RODDY BOYD: I have long since accepted that I'm not going to make a lot of friends doing this.
BRIAN PRICE: Should Mike Pearson be in jail?
RODDY BOYD: I think so. I wanted to do a lot of work and find out what really is going on, and find something about Valeant that no one knows about. It is a lonely job, but I mean, I like it. I think it's important. It's what I'm made to do. It's what we need at this moment.
BRIAN PRICE: Welcome to The Big Interview. Roddy Boyd has been described as one of the most feared men in the world of finance. And he earned that accolade through the ability to independently and effectively investigate public companies and uncover fraud. From Valeant to AIG, we'll explore the wrongdoing he's exposed and we'll also discuss the names that are currently on his radar. However, let's start with how he discovered his calling as a Wall Street whistleblower.
Rod, you've been described as one of the most feared men on Wall Street, one of the most effective investigative reporters. But that being said, you earned that title given your ability to uncover fraud and wrongdoing within public and private companies. So what I want to do is just take a step back, learn a little bit about who you are, your education, your life, and how you got on this path to discovering what it is that you were put on this Earth to do.
RODDY BOYD: Just to be called an investigative reporter is just what my life had been directed to do. I was born, you know, New York City suburbs, Northern Westchester. Pound Ridge, Bedford is where I was raised primarily. And moved to Connecticut when I was 18. I went to one of those kind of goofy boarding schools up there. And I kind of decided I wanted to get a little more urban and wound up in University in the Bronx. Mid '80s was an interesting time to be there, but it was good. I learned a lot. I met my wife there, which I view as my primary accomplishment there or primary benefit.
BRIAN PRICE: Likewise.
RODDY BOYD: Yeah. I came out of there with a degree in English. And looking back on it, I certainly love literature, but most of the time I was at Fordham, I was really focused on journalism. I used to cut a lot of classes just to go to the library, and you know, get into the microfiche or go back into the stacks for really old copies of, quite frankly, papers that aren't around anymore, like The New York Sun or I think one time, I was looking at The New York-- something-- Telegram.
And I'd spend hours just reading. I found the original the muckrakers, like Ida Tarbell and stuff like that-- you know, what she did with Standard Oil and exposing the Rockefeller colossus. And I just, you know, it was brutal on my grade point average, but I really wasn't terribly interested by my junior year in Chaucer, or Milton, or Shakespeare.
I was, however, very interested in understanding how life worked, how our government worked, how policy was made, how the economy worked. And I used to just spend hours, you know, covering council meetings or doing exposés around the campus and making no friends doing that.
And I learned to develop a thick skin and I learned to do a lot of work. I understood that if you're going to say anything in public, you best had do your work beforehand. And doing work beforehand, I had learned-- I just sort of pieced this together-- was understanding fact sets, understanding rules, regulations, the interconnection between business and policy, or between finance and operations.
And I took all of that, did some stringing or freelance work for the Greenwich Time for a while, but I got married very young and had a child pretty young. And I decided that, well, while working as a journalist for $13,000 or $14,000 a year in 1990 was a noble thing, you know, my wife and kid did have to eat. And there were more kids behind it as I worked.
So I wound up on Wall Street for about seven or eight years and really disliked it. I disliked it intensely. And most everything I did was-- I used to just sort of mentally say, OK, well, this is one more day down till I can do what I want to do.
And you know, I look back at one particular incident. I was a trader and I was on the phone with a large, I think, mutual fund-- or actually, an institutional investor in Boston. And this guy wanted to buy some convertible preferred securities that I was selling.
And it was going to be a fairly good trade for us, but I was talking to the guy and I'm like, look, these are pieces of garbage. I don't think you're going to be well-suited to buy this. I've done some work on the company. Let me tell you what I think. And you know, there's just total silence on the other end. He's like, are you a trader trying to talk me out of a trade that-- and you know, he was just mad. I mean, you know, the guy told on me, as it were and I got in a lot of trouble.
