Martin Shkreli was practically gloating.
Even as the FBI closed in, the biotech wunderkind boasted to federal agents that he’d made a fortune investing in life-saving — and high-priced — medicine. He told them he had built a “billion dollar company” — “single-handedly,” no less — because he was ‘smart and resourceful,” the “best asset” his young company had.
Shkreli had requested the January 2015 meeting and walked in without a lawyer because he wanted to find out what the government was up to and make his case that he had done nothing wrong. It didn’t work.
Now, his own words, memorialized in a previously unreported eight-page FBI memo, are part of the case against the man known as the “Pharma Bro” — the brash, unapologetic personification of skyrocketing drug prices. The 34-year-old former biotech executive and hedge-fund manager goes on trial Monday for securities fraud.
Federal prosecutors accuse Shkreli of using $11 million in stock from Retrophin Inc. to pay off investors who lost money in two of his funds. In announcing the case, Robert Capers, then the U.S. Attorney in Brooklyn, said Shkreli ran his companies “like a Ponzi scheme.” He has pleaded not guilty.
Shkreli is far better known for his role as the founder of another company, Turing Pharmaceuticals AG. There, he gleefully raised the price of a decades-old drug by 5,000 percent. The BBC called him “the most hated man in America.” Shkreli maintains he wouldn’t have been charged if not for the price-gouging accusations, which are unrelated to the trial.
He had long had a flair for controversial outbursts. After invoking his Fifth Amendment right not to testify before a Congressional committee about drug prices, he called its members “imbeciles’’ on Twitter. In January, the social-media platform banned him for harassing a female journalist. He has compared himself to O.J. Simpson, saying he’ll beat the rap because of his fame.
Shkreli, the child of working-class immigrants from Albania and Croatia, has prevailed in the past. While working at a hedge fund as a 19-year-old intern, Shkreli once recalled, he drew U.S. Securities and Exchange Commission scrutiny for a particularly well-time bet against a biotech stock. He said the agency found nothing amiss.
In 2012, a nonprofit watchdog group asked the SEC to investigate him for allegedly manipulating biotech stock prices through his interactions with the U.S. Food and Drug Administration. Though the regulators looked into it, nothing came of that inquiry, either.
In the trial, because of his unusual FBI interview, the federal government may be able to use Shkreli’s words against him – though, generally, only to cast doubt on his truthfulness if he testifies in his defense.
Lawyers tend to forbid their clients from speaking to the Federal Bureau of Investigation on their own. They usually tell targets to keep their mouths shut and avoid volunteering information.
“Having been on both sides, there’s ordinarily no benefit to a person in this situation to speak with the government without counsel,” said Scott Klugman, a former federal prosecutor in Brooklyn, now at Levine Lee LLP in New York. “A potential target is often not aware of the risks.”
Before clients meet with the FBI, defense attorneys often seek an agreement that the subject’s words not be used against them in court. Shkreli didn’t get that deal.
Even with expert help, the encounters can be perilous: Entertaining guru Martha Stewart was convicted of lying to FBI agents about a stock trade during such a session, despite being accompanied by some of New York’s top lawyers.
John Marzulli, a spokesman for acting Brooklyn U.S. Attorney Bridget Rohde, Ben Brafman, a lawyer for Shkreli, and Adrienne Senatore, a spokesman for the FBI’s New York Office, all declined to comment.
In 2015, Shkreli met with two agents and two prosecutors at the Brooklyn U.S. Attorney’s office. He had a lot to say about Retrophin, which he founded in 2011 to develop medicine for rare and life-threatening diseases.
While Shkreli didn’t know what the government was examining, he told agents he wanted to discuss press reports. They included a Jan. 7, 2015 Bloomberg News article, which said federal prosecutors were investigating him for possible securities law violations at Retrophin.
An earlier Bloomberg Businessweek piece said Retrophin’s board had fired Shkreli in September 2014 after finding stock-related irregularities. These included the awarding of Retrophin shares without shareholder approval and his failure to disclose stock grants.
Shkreli wanted to “get to the bottom’’ of that article, he told FBI Agent Christopher Delzotto, according to the memo, which is included in the court file.
First, though, he made sure the agents knew who the FBI was dealing with. “A leader in the biotechnology industry,” he “single-handedly’’ grew Retrophin’s share price from $3 to $25, Shkreli told the agents. He suggested he lost his job because of corporate jealousy.
Shkreli said Retrophin officials rejected him because its board said “he does not listen” and shared too much information on the Internet.
“The board of directors wanted [me] to stop tweeting,’’ he said. They “cared more about their image, than creating value for its shareholders.’’
Shkreli seemed to believe he was being investigated for insider trading, with which he was never charged. He said he “was always careful to warn shareholders prior to divulging any material, nonpublic information to them.’’
At one point, Shkreli said he gave shares to an employee who then “stole millions” from him and “stopped showing up.” He told the agents he sued and “threatened” the man on the telephone, while saying he “never crossed the line.” (Prosecutors now accuse Shkreli of transferring the shares to the man and others at Retrophin while still secretly controlling them. The employee he threatened is now on the government’s witness list.)
The pharma executive defended the performance of his two hedge funds. Shkreli insisted that when he bought shares in Retrophin, investors “encouraged it.’’ He insisted, “in terms of performance, [he] did not misrepresent the fund to its investors.’’
“At the end of the day, no investor in [his hedge funds] has ever lost money,” Shkreli declared.
Actually, at the end of the day, that was the rub for Shkreli. In the view of the government, the hedge fund investors should have lost money.
Ten months later, prosecutors charged him with looting Retrophin coffers to make up for losses in the two hedge funds, MSMB Capital and MSMB Healthcare, which operated out of the same Manhattan offices as Retrophin.
In other words, he arrived at the Brooklyn U.S. Attorney’s office thinking he was helping himself. Instead, he may well have helped the government.