US court finds ‘Pharma Bro’ Shkreli guilty of securities fraud

PUBLISHED : Saturday, 05 August, 2017, 3:18am
UPDATED : Saturday, 05 August, 2017, 8:31am

Martin Shkreli, the eccentric former pharmaceutical CEO notorious for a price-gouging scandal and for his snide “Pharma Bro” persona on social media, was convicted on Friday on federal charges he deceived investors in a pair of failed hedge funds.

A Brooklyn jury deliberated five days before finding Shkreli guilty on three of eight counts. He had been charged with securities fraud, conspiracy to commit securities fraud and conspiracy to commit wire fraud.

“This was a witch hunt of epic proportions,” a smiling Shkreli, flanked by his lawyers, told reporters outside the Brooklyn, New York, courthouse following the verdict. “Maybe they found one or two broomsticks but at the end of the day we’ve been acquitted of the most important charges in this case.”

Prosecutors had accused Shkreli of repeatedly misleading investors about what he was doing with their money. Mostly, he was blowing it with horrible stock picks, forcing him to cook up a scheme to recover millions in losses, they said.

Shkreli, 34, told “lies upon lies,” including claiming he had US$40 million in one of his funds at a time when it only had about US$300 in the bank, Assistant US Attorney Alixandra Smith said in closing arguments. The trial “has exposed Martin Shkreli for who he really is, a con man who stole millions,” added another prosecutor, Jacquelyn Kasulis.

But the case was tricky for the government because investors, including some wealthy financiers from Texas, conceded in testimony at the trial that Shkreli’s scheme actually succeeded in making them richer, in some cases doubling or even tripling their money on his company’s stock when it went public. The defence portrayed them as spoiled “rich people” who were the ones doing the manipulating.

“Who lost anything? Nobody,” defence lawyer Ben Brafman said in his closing argument. Some investors had to admit on the witness box that partnering with Shkreli was “the greatest investment I’ve ever made,” he added.

For the young-looking Shkreli, one of the biggest problems was not part of the case, his purchase in 2014 of rights to a life-saving drug that he promptly raised the price from US$13.50 to US$750 per pill. Several potential jurors were kept off the panel after expressing disdain for the defendant, with one calling him a “snake” and another “the face of corporate greed.”

‘Is he strange? Yes’: lawyer for ‘Pharma bro’ Shkreli tells court he’s a weird, dysfunctional genius

The defendant also came into the trial with a reputation for trolling his critics on social media to a degree that got him kicked off Twitter and for live-streaming himself giving maths lessons or doing nothing more than petting his cat, named Trashy. Among his other antics: boasting about buying a one-of-a-kind Wu-Tang Clan album for US$2 million.

During about a month of testimony, Shkreli appeared engaged at times, grinning when his lawyer described him as a misunderstood misfit. Other times he looked bored, staring into space and playing with his hair.

Shkreli, who comes from an Albanian family in Brooklyn, was arrested in 2015 on charges he looted another drug company he founded, Retrophin, of US$11 million in stock and cash to pay back the hedge fund investors. Investors took the witness box to accuse Shkreli of keeping them in the dark as his scheme unfolded.

“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 US$200,000 with Shkreli in 2012. “It was insulting.”

Will arrested ‘pharma bro’ Martin Shkreli have to hand over his US$2m Wu-Tang Clan album?

Shkreli’s lawyer agreed his client could be annoying, saying, “In terms of people skills, he’s impossible,” and referring to him as a “nerd” and a “mad scientist.” But he said his hedge fund investors knew what they were getting.

“They found him strange. They found him weird. And they gave him money. Why? Because they recognised genius,” Brafman said, adding that they had signed agreements that his client wasn’t liable if they lost their money.

Jurors also heard odd vignettes befitting the quirky defendant: how Shkreli slept on the floor of his office in a sleeping bag for two years; how a drug company board member and former American Express executive wrote an email saying he’d meet Shkreli “only if I can touch your soft skin”; how Shkreli wrote to the wife of an employee threatening to make the family homeless if the man didn’t settle a debt.

Shkreli didn’t testify. But rather than lay low like his lawyers wanted, he got into the act by using Facebook to bash prosecutors and news organisations covering his case.

In one recent post, he wrote, “My case is a silly witch hunt perpetrated by self-serving prosecutors. Drain the swamp. Drain the sewer that is the (Department of Justice.)”

The judge ordered Shkreli to keep his mouth shut in and around the courtroom after another rant to new reporters covering the trial.

Prosecutors “blame me for everything,” he said. “They blame me for capitalism.”