Last weekend, Martin “Pharma Bro” Shkreli had his dreams of a huge payday from gouging the price of two drugs derailed by the U. S. Attorney in Brooklyn. Shkreli was indicted on federal charges that he looted his former company in hopes of appeasing investors in his hedge fund. Well, Shkreli claims he’s the target of a witch hunt.
Shkreli was arrested early Thursday morning and arraigned on a seven-count indictment charging him with securities fraud, conspiracy to commit securities fraud, and conspiracy to commit wire fraud. Prosecutors believe that Shkreli falsely told investors in his two hedge funds, MSNB Capital and MSNB Healthcare, that they were earning double-digit returns. In truth, Shkreli lost millions of dollars on the market. By 2011, MSNB Capital had a grand total of $700 in its accounts and had stopped trading altogether. However, U. S. Attorney Robert Capers accuses Shkreli of passing off MSNB Capital as having $35 million under management.
To cover his tracks, Shkreli allegedly stole $11 million in cash and stock from his biotech company, Retrophin, and used that money to pay defrauded investors. Retrophin’s outside counsel, Evan Greebel, is accused of helping Shkreli pass off the payments as settlement and consulting agreements to stave off uncomfortable questions at audit time.
The result was what Diego Rodriguez, the number-two man at the New York FBI, described as “a securities fraud trifecta of lies, deceit, and greed.” If convicted, Shkreli and Greebel could both get up to 20 years in prison. In a separate move, the Securities and Exchange Commission sued both Shkreli and Greebel for their roles in the fraud, and wants them both banned from ever serving as officers or directors of public companies again.
When Retrophin found out about this and other instances of misconduct by Shkreli, it fired him in 2014 and later filed a $65 million lawsuit against him. The allegations in both the criminal indictment and the SEC complaint closely echo those in Retrophin’s suit.
Federal investigators began taking a closer look at Shkreli as early as 2014–long before his name was known to anyone who doesn’t read The Wall Street Journal or watch CNBC. But Shkreli told The Journal that the feds are on a fishing trip. He thinks that he wouldn’t even have been in court last week had he not announced plans to jack up the price of Daraprim, a critical anti-parasitic drug, by 5,000 percent. Later, he announced plans to raise the price of another drug by a thousand-fold. As Shkreli tells it, the U. S. Attorney, the FBI, and the SEC were under pressure to find something to use against him, no matter how flimsy it was on paper.
“‘Trying to find anything we could to stop him,’ was the attitude of the government. Beating the person up and then trying to find the merits to make up for it—I would have hoped the government wouldn’t take that kind of approach.”
Shkreli also claimed that the government denied him a chance to tell his side of the story in its rush to haul him into court. All he wants, he says, is a chance to let the nation meet “the real Martin Shkreli”–someone who isn’t really as bombastic as he’s portrayed himself in public.
From where I’m sitting, Shkreli is the last person to complain about questionable timing by the U. S. Attorney, the FBI, and the SEC. After all, a little more than a year after Retrophin dumped him, his new company, Turing, announced plans to ramp up the price of Daraprim. Later, he bought KaloBios and announced plans for an equally staggering increase in the price of a drug that treats Chagas disease, a parasitic disease that can cause fatal heart problems. The obvious question–was Shkreli hoping to use the proceeds from those drugs to pay his legal fees in the Retrophin suit?
If that was what Shkreli was banking on, he’s already a dead loser. Within hours of his arrest, he had been forced to resign from Turing, and KaloBios had fired him. You also have to wonder–did Shkreli know this bomb was about to go off, and not tell prospective investors at Turing? And did he also hide this from KaloBios when he was negotiating to buy the company? I may not be an attorney, but if either is the case, he could be facing more lawsuits. Those investors are the ones who deserve our sympathy–not Shkreli.
