its practices and
`refused to continue doing business with it.
`
`The ties between the companies were particularly close. Valeant executives
`worked at Philidor, the asset manager T. Rowe Price Group Inc. alleges in a
`lawsuit against the company filed in August. Also, senior Valeant management
`and board members -- including the entire audit committee on one occasion -(cid:173)
`went on site visits to Philidor, the suit alleges. E-mails and transcripts of
`conference calls show that senior company management and board members
`knew of the accounting treatment ofValeant's relationship with Philidor,
`according to the suit. Valeant hasn't filed a response in the case.
`
`- With assistance by Claire Boston, and Matt Robinson
`
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