Salix Pharma (SLXP) Discloses SEC Probe into Possible Securities Law Violations

From This Report from StreetInsider.com

Salix Pharma (NASDAQ: SLXP) disclosed the following in its 10-K filed after markets closed Monday:

The Audit Committee of the Board of Directors of the Company has retained outside counsel and is conducting an internal investigation of disclosures of inventory amounts in the distribution channel and related issues in press releases, on analyst calls, and in the Company’s various SEC filings. That investigation includes certain accounting issues identified during the course of the investigation, including returns of Giazo, marketing fees paid to a wholesaler, and the Company’s practices for recognizing revenue for shipments made to another wholesaler on or after October 1, 2013, and resulted in our restating our financial results for 2013 and the first three quarters of 2014. The Audit Committee has notified the SEC Enforcement Staff that it is conducting this investigation, and has had meetings with the SEC Enforcement Staff with respect to the Audit Committee’s investigation. Moreover, counsel to the Audit Committee has voluntarily provided relevant documents to the SEC Enforcement Staff, and is cooperating with the SEC Enforcement Staff in the SEC’s investigation. The Company has received information requests from the SEC and the Company expects to receive subpoenas for documents and testimony during the course of the SEC’s investigation.

We cannot predict the outcome or the duration of the SEC investigation or any other legal proceedings or enforcement that may arise out of the SEC investigation. We also could be subjected to other lawsuits and could become the subject of other regulatory inquiries or investigations in addition to the SEC investigation now underway. If we are subject to adverse findings in any proceedings, we may be required to incur costs, or pay damages or penalties or have other remedies imposed upon us which could have a material adverse effect on our financial condition and results of operations.

Responding to the SEC investigation could divert management’s attention from managing our day-to-day operations. Additionally, expenses that may arise from responding to the SEC investigation, management’s review of responsive materials, any related litigation or other associated activities may be significant. Current and former employees, officers and directors may seek indemnification, advancement or reimbursement of expenses from us, including attorneys’ fees, with respect to the current investigation or future proceedings related to this matter, if any such investigation or proceeding involves such employees, officers and directors personally. In addition, the SEC investigation may adversely affect our ability to obtain, or increase the cost of obtaining, directors’ and officers’ liability and other types of insurance. These events could adversely affect our financial condition, results of operations and the price of our common stock