Former Valeant CEO J. Michael Pearson took home a hefty sum last year in severance pay and consulting fees. But the departed skipper says the company owes him even more—and he’s suing to collect.
In a lawsuit filed Monday in the U.S. District Court of New Jersey, Pearson claimed Valeant breached his contract by failing to fork over 580,676 shares and 2.5 million performance shares due in November under the terms of his separation agreement with the drugmaker. According to Bloomberg, those shares would have had a market value of $32.8 million based on Monday's closing price of $10.81. Pearson claims the company owes him $180,000 in consulting fees, too.
According to the complaint, Pearson’s counsel first got in touch with Valeant in January about the “delay in delivery” of the vested equity awards, which allegedly were due within six months and one day of his official May 2, 2016, separation date. But as Valeant EVP and General Counsel Christina Ackermann responded, the board had “reviewed the matter and determined that the shares will not be released to Mike Pearson due to the circumstances that Valeant finds itself in at this time.”
Those circumstances, as any Valeant-watcher knows, are pretty poor, and Valeant's employees are sharing in the company's pain, one of the company's lawyers said in a letter cited in the lawsuit.
“Valeant believes it would be inappropriate or inequitable in the current environment for Mr. Pearson to receive additional compensation—to the tune of millions of dollars—at a time when countless other Valeant employees have been asked to sacrifice for the good of the company and its shareholders,” the letter stated.
But that doesn't get Valeant off the hook with Pearson, the lawsuit says. “Valeant has not articulated any legal or factual basis for its disavowal of its contractual obligations,” according to the complaint.
Valeant, which has faced debt-default worries since last year—in large part because of Pearson's aggressive M&A strategy—faces plenty of other woes as well. Multiple investigations into its pricing policies and pharmacy relationships, poor sales of key products and a series of debt restructurings have triggered a stock collapse and a whole lot of turnover within its ranks.
A spokeswoman for Valeant said the company was not commenting on ongoing litigation.
Pearson, meanwhile, has lined his pockets at Valeant’s expense—and that’s not something he’s denying. The Canadian drugmaker paid him a pro-rated bonus for 2016 as well as a $9 million severance payment, and going forward, the company said it’ll continue to provide insurance coverage, office space, administrative assistance and IT support, the complaint said. The embattled drugmaker also coughed up nearly $500,000 in consulting fees, it said in its 2016 proxy filing.