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In Duel With Valeant, Ackman; Is Judge David Carter The "New Jed Rakoff?"

Tyler Durden's picture




 

Via NewYorkShockExchange.com,

The U.S. is the most incarcerated country in the world. According to Shock Exchange: How Inner-City Kids From Brooklyn Predicted The Great Recession And The Pain Ahead, at 2011 the U.S. had 743 prisoners per 100,000 members of the population; Rwanda (595) and Russia (568) were next. Remarkably, there was a dearth of white collar crimes after the financial crisis of 2008. In his rejection of an SEC settlement with Citigroup, Judge Jed Rakoff vowed to "see that the truth emerges." After presiding over the most high-profile insider trading cases since the crisis -- including Raj Rajaratnam and Rajit Gupta -- Judge Rakoff has come to symbolize the mantra that "nobody is above the law." In determining that Valeant and hedge fund manager Bill Ackman must face insider trading charges for their failed takeover of Allergan, U.S. District Judge David Carter may be the "new Rakoff."

Wednesday Judge Carter in Santa Ana, California, said Valeant and Pershing Square's Bill Ackman must face a lawsuit accusing them of insider trading in botox maker Allergan prior to Valeant's unsuccessful takeover bid:

The lawsuit was filed on behalf of investors who sold Allergan shares in the two months before the defendants on April 22, 2014 announced an unsolicited $51 billion bid for Allergan.

 

Pershing had by then quietly amassed a 9.7 percent stake in Allergan, which soared in value after the bid was announced. Investors said Pershing bought those shares knowing that Valeant was preparing a bid that could, and later did, become hostile ... the judge, without ruling on the merits, found "serious questions" as to whether "substantial steps" had been taken toward a possible hostile bid, which would have required Valeant to disclose more or Ackman to stop his buying.

Valeant and Ackman have claimed no breach of duties by sharing information before the takeover bid became public knowledge. Now it seems Judge Carter will have the final say.

The Situation

Ackman's Pershing Square acquired a 10% stake ($5.3 billion) in Allergan in 2014. In October 2014 Judge Jackson had to decide whether Ackman could vote his 10% stake to seal a hostile bid by Valeant. Allergan countered that Ackman began acquiring his stake as early as February 2014 when he knew a takeover bid was imminent, and would create a windfall for his shares; in effect Ackman relied on inside information in acquiring Allergan shares. It also sought a court order blocking Ackman from voting his shares pursuant to a decision that could have removed six Allergan directors who opposed Valeant's takeover bid.

Judge Carter later agreed to allow Ackman to vote his shares; however, on November 17th Allergan agreed to a $219 per share bid from Actavis which trumped Valeant's $180 per share bid. Nonetheless, Ackman's Pershing Square stake stood to net $6 billion, of which Ackman said he would share 15% with Valeant.

Implications

A potential ruling against Valeant and Ackman could hinge on whether they can prove Valeant's tender offer for Allergan had not been planned out before Ackman bought up Allergan's shares. A negative ruling could force Ackman to disgorge his profits made on the Allergan trade; this could also result in Ackman selling certain of his current Pershing Square holdings to come up with the cash. To the extent Valeant also shared in the booty, it would potentially have to disgorge its earnings and take a one-time charge on it profit and loss statement.

Valeant is currently the subject of an investigation on price gouging by the Senate Special Committee on Aging. The insider trading lawsuit and the murky details behind it could give the Special Committee the impression that Valeant is an entity designed for financial engineering, and not a traditional pharmaceutical company. If so, it may hinder Valeant's cause in protecting price increases pursuant to heart drugs Nitropress and Isuprel.

Secondly, Valeant recently decided to tamp down its acquisitions in order to pare its $30 billion debt load which is currently at junk levels. Valeant's management team has been great at growing revenue through via deals. However, in my opinion, the Philidor fiasco was evidence that the company has not exhibited best-in-class internal controls. If the company is to cut costs, pare debt and maintain excellent working relationships with doctors and pharmacy benefit managers, management will need all hands on deck. It will need to strengthen internal controls and have the full commitment and focus of management.

If a protracted insider trading case ties up management resources, Valeant could drop the ball on its debt repayment plan. Another misstep by Valeant could send VRX plummeting further. At least that's what I'm betting on. I'm short VRX.

 

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Fri, 11/13/2015 - 12:26 | 6786717 buzzsaw99
buzzsaw99's picture

red jackoff moar like

Fri, 11/13/2015 - 12:55 | 6786822 HopefulCynical
HopefulCynical's picture

< Long nail guns

< Tribal housecleaning

Fri, 11/13/2015 - 15:02 | 6787351 junction
junction's picture

Unlike in Action Comics, where Clark Kent takes off his street clothes and becomes Superman, if Judge Carter takes off his robes, he will more likely be wearing a French maid's outfit.  These federal judges are strange and degenerate creatures who, like whores, follow their clients' instructions (AG Lynch's stooges), however degrading the request.  So anyone writing about how federal judges will do the right thing is a liar.  The federal judiciary is two thirds filled with Nazi Peoples' Court type judges who get a sexual thrill sending men (especially young black men) off to prisons for decades of incarceration.  Expect no justice from these judicial low lives. 

Fri, 11/13/2015 - 12:26 | 6786719 Grandad Grumps
Grandad Grumps's picture

No insider gets prosecuted unless they jave lost favor with the insiders.

