Two former backers testify ‘pharma bro’ misled them
Shkreli’s defense argues no one was financially harmed
Martin Shkreli, the NEW YORK so-called “Pharma Bro,” is all about disclosures on social media, but when it came to business he was hardly transparent, according to two former investors.
The investors testified Monday that Shkreli misled them and stalled their efforts to cash out — nearly wrecking one of the men’s plans for another financial deal.
The investors described a months-long “runaround” of unanswered emails and phone calls before they recovered their initial stakes, along with large profits.
The testimony of Richard Kocher, a New Jersey building contractor, and Schuyler Marshall, a Texas attorney, was aimed at supporting prosecution arguments that Shkreli lied and violated financial rules while allegedly scamming investors in two of his former hedge funds.
He is also accused of illegally reimbursing some of the hedge fund investors with stock and financial resources from Retrophin, a pharmaceutical company he founded and previously headed.
However, Shkreli is best known publicly for imposing a 5,000% price hike on a drug used to treat those with the HIV virus and others with weakened immune systems.
Challenging Kocher and Marshall under cross-examination, defense lawyers argued that Shkreli did nothing wrong and stressed that both men ultimately were made financially whole.
Monday’s proceedings underscored a legal question underlying the trial: Could Shkreli be convicted on conspiracy and securities fraud charges if his investors weren’t financial victims but instead made money?
Kocher detailed what he char-
acterized as the “painful process” of trying to recover his $200,000 investment that started in September 2012 when Shkreli unexpectedly notified investors about plans to close the funds. The announcement offered repayments with cash, Retrophin stock or a combination of the two.
Shkreli stalled redemption efforts well into 2013, Kocher testified in response to prosecution questioning. Shkreli offered repayment through Retrophin stock that could not immediately be sold or traded, a move Kocher likened to “an insult.”
Kocher said he felt betrayed because he had contributed $100,000 “on a day’s notice” to help Shkreli’s funds survive a financial squeeze.
Subsequently, Kocher faced a tough spot of his own. He needed his money back to finalize a planned real estate purchase in New Jersey, the businessman testified.
“My problem was I needed cash,” Kocher said, explaining that Shkreli’s delays forced him to recruit a partner to salvage the property deal.
He gave Shkreli repeated reminders about that episode, threatened legal action and accused Shkreli of having a conflict of interest by running the hedge funds and Retrophin simultaneously.
Kocher said he finally received $350,000 in cash and Retrophin stock in a May 2013 agreement. Responding to questions from Shkreli defense lawyer Marc Agnifilo, Kocher acknowledged the settlement surpassed his initial investment.
“I spent five months just trying to get a settlement and then five months trying to sell the stock,” responded Kocher, who added that he also had to pay the attorney he hired for a potential lawsuit. “I’m sure my time’s not worth what your time is, but it’s worth something.”
Marshall recounted a similar effort to recover the $200,000 investment he’d made through a retirement account. He said Shkreli misled and “shocked” him by investing most of one fund’s assets in Retrophin, not a mix of publicly traded health care stocks.
However, Marshall ultimately recovered as much as $400,000 in cash and Retrophin stock, poten- tially doubling his investment, he testified.
Answering questions from lead defense attorney Benjamin Brafman, Marshall said he made the investment because he was impressed by Shkreli’s near-encyclopedic knowledge.
Marshall acknowledged he might have said Shkreli reminded him of Rain Man, the title character of the 1988 movie in which actor Dustin Hoffman portrayed an autistic savant. He said Shkreli surprised him by instantly recounting tests on an experimental drug that Australian company Prana Biotechnology developed to treat Alzheimer’s disease.
The 2013 results showed the medication seemed to reduce damage to brain cells in mice. But Shkreli provided arguments to prove the findings would stop Alzheimer’s disease, or make Prana a good investment, Marshall testified.
“I spent five months just trying to get a settlement and then five months trying to sell the stock.” Richard Kocher, a building contractor