Shkreli’s ve­rac­ity at­tacked at trial

De­fense says his in­vestors did well

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - RENAE MERLE

NEW YORK — Tes­ti­mony in the trial of a for­mer hedge fund man­ager and drug com­pany chief ex­ec­u­tive sped to a close Thurs­day with pros­e­cu­tors por­tray­ing Martin Shkreli as a liar who tricked in­vestors into forking over mil­lions and then hid his huge losses.

Shkreli told “lies upon lies,” As­sis­tant U.S. At­tor­ney Alixan­dra Smith told a Brook­lyn jury in clos­ing state­ments that lasted more than two hours. He lied about the size of his hedge funds, whether they had an au­di­tor and how they were per­form­ing. He lied about at­tend­ing Columbia Univer­sity, Smith said.

Smith metic­u­lously re­counted lies pros­e­cu­tors say Shkreli told to in­vestors to per­suade them to give him money, in­clud­ing that his hedge fund was worth mil­lions when it was ac­tu­ally broke. “Depend­ing on which in­vestors he is talk­ing to, he changes the story,” she said. “The de­fen­dant was mak­ing these mis­rep­re­sen­ta­tion be­cause he knew by say­ing these things he would get peo­ple to give him money.”

While Smith re­peat­edly called him a liar, Shkreli, 34, sat a few feet away smirk-

ing and swivel­ing in his chair. His father, who has at­tended ev­ery day of the trial, sat in the front row close by. Shkreli — who has been nick­named “Pharma Bro” on so­cial me­dia — earned no­to­ri­ety for rais­ing the price of a vi­tal drug used by AIDS pa­tients by 5,000 per­cent and then pub­licly lament­ing that he didn’t raise it more.

But that is not why he is on trial. Shkreli is charged with de­fraud­ing in­vestors at two hedge funds that he founded, MSMB Cap­i­tal and MSMB Health­care. When one of the funds col­lapsed, rather than tell in­vestors, Shkreli raised more money and then used the cash to start a phar­ma­ceu­ti­cal com­pany, Retrophin, ac­cord­ing to pros­e­cu­tors. He also used in­vestors’ money to pay off per­sonal debts. When the hedge fund in­vestors be­gan to ask for their money, Shkreli paid them back us­ing Retrophin money and stock.

The ar­range­ments were not ap­proved by Retrophin’s board of di­rec­tors and cost the com­pany more than $10 mil­lion, ac­cord­ing to pros­e­cu­tors.

“Retrophin was not re­spon­si­ble for the lies that were told to” Shkreli’s hedge fund in­vestors, Smith said. “He made a choice to steal that money … and to use it to pay back the in­vestors he de­frauded.”

Shkreli’s de­fense team has sought to re­but the ac­cu­sa­tions with a sim­ple ar­gu­ment: His in­vestors were not vic­tims but wealthy peo­ple whom Shkreli made even richer. De­spite trou­bles with his hedge funds, Shkreli’s in­vestors walked away with a profit, de­fense at­tor­neys said. Dur­ing the trial, the de­fense team did not of­fer any wit­nesses, and Shkreli did not tes­tify.

In clos­ing ar­gu­ments later Thurs­day, Shkreli de­fense at­tor­ney Ben­jamin Braf­man paced in front of the jury and called his client a ge­nius who did not in­tend to de­fraud in­vestors.

“If Martin Shkreli wanted to de­fraud these peo­ple, why did he sleep in his of­fice for two years in a sleep­ing bag to make Retrophin a suc­cess?” an an­i­mated Braf­man asked. “Maybe he screwed up, maybe he made mis­takes,” the at­tor­ney said, but “Martin Shkreli was al­ways truth­ful to the mis­sion to make Retrophin a suc­cess.”

If Shkreli de­frauded his in­vestors, why did they con­tinue to say pos­i­tive things about him? Braf­man asked. Why didn’t Retrophin re­quire them to re­turn the money Shkreli gave them?

“This is rich peo­ple B.S., ladies and gen­tle­man,” he said.

Shkreli’s fate will soon be in the hands of the jury — five men and seven women — who have sat through more than four weeks of tes­ti­mony that veered be­tween tech­ni­cal ex­pla­na­tions of how hedge funds work and com­pli­cated ac­count­ing terms to sto­ries of Shkreli’s in­ter­ac­tions with in­vestors and em­ploy­ees, in­clud­ing one he threat­ened to drive into home­less­ness. He told one in­vestor that he wanted to be like Steve Co­hen, the bil­lion­aire hedge fund in­vestor. One of Shkreli’s in­vestors, a gay man, tes­ti­fied that the for­mer hedge fund man­ager some­times made him feel “un­com­fort­able” by say­ing he might try to have sex with a male co-worker.

The tes­ti­mony has painted Shkreli as a some­times so­cially awk­ward man who nonethe­less per­suaded dozens of wealthy in­vestors to fork over mil­lions of dol­lars. Pros­e­cu­tors say that is be­cause he is a con man, while his de­fense team says in­vestors were bet­ting on Shkreli’s ge­nius.

The case has cap­tured the pub­lic’s at­ten­tion as much for the charges Shkreli faces as his out­size per­son­al­ity. Even af­ter be­ing charged with eight counts of se­cu­ri­ties and wire fraud, Shkreli ap­peared to rel­ish the me­dia at­ten­tion, taunt­ing re­porters on Twit­ter and smirk­ing his way through a con­gres­sional hear­ing about ris­ing drug prices.

Shkreli’s an­tics con­tin­ued through­out the trial. One day he ca­su­ally strolled into a room full of re­porters and mocked pros­e­cu­tors as the “ju­nior var­sity” and then lamented that “the world blames me for al­most ev­ery­thing.” That in­ci­dent drew a re­buke from U. S. Dis­trict Judge Kiyo Mat­sumoto, who or­dered him to stop talk­ing to re­porters in the court­house or out­side on the street.

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