Fri, 11/13/2015 - 12:32 | 6786735 NoDebt
NoDebt's picture

I think the implication is that even those who WEREN'T in favor with the elites were avoiding prosecution.  

You pay your tithe to the elites for a reason.  The system still has to have enough teeth in it that paying tribute to the MIC is a must-do investment if you care about your own future.

 

Fri, 11/13/2015 - 12:27 | 6786721 _ConanTheLibert...
_ConanTheLibertarian_'s picture

JEd RaKOFF

Fri, 11/13/2015 - 12:27 | 6786722 NoDebt
NoDebt's picture

"I want to believe."

Fri, 11/13/2015 - 12:48 | 6786778 curbjob
curbjob's picture

Color me skeptical but historically, tribal law trumps judicial law.

Fri, 11/13/2015 - 12:28 | 6786727 rose1959
rose1959's picture

How to achieve impossible investment goals https://www.youtube.com/watch?v=SFx3fhFpaKk

Fri, 11/13/2015 - 12:29 | 6786730 RaceToTheBottom
RaceToTheBottom's picture

Double Down, always Double Down.

Fri, 11/13/2015 - 12:43 | 6786769 Rodders75
Rodders75's picture

He'd better check under his car every time he takes it out for a spin...

Fri, 11/13/2015 - 13:15 | 6786897 wcvarones
wcvarones's picture

Better question: Is Judge David the new Red Jakoff?

Fri, 11/13/2015 - 15:33 | 6787507 Zero-Hegemon
Zero-Hegemon's picture

Dang, you "beat" me too it

Fri, 11/13/2015 - 13:19 | 6786912 pebblewriter
pebblewriter's picture

Might want to upgrade his deadbolts and make sure his life insurance is paid up...

Fri, 11/13/2015 - 13:42 | 6786988 ILike2Watch
ILike2Watch's picture

Hide the nailguns. Live no higher than the second story. Have a chauffeur with a secure/monitored garage. 

 

Secondly - select the best location for a prison tattoo (one that will not be obvious with a suit on for your afterlife - if there is one).

Fri, 11/13/2015 - 13:47 | 6787008 Joebloinvestor
Joebloinvestor's picture

Valeant is nothing more then a wall street pump and dump.

A business model based on the American attitude that "instant gratification isn't fast enough" as it sure wasn't concerned about patients.

Of course Valeant and Ackman acted in concert.

Fri, 11/13/2015 - 13:49 | 6787020 PoasterToaster
PoasterToaster's picture

Show trials to appease the plebians.  How many are appeased?

Fri, 11/13/2015 - 14:51 | 6787307 sunkeye
sunkeye's picture

Yeah riight. Ackman will go down just like Corzine did.

Fri, 11/13/2015 - 15:42 | 6787574 Getting Old Sucks
Getting Old Sucks's picture

Ya never know.  Perhaps TPTB need to slay a big time sacrificial lamb to calm the masses and Ackman was chosen?

Sat, 11/14/2015 - 17:11 | 6793542 Joseph Zernik
Joseph Zernik's picture

Amazing how so many people get it totally wrong... Jed Rakoff is the epitome of judicial-banksters collusion:

1/6/2014 at 09:13:07

Duplicitous US judges: Jed Rakoff, Richard Leon

By (about the author)

Media have recently hailed Jed Rakoff for his article in New York Review of Books, calling for enforcement of the law on those culpable for the current financial crisis.[i]

Indeed, the article appears full of compassion - an unusual off-the-bench statement by a US judge, calling for justice: [ii]

"... millions of Americans leading lives of quiet desperation: without jobs, without resources, without hope"; "...was it the result, at least in part, of fraudulent practices...? ...if, by contrast, the Great Recession was in material part the product of intentional fraud, the failure to prosecute those responsible must be judged one of the more egregious failures of the criminal justice system in many years... the Financial Crisis Inquiry Commission, in its final report, uses variants of the word "fraud" no fewer than 157 times in describing what led to the crisis... not a single high-level executive has been successfully prosecuted in connection with the recent financial crisis, and given the fact that most of the relevant criminal provisions are governed by a five-year statute of limitations, it appears likely that none will be... To a federal judge, who takes an oath to apply the law equally to rich and to poor, this excuse--sometimes labeled the "too big to jail" excuse--is disturbing..."

One is hard-pressed to recall a more hypocritical piece of writing, since Jed Rakoff himself should be deemed a central figure in the financial crisis and in undermining banking regulation. [iii, iv, v]

READ MORE:

http://www.opednews.com/articles/Duplicitous-US-judges-Jed-by-Joseph-Zer...

 

9/26/2012 at 02:59:04

Large-scale fraud in US court records is linked to failing banking regulation, detailed in a paper, peer-reviewed and pu

Barcelona, September 25 - a paper, detailing large-scale fraud in the electronic record systems of the US courts (PACER and CM/ECF), and focusing in particular on the employment of such fraud to undermine banking regulation, has been published by an international computer science journal, Data Analytics,  following rigorous, anonymous peer-review by international computer-science academic scholars.

The US government has completed a decade-long project of transition to electronic administration of the US courts at a cost that is estimated at several billion US dollars.   Record keeping under paper administration of the courts has evolved over centuries and formed the core of due process and fair hearing.  The transition to electronic administration of the courts affected a sea change in such court procedures.

http://www.opednews.com/articles/Large-scale-fraud-in-US-co-by-Joseph-Ze...

 

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