Shortly before 11 p.m. on February 4, Valeant Pharmaceuticals chief executive officer Howard Schiller took off from Dulles International Airport for home. It had been a long, tiring day of preparation, congressional testimony with plenty of blunt questioning and afterwards, the inevitable debriefing with his legal and public relations advisory team.
It was not a lost day though: speculators in Valeant’s shares perceived Schiller as having done well and the stock price closed up $3.87, an unexpected development when a CEO is called to account for his company’s business model. He certainly helped his cause when he flatly admitted the company made mistakes and understood the pain its drug pricing policies had caused.
To be sure, it did not go flawlessly — there were several broadsides landed from the likes of Congressman Elijah Cummings, the head of the House Committee on Government Oversight and Reform panel that subpoenaed him. And a day earlier the Democratic committee staff had posted a letter–culled from discovery in the Committee’s ongoing investigation–with several deeply unflattering references to Valeant’s business practices.
Still, whatever else that day brought Schiller, it can be safely assumed that had the Representatives known he flew home on Valeant’s G650, the world’s most expensive private jet, not even sitting next to a smirking Martin Shkreli–whose colleague was castigated for acknowledging Turing Pharmaceuticals threw a $23,000 party for its sales force on a yacht–could have shielded him from some populist outrage. (Congress has a track record of criticizing executive’s private jet flight at companies under investigation.)
This is Valeant’s G650:
So Schiller’s flight home was good. He didn’t have to sit on plastic seats waiting to be boarded by zones; he just walked right onto the plane. Nor did he have to shimmy into a closet-sized restroom that smelled like a mashup of Lysol and Mennen Speed Stick. There was plenty of leg room and he was always free to move about the cabin. In case he wanted a snack, the refrigerator has its own IP address that communicated its inventory to the D.C. based ground crew who restocked it prior to takeoff.
Exactly 57 minutes after take-off Schiller landed at the Morristown, New Jersey airport, a 20-minute car service ride to his home in Short Hills. Flying home at over 500 miles per hour, Valeant’s newly-appointed CEO went from Dulles’ suburban D.C. tarmac to his northern New Jersey house in less time than he would have been inside an airport prior to boarding a commercial flight.
Flight records reviewed by the Southern Investigative Reporting Foundation suggest Schiller has quickly grown fond of the G6, having flown three times in the past month with his family and friends to a small regional airport in Montrose, Colorado near his Telluride ski house.
Those drug pricing policies that necessitated Schiller’s D.C. interlude have made Valeant a great deal of money, or at least enough to maintain a fleet of three Gulfstream jets: a G4, G5 and G6. The G5 and G6 are owned through a company subsidiary, Audrey Enterprise LLC. It keeps them in Morristown, 23 miles away from its U.S. headquarters in Bridgewater.
Valeant is hardly alone in having a fleet of its own planes but it certainly chose from the high-end of the menu. The G6 cost just under $65 million when it was delivered in 2013 and the G5 was about $59 million in 2012. It costs between $2- and $3 million annually to staff, insure, house and maintain the three jets before variable costs like fuel–a 1000 nautical mile trip in the G6 uses about 860 gallons–and cabin crew. When underway, the cost per hour is about $4,500 for the G5 and G6 and around $3,400 for the G4, although the recent drop in fuel prices probably puts these figures on the high side.
Under the best of circumstances a company extending its leadership the personal use of a major corporate asset like an aircraft can be fraught with potential headaches. At the top of that list is what happens when that company comes in for some bad publicity; then there is what happened to Valeant, which has become a corporate pariah.
Most chief executives would be hard-pressed to afford regular personal travel aboard a Gulfstream or its equivalent but Schiller’s personal financial situation is not like most chief executives. A Goldman Sachs partner at the time of its 1999 initial public offering–where his 0.375% stake became $61.87 million in cash–chartering his own plane isn’t likely beyond his means. His salary is $4.8 million and he currently holds a little over $36 million in Valeant shares.
Valeant’s 2014 proxy statement explicitly permitted Schiller’s predecessor Michael Pearson–who is still on medical leave and recuperating in his New Vernon, N.J. home–to use company aircraft as he saw fit. In 2014 it valued this use at $195,614 (although it stopped paying his taxes for these flights.) Schiller’s employment agreement does not mention aircraft use but in the proxy he and Pearson were the only executives with personal use allowances.
On Friday a Valeant spokeswoman, Renee Soto of Sard Verbinnen & Co., was emailed a pair of questions about “the optics” of flying back from the Congressional hearing on a G6 as well as Schiller’s personal use of company aircraft. She did not reply.