By Rebecca Davis O'Brien
During closing arguments for Martin Shkreli's securities-fraud
trial Thursday, a federal prosecutor told jurors they could now see
"the whole picture," that behind Mr. Shkreli's hedge funds'
impressive performance reports, there was no cash, and behind his
new pharmaceutical company, there were unauthorized stock transfers
and improper payouts.
Mr. Shkreli's lawyer, Ben Brafman, said the government hadn't
told the full story, and didn't prove that Mr. Shkreli had actually
committed fraud. "It is not a crime to aggravate somebody," Mr.
Brafman said. "Stalling...is not evidence of a fraud."
Mr. Shkreli, 34 years old, is on trial facing securities and
wire fraud charges stemming from his management of two now-defunct
hedge funds, MSMB Capital and MSMB Healthcare, and a pharmaceutical
company, Retrophin Inc. Prosecutors allege that he lied to the
investors in the hedge fund, then used cash and stock from
Retrophin to cover the losses.
Mr. Shkreli, who is also facing civil charges brought by the
Securities and Exchange Commission and a $65 million lawsuit filed
by Retrophin, has pleaded not guilty and denied wrongdoing. Mr.
Brafman is expected to finish his summation Friday morning, and the
government will deliver a rebuttal. The jury will then begin
deliberating.
In a comment posted on his Facebook page shortly after court
adjourned for the day, Mr. Shkreli said: "My case is a silly witch
hunt perpetuated by self-serving prosecutors. Thankfully my amazing
attorney sent them back to junior varsity where they belong. Drain
the swamp. Drain the sewer that is the DOJ. MAGA."
In a roughly four-hour summation, Assistant U.S. Attorney
Alixandra Smith detailed four overlapping schemes, piecing together
two-dozen witnesses and dozens of exhibits, from the five-week
trial.
From 2009 to 2011, as Mr. Shkreli courted investors for MSMB
Capital, Ms. Smith said, he told them he had at least $30 million
under investment in the fund, and described a track record of
success in hedge funds.
In fact, Ms. Smith said, the fund never had more than $3
million, and at times was just a couple hundred dollars. After a
disastrous trade in February 2011 wiped out all his investors'
money, MSMB Capital ceased trading activity altogether, and had no
money in its account, said Ms. Smith.
But Mr. Shkreli didn't tell his investors about the loss, to
whom he continued to send performance reports suggesting they were
making impressive returns, Ms. Smith said. Instead, he started
raising money for MSMB Healthcare, using some of the funds to pay
an angry MSMB Capital investor and putting more than $2 million
into his new company, Retrophin.
MSMB Healthcare, Ms. Smith said, "basically existed to funnel
money to Retrophin."
In September 2012, Mr. Shkreli told investors he was shutting
down both funds. Ms. Smith described the following months as
frantic, as Mr. Shkreli -- working with a lawyer from Retrophin --
transferred shares of Retrophin among employees and MSMB investors
to satisfy redemption demands.
"He didn't want to take responsibility for what he did," Ms.
Smith said. "And he didn't want to pay them back himself." After
taking Retrophin public through a reverse merger, Mr. Shkreli
engineered settlements and consulting agreements between Retrophin
and investors from the MSMB funds, Ms. Smith said, without
Retrophin board's approval.
Mr. Shkreli's lawyers didn't call any witnesses in the trial.
But during his summation, Mr. Brafman said the cross-examinations
of government witnesses -- which Ms. Smith, he said, had
"completely ignored" in her closing remarks -- were critical to
"fill out the narrative."
Much of Mr. Brafman's summation focused on the investors in Mr.
Shkreli's hedge funds and Retrophin board members who had testified
for the government, on several occasions describing aspects of
their testimony as "rich people b.s."
Mr. Shkreli had no obligation to repay his investors, Mr.
Brafman said. "If you're committing a fraud, you don't care about
making people whole, " Mr. Brafman said. "Everything he did is
inconsistent with bad faith."
All of the investors eventually made their money back and in
fact made a profit off the sale of Retrophin shares, Mr. Brafman
pointed out. As an aside, Mr. Brafman observed, he puzzled that
some investors seemed not to be able to recall how much money they
had made, sometimes offering estimates that varied by several
hundred thousand dollars.
"Rich people know exactly how much money they have, exactly how
much money they make" Mr. Brafman said, to laughter in the packed
courtroom. "That's how they became rich."
(END) Dow Jones Newswires
July 27, 2017 20:21 ET (00:21 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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