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Martin Shkreli, ‘Pharma Bro,’ Prepares for Trial: ‘I’m So Innocent’

By STEPHANIE CLIFFORDJUNE 22, 2017
https://www.nytimes.com/2017/06/22/business/dealbook/martin-shkreli-trial.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0

Martin Shkreli, former hedge fund manager, “pharma bro” and self-styled bad boy, sat in federal court for a hearing on Monday before his fraud trial begins next week.

Like most defendants, he sat mostly still; like most defendants, he stayed quiet, declining to speak to reporters as he left.

Then he went home, turned on his web camera and live-streamed himself on the computer for almost two and a half hours. He played League of Legends; he filled in Excel models on pharmaceutical stocks and bonds; he patted his cat; he drank Coca-Colas; he checked Twitter. He voice chatted while live chatting in another window while playing online chess. The only sign of his federal case was a window that could be seen briefly, showing a PowerPoint titled “Witness Guide” and a slide on a former boss of his.

This is how a self-promoter goes to trial.

In January 2015, learning that federal prosecutors had opened an investigation, Mr. Shkreli volunteered to meet with prosecutors and F.B.I. agents — without a lawyer. After agents arrested him in December 2015, he continued to talk, making “additional one-off statements,” according to a prosecution filing, even as agents and prosecutors recorded his every word. The next day, at home, he live-streamed for almost five hours. “Sorry I couldn’t live-stream yesterday. Had a lot going on,” he told viewers.

In his business life, Mr. Shkreli, who has run several hedge funds and pharmaceutical companies, is perhaps best known for increasing the price on the drug Daraprim, which treats a parasitic infection, to $750 a tablet from $13.50, when he was chief executive of Turing Pharmaceuticals in 2015.

His trial, in Federal District Court in Brooklyn, is on eight counts of securities and wire fraud. The charges stem from two hedge funds he founded and ran between 2009 and 2012, MSMB Capital Management and MSMB Healthcare, and from Retrophin, a biopharmaceutical company he founded in 2011. Mr. Shkreli has denied the charges.

The indictment contends that Mr. Shkreli lied to investors and potential investors about the funds’ performance, about how much money investors had put into the funds, and about how much he withdrew from the funds for himself.

Investors began to get suspicious after he told them, in September 2012, that he was winding down both funds and that they could redeem their stakes for cash or for shares in Retrophin, according to the indictment. But Mr. Shkreli didn’t give cash to those who had requested it.

According to the indictment, he then arranged to pay the MSMB investors through Retrophin. He created settlements between MSMB investors and Retrophin without board approval, and made up sham consulting agreements with MSMB investors so that Retrophin routed them money.

Asked for a comment, a lawyer for Mr. Shkreli, Benjamin Brafman, said, “Because of the many complicated issues in this trial, I am intent on doing all of my commenting in the courtroom, not in the press.”

Mr. Shkreli is a curious mix of blue-collar-boy-made-good and attention seeker — particularly when that attention is negative.

Born to Albanian parents in Brooklyn who worked as janitors, Mr. Shkreli, 34, attended the competitive public school Hunter College High School in Manhattan, landed an internship at the hedge fund of the CNBC star Jim Cramer in high school, and went on to Baruch College, a City University of New York school.

While at Baruch, he continued working at Mr. Cramer’s company, and at night read patent filings and other drug-research documents, according to a filing by his lawyers. He started his first hedge fund in 2006, then MSMB Capital in 2009, followed by running the pharmaceutical companies Retrophin, Turing and one other.

Vilified by the public and politicians for the Daraprim price increase, Mr. Shkreli responded by buying another drug that treated a rare disease and announcing he would raise the price on that one, too.

Called before Congress last year to testify at a hearing on drug prices — after his indictment, when some public sympathy might have helped — Mr. Shkreli invoked the Fifth Amendment, smirked through the hearing, and afterward tweeted, “Hard to accept that these imbeciles represent the people in our government.”

He harassed a journalist on Twitter until he was banned from the site. Derisively called a “pharma bro” on social media, Mr. Shkreli now uses PharmaBroMS as his handle in League of Legends.

While neither his personality nor the pharmaceutical prices are on trial, Mr. Shkreli’s out-of-court exploits have already complicated his lawyers’ in-court arguments.

A prosecutor also described the behavior of one of Mr. Shkreli’s family members as “less than appropriate,” in a separate hearing on Thursday. A member of the defendant’s family contacted a witness, the prosecutor, Alixandra Smith, said, and “it has veered into the territory of suggesting a witness not testify.”

