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T. Rowe Price Sues Valeant Over Alleged Fraud

Pershing Square's Bill Ackman and Valeant Pharmaceuticals International's Michael Pearson InterviewPershing Square's Bill Ackman and Valeant Pharmaceuticals International's Michael Pearson Interview
Former Valeant CEO Michael Pearson is one of the defendants named in the suit.Photograph by Bloomberg — Getty Images

T. Rowe Price (TROW) is locking horns with the embattled Valeant Pharmaceuticals (VRX), alleging a “fraudulent scheme” by the drugmaker in a lawsuit.

The mutual fund and investing giant filed suit in New Jersey alongside fellow Valeant investor Alleghany Cos. earlier this week, according to the Wall Street Journal, alleging that Valeant’s accounting practices and relationship with the now-defunct specialty pharmacy Philidor Rx amounted to fraud that cost investors billions. Former Valeant CEO Michael Pearson, who left his perch as chief executive in March over the Philidor imbroglio and scrutiny over drug price hikes, and five other current and former executives are named as defendants in the suit.

“We are aware of the filing and have not been served yet,” a Valeant spokesperson emailed Fortune. “This T. Rowe Price complaint repeats allegations and claims as in the pending securities putative class action brought against Valeant… As with the original complaint, which was filed in October 2015, Valeant intends to defend itself and cannot comment further on ongoing litigation.”

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T. Rowe Price was one of several investment entities with large stakes in Valeant, whose stock price growth had been impressive prior to its rapid fall from grace beginning last fall. Valeant shares have plunged more than 71% year-to-date and more than 88% over the past 12 months (despite the occasional brief uptick).

Price had owned as much as a 6.4% stake in Valeant at one point, according to the Journal, and began dumping shares in the wake of various concerns at the beginning of 2016.

The mutual fund is far from the first victim of Valeant’s woes. Robert Goldfarb, head of the Warren Buffet-linked Sequoia Fund, stepped down in March largely thanks to his promotion of a big stake in Valeant. Sequoia’s new leadership decided to ditch the company and sell off its remaining position in July.

Valeant is potentially facing criminal investigation by the federal government for failing to disclose relevant information about its relationship with the Philidor pharmacy unit to insurers. The company has been attempting to turn a new page through a series of management and business practice changes, but is still feeling the sting of previous controversy. The firm is also facing a class-action shareholder lawsuit.