BUSINESS

Valeant Denies 'Erroneous' Allegation It's Another Enron, Forms Committee To Review Claim

10/26/2015 07:44 EDT | Updated 10/26/2016 05:12 EDT

MONTREAL -- Valeant Pharmaceuticals has assigned its lead director to head an internal review of allegations into the drug maker's business relationship with Philidor -- one of the main issues that cut billions of dollars off the company's value last week.

Valeant says it believes it has complied with the law but a committee of non-management directors will review allegations surrounding Philidor, a specialty pharmaceutical company.

Read more: Valeant Was Canada's Largest Company Three Months Ago. Now It's Being Called The Next Enron

The company is trying to extinguish concerns ignited by Citron Research, which compared Valeant with the collapsed energy giant Enron.

It has also called Citron's allegations "erroneous'' and an attempt to manipulate the market to drive down Valeant's stock price -- which fell 32 per cent last week to $152.69 on Friday, lowering the company's market value to about $52 billion.

UPDATE 10/26/2015: Valeant Pharmaceuticals is asking U.S. securities regulators to investigate Citron Research, whose explosive report about the Quebec-based company's business practices caused its stock to crater.

Chief executive Michael Pearson told analysts on a conference call Monday that the main reason for Valeant's recent problems is that it's the victim of false allegations by outsiders who want to manipulate the market to their own profit.

Pearson says he has called on the Securities and Exchange Commission to investigate Citron Research and Andrew Left, its executive editor, after the U.S. short seller compared Valeant to Enron, the U.S. energy firm that collapsed after widespread deception and fraud at the highest levels of management.

"His motivation is the same as someone who runs into a crowded theatre to falsely yell, 'Fire.' He wanted people to run,'' Pearson said.

"He intentionally designed the report to frighten our shareholders to drive down the price of our stock so he could make money for his short selling.''

Original story continues below.

The committee looking into the allegation will be headed by Robert Ingram, who has been on Valeant's board for five years. Ingram is also a partner of Hatteras Venture Partners, which specializes on pharmaceuticals and medical devices.

Valeant chairman and chief executive Michael Pearson repeated that Valeant has complied with the law but welcomed the board's review and said it would free management to run the business.

"We operate our business based on the highest standard of ethics, and we are committed to transparency,'' Pearson said in a statement ahead of Monday's conference call with analysts -- the second in less than a week.

In the company's statement, Ingram said the board "has complete confidence in Mike Pearson's performance as CEO and has fully supported the company's specialty pharmacy strategy.''