And that's what I just wasn't made for that life-- wasn't made for trading desk life. And I was able to, but I learned an intense amount about not only business, and finance, and trading, and valuation. So even though it was a rough proving ground, I certainly acquired a knowledge base that has served me remarkably well in later years.
BRIAN PRICE: So let's jump to 2012. And you're part of the team that establishes the Southern Investigative Reporting Foundation, the mission of which is to have a goal of providing in-depth financial investigative reporting for the common good. So given your work, given the fact that you're a board member of this foundation, are you one of the loneliest guys in the world?
RODDY BOYD: At times. I mean, at times. I have long since accepted that I'm not going to make a lot of friends doing this, that while people profess to appreciate it, they appreciate it in the abstract. Everybody says they love investigative reporters reporting, but they don't really love investigative reporters. And you don't make a ton of friends doing this. And you don't, by definition, have a ton of allies.
So yeah, it is a lonely job, but I mean, I like it. I think it's important and it's what I'm made to do. It's what we need at this moment, quite frankly.
BRIAN PRICE: Why do you say that?
RODDY BOYD: Because there isn't really other people doing what I do. I should say there are plenty of great reporters out there. And some of them do find business journalism and some of them do it on the regular, but there isn't an organization out there dedicated 24/7 to exposing abuses, or misrepresentations, or quite frankly, just plain old naked fraud as their mission. And our mission is to do it for the common good. You know, we don't take advertisement. We don't short stocks. We don't tell people when the story is coming. We don't do any of that. And I think that's important in this day and age.
BRIAN PRICE: With that, I want to start unpacking some of your most impactful work. And I want to start with Valeant and I want to start with The King's Gambit-- Valeant's Big Secret, which made a lot of waves when it came out. Walk me through your work leading up to what you suspected Valeant was up to. And ultimately, does it start with a hunch? Does it start with a gut instinct? What ultimately led to this discovery that really rocked Wall Street, and finance, and the entire world that Valeant was a part of?
RODDY BOYD: That story is kind of the Southern Investigative Reporting Foundation's approach to journalism in a nutshell, in that through 2013, 2014, 2015, and most of 2015, Valeant was Wall Street's darling and corporate America's darling. And the investors it had attracted and the serious accolades it was generating were unusual.
And I was attracted to it because there was this sort of Olympian battle going on. While it was being lauded, and making many people rich, and attracting star investors, on the other hand, there was a very loud, defined, and serious coterie of Valeant skeptics.
People were doing a great deal of work-- highly credible people, in my estimation. I mean, most publicly would be Jim Chanos, the guy who runs Kynikos Investments-- Kynikos Partners, I believe-- and was quite public that this was a roll-up-- just a company that was using acquisition accounting to its benefit. Eventually, they would not be able to implement across-the-board absurd price increases. There was another short seller out there that was quite public, Fahmi Quadir. John Hampton had written about it extensively. So there were these people who are highly credible.
BRIAN PRICE: And I want to just note, Fahmi was the protégé to Marc Cohodes.
RODDY BOYD: Yeah, yeah. Well, she was at a place called Krensavage Capital Management, I believe. And so you have these highly credible people on both sides. And the journalism, quite frankly, was reflecting that. It was very obvious who was talking to who.
And I don't view my job as just intermediating this fight or just noting that the fight's going on. I wanted to do a lot of work and find out what really is going on. And I took a step, I said, OK, I'm going to try and find something about Valeant that no one knows about. And this is like an absurd thing, right? You're looking for a needle in a stack of needles because everybody's combing over this.
And 4:00 o'clock or at 3:00 o'clock in the morning, I'd woken up one time and couldn't get back to sleep. And I just started scrolling through a Cafepharma message board, which is this kind of pharma industry chat site where people gossip about their bonuses, or talk about what's selling, or this doctor or that manager is a jerk or a prince.
And I found something on like page 14 of Valeant's message board-- you know, screen 14, so it shows you I'd been there a while-- and it was some guy was saying that he was going to get in trouble if he talked about Philidor. And he was being told, you know, telling all these doctors just to call Philidor and it will work out great for the patient.
