‘Pharma Bro’

In­vestors say Martin Shkreli was shady — and prof­itable

The Guardian (Charlottetown) - - BUSINESS - BY TOM HAYS

The jury at the se­cu­ri­ties fraud trial of “Pharma Bro” Martin Shkreli has heard in­vestors ac­cuse the quirky former biotech CEO of re­peat­edly giv­ing them the runaround when they tried to pull their money out of his fail­ing health care hedge fund.

But the gov­ern­ment wit­nesses have made a con­ces­sion that the de­fence hopes plays in its favour: In the end, they made a killing.

Whether ju­rors at the trial that be­gan June 26 in fed­eral court in Brook­lyn will see Shkreli’s clients as vic­tims of a crime is cen­tral to a case that’s fea­tured odd sub­plots, in­clud­ing a self-serv­ing rant by the de­fen­dant to re­porters and email ev­i­dence by a men­tor about want­ing to touch his “soft skin.”

Tes­ti­mony re­sumed Thurs­day with the gov­ern­ment still in the mid­dle of its case.

The lack of clear-cut fi­nan­cial harm sep­a­rates the al­leged fraud from oth­ers like Bernard Mad­off’s no­to­ri­ous Ponzi scheme, which wiped out the nest eggs of or­di­nary in­vestors. Pros­e­cu­tors have ar­gued it doesn’t mat­ter be­cause Shkreli still broke the law by blow­ing in­vestors’ funds with bad stock picks and then ly­ing to them for months — or even years — while he cooked up a way to get out of it.

“I don’t think it mat­tered to him — it was just what he thought he could get away with,” said Richard Kocher, a New Jersey con­struc­tion com­pany owner who in­vested $200,000 in with Shkreli in 2012. “It was in­sult­ing.”

Dar­ren Blan­ton, a Dal­las­based in­vest­ment firm founder, tes­ti­fied Shkreli stalled for three years when he tried to re­deem his $1.3 mil­lion in­vest­ment.

Over time, “I was wor­ried Martin might be ly­ing to me and not cred­i­ble,” Blan­ton, who no­ti­fied the Se­cu­ri­ties and Ex­change Com­mis­sion.

Shkreli, 34, was ar­rested in 2015 after he al­ready had gained no­to­ri­ety by us­ing his Tur­ing Phar­ma­ceu­ti­cals com­pany to raise the price of a life-sav­ing med­i­ca­tion by 5,000 per cent and for his non­stop pos­tur­ing and trolling on so­cial me­dia, a com­pul­sion that spawned the “Pharma Bro” nick­name.

Fed­eral au­thor­i­ties fo­cused in­stead on his MSMB Cap­i­tal hedge fund, ac­cus­ing him of ly­ing to in­vestors by boast­ing about too-good-to-be-true re­turns at a time when he had lost more than $7 mil­lion on a 2011 trade and let the fund dwin­dle to about $2 mil­lion in as­sets. He’s also charged with start­ing a new drug com­pany, Retrophin, and loot­ing it for $11 mil­lion to pay his in­vestors back.

An un­re­pen­tant Shkreli has de­nied wrong­do­ing, com­plain­ing to re­porters last month that pros­e­cu­tors “blame me for ev­ery­thing. They blame me for cap­i­tal­ism.” The com­ments prompted the judge to or­der him to shut up about the case in and around the court­house.

On cross-ex­am­i­na­tion, the in­vestor wit­nesses have ad­mit­ted that Shkreli made set­tle­ment deals that ul­ti­mately proved prof­itable. Blan­ton got $2.6 mil­lion — $200,000 in cash and the bal­ance from shares of Retrophin he sold, and in ad­di­tion still holds shares worth $3 mil­lion; Kocher made an es­ti­mated $350,000 the same way; a third wit­ness, Schuyler Mar­shall, dou­bled his ini­tial $200,000 in­vest­ment.

Mar­shall, an­other Dal­las­based fi­nancier, tes­ti­fied that Shkreli re­minded him of “Rain Man,” but that didn’t mean he was mak­ing fun of him, as the de­fence has sug­gested.

Mar­shall saw Shkreli as more of a po­ten­tial rain­maker “who was in­tensely fo­cused on one small seg­ment of the stock mar­ket, and just lived it day and night, and that was his in­vest­ing ad­van­tage.”

AP PHOTO

In this June 26 file photo, former Tur­ing Phar­ma­ceu­ti­cals CEO Martin Shkreli, left, ar­rives at fed­eral court with his at­tor­ney Ben­jamin Braf­man in New York. The jury at the se­cu­ri­ties fraud trial of “Pharma Bro” Martin Shkreli has heard in­vestors ac­cuse the quirky former biotech CEO of re­peat­edly giv­ing them the runaround when they tried to pull their money out of his fail­ing health care hedge fund.

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