Mr. Shkreli’s notoriety came into play Thursday as lawyers argued over whether to restrict journalists from portions of jury selection that take place at a sidebar conference. Mr. Shkreli’s lawyers said the negative press coverage had been intense.

A lawyer arguing on behalf of several media organizations, including The New York Times, said that Mr. Shkreli himself helped create his reputation. “Mr. Shkreli live-streamed his life,” said the lawyer, Katherine M. Bolger.

At Monday’s hearing, Mr. Shkreli’s lawyers outlined a few lines of defense.

They indicated that they would portray Mr. Shkreli as a “boy genius,” as his lawyer, Mr. Brafman, put it, who never meant to defraud his investors. In fact, Mr. Brafman said, Mr. Shkreli never did defraud them, as the investors ultimately got their money back.

If Mr. Shkreli testifies, the lawyer said, he will discuss why he worked on these companies, how hard he worked on them, and whether he intended to defraud or was trying to make good on money he lost trading.

A prosecutor, Jacquelyn Kasulis, argued that investors getting money back was not a legitimate defense. Fraud, she said, can mean depriving investors of a right to control their assets.

“There is law here, there are rules, they apply to Mr. Shkreli,” she said.

Mr. Shkreli’s lawyers have also indicated that they will go after Retrophin in their defense. By fall 2014, Retrophin had removed Mr. Shkreli as chief executive, replacing him with Stephen Aselage. Then, Retrophin wanted Mr. Shkreli out of the company altogether, his lawyers have argued. But according to his employment contract, only a felony conviction for “moral turpitude” could oust him.

Mr. Shkreli’s lawyers say Retrophin dealt extensively with federal authorities before his indictment, and knew an indictment was likely, giving them the confidence to remove him from the board even given his employment-contract terms. Retrophin, Mr. Shkreli’s lawyers pointed out, filed a $65 million lawsuit against Mr. Shkreli in August 2015, before his arrest, with many claims similar to the later criminal case.

“There is a motive, that will become crystal clear when people like Aselage testify,” Mr. Brafman said in court on Monday.

Chris Cline, a Retrophin spokesman, said Wednesday that Mr. Shkreli was put on leave as chief executive and “voluntarily resigned” as an officer and board member soon after, in October 2014, “well after the government investigation of Mr. Shkreli had begun.” Mr. Cline said that all of the documents Retrophin gave to the government were in response to grand-jury subpoenas, and that Retrophin cooperated with the government investigation by “providing information relating to those documents and by responding to government inquiries.”

The trial is expected to last six weeks. And Mr. Shkreli sounds confident about it.

“I’m so innocent, the jury, judge and the prosecution are gonna give me an apology,” he said in a recent live stream. (Several of his live streams, available early this week, had been taken down by midweek.)

The cost of defending himself, though, has already affected one of his bragging rights: how rich he is.

Mr. Shkreli told federal authorities he was worth $70 million after he was arrested, Ms. Smith, the prosecutor, said at Monday’s hearing.

But in asking for a reduction in Mr. Shkreli’s $5 million bail, Mr. Brafman, his lawyer, said that his client had no bank accounts, and no valuable assets other than his share in Turing, worth $30 million to $50 million. And Mr. Shkreli is restricted from selling that because of how his stake in the private company is structured, Mr. Brafman said.

Ms. Smith argued against a bail reduction, pointing to recent articles and statements from Mr. Shkreli about his free spending. Those included paying $40,000 to an attendee at a Princeton lecture Mr. Shkreli gave who solved a geometry proof; buying domain names related to journalists who had written about him; offering $100,000 for information leading to the murderer of the Democratic National Committee staff member Seth Rich; buying an Enigma coding machine of the sort used by Nazi Germany in World War II; and buying the sole copy of a Lil Wayne album. (He had already bought, before his arrest, the only copy of a Wu-Tang Clan album for millions of dollars.)

“He has a Picasso,” Ms. Smith noted.

Judge Kiyo A. Matsumoto has yet to rule on the bail matter. And Mr. Brafman characterized some of his client’s words as “preposterous promises.”

“They are still part of this effort, if you will, for him to remain a person in his own right, traveling to the beat of his very unique drummer,” which will become evident during the trial, Mr. Brafman said.

A version of this article appears in print on June 23, 2017, on Page B1 of the New York edition with the headline: Promoter, Pariah, Defendant.

https://www.nytimes.com/2017/06/22/business/dealbook/martin-shkreli-trial.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=second-column-region®ion=top-news&WT.nav=top-news&_r=0