CEO Accused Of Using Company As His Personal Piggy Bank

Martin Shkreli (courtesy Raw Story)
Martin Shkreli (courtesy Raw Story)

With apologies to Keith Olbermann, it’s been amply established that Martin Shkreli is the Worst Person in the World. For those who don’t know, just hours after buying the rights to the anti-parasite drug Daraphim, Shkreli jacked up the price from $13 per pill to $750 per pill. He finally backed down after a firestorm of criticism, saying that he would drop the price to a more reasonable level. But new information offers proof beyond any doubt that the hot lights shouldn’t come off Shkreli any time soon. He’s currently facing a lawsuit from his former company accusing him of looting its coffers to pay both his personal debts and those of his investment firm.

Shkreli founded Retrophin, a drug manufacturer, in 2011. However, in October 2014, Shkreli’s own board abruptly fired him for what Bloomberg’s Paul Barrett described as “stock-trading irregularities and other violations of securities rules.” Later, Retrophin accused Shkreli of selling Retrophin stock, while encouraging people to invest in his company and passing off legal settlements as consulting contracts. Last month, Retrophin sued Shkreli, accusing him of looting the company that he founded.

The complaint¬†claims that after Shkreli’s investment firm, MSNB Capital Management, lost $7 million while investing in obesity drug maker Orexigen, he falsely told MSNB investors that he was winding up the firm to focus solely on Retrophin. He then offered them the chance to redeem their investments with cash or Retrophin stock. Retrophin claims that Shkreli covered his tracks by turning the corporate treasury into his personal piggy bank.

Retrophin claims that Shkreli paid 10 disgruntled MSNB investors $2.7 million in cash, and also gave them 600,000 Retrophin shares. To stave off a lawsuit from Merrill Lynch, MSNB’s partner in the Retrophin deal, he characterized a $900,000 investment that MSNB made in Retrophin as a loan to be paid back with interest–in effect, stealing Retrophin money to pay MSNB debts. The suit also claims that, while looting the company, Shkreli gave Retrophin stock to friends without board approval and used company assets to pay his personal debts.

Retrophin also accuses Shkreli of rooking the company into suing a former MSNB employee, Timothy Pierotti. According to Retrophin, Shkreli used the suit as a dodge to get Pierotti’s Retrophin shares for himself. In a particularly sordid footnote, Pierotti claimed he was harassed by Shkreli for over a year. According to Pierotti, Shkreli hacked into Pierotti’s social media and email accounts and sent harassing messages to Pierotti’s kids.

All told, Retrophin is seeking $65 million in actual damages–$5.6 million in cash, plus the market value of two million shares that were improperly used which were worth more than $59 million at the close of business when the suit was filed. It also wants to claw back $2.9 million worth of Retrophin stock, plus every penny that he earned in his three-plus years at CEO.

Well, at least we have a theory about why Shkreli wanted to sell Deraphim at such obscene levels. He knew this bomb was going to blow, and needed every penny he could get his hands on, given the near-certainty that he would lose this suit–especially if he has to pay treble damages. But if this suit had been publicly known, it’s a safe bet that he never would have been in a position to buy Deraphim in the first place. After all, he nearly ran the company he originally founded into the ground to cover his own bad investments.

Darrell is a 30-something graduate of the University of North Carolina who considers himself a journalist of the old school. An attempt to turn him into a member of the religious right in college only succeeded in turning him into the religious right's worst nightmare--a charismatic Christian who is an unapologetic liberal. His desire to stand up for those who have been scared into silence only increased when he survived an abusive three-year marriage. You may know him on Daily Kos as Christian Dem in NC. Follow him on Twitter @DarrellLucus or connect with him on Facebook. Click here to buy Darrell a Mello Yello.