And he's like, uh, hey, guys, anybody know what Philidor is because they told me not to talk about it internally? So he's just throwing it out there, you know, hoping a rep from another district picks it up. And some guy replied a day later explaining roughly what he thought Philidor was, which was a fulfillment center, but it might be a specialty pharmacy. And there was this cryptic line in it and it's the reason this company is profitable, and in fact in business.
And I was like, well, what's that mean? So I just-- you know, again, so it's 4:30 in the morning now. I crank open my 10-K and I'm like, this company really is benef-- I think Chanos and Hempton had the truth of it. This company is a roll-up and they're not being able to grow organically.
So well, if you can't grow organically, the minute you stop buying big companies for more and more money, and piling on more and more debt, you're going to be in a great deal of trouble. Now that might be in 15 years, and, you know, the stock might be $970, and all the short sellers are bankrupt, but when that day comes, it'll be a reckoning that's going to be cruel. I was like, how is this company Philidor this crux of the company?
So I started making calls and asking people across the industry who might have an idea what it was. The company wasn't talking about it. And it took me weeks. I mean, I'm talking weeks to get an informed sense of what it is. And I finally was able to start pulling documents on the company. They were registered in lots of different states, but you couldn't figure out who is on the board, who was the beneficial owner. There were hold cos on top, like one of those Russian nesting dolls.
And so I was able to disaggregate that after weeks and months. And then I got really lucky just as I was about ready to throw my hands up in exasperation. Because you can't go out to the public, you know, when you're a nonprofit and say, hey, donate or support SIRF, and here's something that might be something, but it might not be anything. Here's what I know and here's what I don't know later. You know, like, that just doesn't happen.
So I was able to find buried somewhere, a copy-- a video copy-- of a proceeding from the California Pharmacy Regulation Board or some such. And they were essentially rejecting the application of Philidor to have a specialty pharmacy in the state of California. Well, that's big news right there. And then it's also big news because California is, what, 10% of the American economy?
So I got lucky there. I got to see a face and a name. And I actually got in my car and I went up there. And I saw the operation. I just figured this might be some storefront kind of like these things you see on side streets of New York City, like little cell phone stores that are like six foot by eight foot.
Not so. This was a massive-- it was in a former, I think, paper mill. I mean, it's multiple 1,000 square feet, 600, 700 employees, and expanding. And you know, well, I was able to get on some glassdoor.com. And they're paying above market wages, so it tells you they're profitable. And I pieced all this together.
And part of what I think makes SIRF, SIRF is we approach the company and I laid all this out-- you know, a very, long, detailed email and series of phone calls to Valeant's press operation-- a woman named Renee Soto at Sard Verbinnen, an outside PR company was. And they kept me going for about a week or two. I held off, I held off, and finally, I get an email from her saying, oh, you know, regarding your questions, just listen to the conference call on Monday.
Well, I'm like, what? They're not reporting earnings. They're not-- what's going on? And I looked at they had moved up their conference call and this was going to be part of it. And I was astounded. I mean, this is companies don't do that. They schedule their calls, and then they don't move them up unless there's a damned good reason. And the only thing I could think of-- and might be totally self-referential and flattering-- was these series of questions I'm asking about Philidor.
And I just put it out at 6:00 that morning, maybe 6:15, the morning of that conference call. I think it was October 15 or 16, 2015. And again, I just thought I had an interesting story. Hey, this might be additive to these, you know, Jim Chanos-- a rich guy-- throwing lightning bolts at Bill Ackman-- a richer guy-- you know, Harvard, Yale guys. I mean, this is just not my milieu.
BRIAN PRICE: Fordham guy.
RODDY BOYD: And I'm a Fordham guy. And so I just throw out that little thing. And I promptly, I think I went for either a run or did some push-ups, showered, shaved, and was making my kids lunch. I turn on my cell phone. Let's say it's 7:15 that morning. I have 19 messages, and then I have a message from my cell phone provider, Verizon, saying, you know, capacity full. You know, you need extra. You know, you need a new plan.
I have texts from people I've never heard of. My email box is at like 44, 48 emails. And