Martin Shkreli, face of a new economy, charged with an old-school crime

23 Dec 2015 | Author: | No comments yet »

Martin Shkreli, reviled pharmaceutical CEO, posts bail after arrest on fraud charges.

Martin Shkreli, center, leaves the courthouse after his arraignment in New York, Thursday, Dec. 17, 2015. A boyish-looking entrepreneur who became the new face of corporate greed when he jacked up the price of a lifesaving drug fiftyfold was led away in handcuffs by the FBI on unrelated fraud charges Thursday in a scene that left more than a few Americans positively gleeful.Until Thursday, Martin Shkreli, the defiant CEO of upstart Turing Pharmaceuticals, boasted that he would personally put up $2 million in bail for rapper Bobby Schmurda, jailed since last year for conspiracy to commit murder.It is not clear why Shkreli decided to begin hosting these livestreams on YouTube, that feature him sitting in front of his computer while engaging with fans who message him, checking his OK Cupid profile and playing his guitar, among other things.

The Federal Bureau of Investigation, known for its poker-faced men in black, engaged in a dry little chuckle at the expense of newly arrested — and released — Turing Pharmaceuticals CEO Martin Shkreli, one of the most hated men on the internet who revels in ticking people off. Martin Shkreli, a 32-year-old former hedge fund manager and relentless self-promoter who has called himself “the world’s most eligible bachelor” on Twitter, was arrested in a gray hoodie and taken into federal court in Brooklyn, where he pleaded not guilty. Shkreli, who has become a lightning rod for growing outrage over soaring prescription drug prices, was arrested before dawn at the tony Murray Hill Tower Apartments in midtown Manhattan. It was a dramatic turn of events for Shkreli, who in recent months became a pariah for his controversial remarks in the press and taunts on social media outlets, including to Democratic presidential candidate Bernie Sanders. Prosecutors said that between 2009 and 2014, Shkreli lost some of his hedge fund investors’ money through bad trades, then looted Retrophin, a pharmaceutical company where he was CEO, for $11 million to pay back his disgruntled clients.

Shkreli, 32, now CEO of Turing Pharmaceuticals AG and KaloBios Pharmaceuticals, has a history of speculative financial gambits and fractured relationships. There were also jokes about Bill Murray making a break for the album; according to the unusual terms of the sale, Murray is the only person allowed to take it away from the purchaser. Turing later announced that while it would not lower the drug’s per-tablet price, it would negotiate agreements with health groups on wholesale prices. In November, he gained control of another drug company, Kalobios Pharmaceuticals, whose stock price plummeted on news of his arrest, falling 53.24 percent to $11.03 before trading was suspended.

In September, Shkreli was widely vilified after a drug company he founded, Turing Pharmaceuticals, spent $55 million for the U.S. rights to sell a medicine called Daraprim and promptly raised the price from $13.50 to $750 per pill. Reveling in controversy, Shkreli made waves earlier this month by buying a secret Wu-Tang Clan album for $2 million, “Once Upon a Time in Shaolin.”

Attorney Robert Capers said at a news conference that Shkreli “essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off defrauded investors in the prior company.” Authorities highlighted what they called the “brazenness” of his actions. The move enraged patients, doctors and hospitals and made Turing, along with Retrophin and other companies, the focus of a bipartisan Senate investigation. Headlines called the Brooklyn-born Shkreli such thing as “America’s most hated man,” the “drug industry’s villain” and “biotech’s bad boy” — and those were just some of the more printable names.

Experts say that a flurry of developments affecting the marketplace for new drugs over the last decade are now converging and conspiring to drive prices up. Hillary Clinton called it price-gouging and said the company’s behavior was “outrageous.” Donald Trump called Shkreli “a spoiled brat.” Bernie Sanders returned a donation from Shkreli. The stage was set a decade ago, Miller says, when the patents on many innovative new drugs began to expire and waves of generics began reaching the market.

Attorney’s Office for the Eastern District of New York (EDNY) and the Securities & Exchange Commission,” a representative said in a statement late Thursday. “(He) also strongly denies the charges regarding the MSMB entities, which involve complex accounting matters that the EDNY and SEC fail to understand,” the representative added. The market tolerated these price hikes, because so many patients were shifting to generics. “For every patient who went on an expensive new drug,” he says, “I could move 10 patients to a generic product.” No longer, he says. The indictment, the result of an ongoing investigation, also charged Evan Greebel, a former partner at law firm Katten Muchin Rosenman who was Retrophin’s outside counsel. While most patients’ copayments will be $10 or less a month, insurance companies will be stuck with the bulk of the tab, potentially driving up future treatment and insurance costs. “Al Capone was brought down for tax evasion, but he committed many worse crimes,” Weissman said. “So if Shkreli’s arrested for securities violations, it’s a comparable justice.” Shkreli is known as a prolific user of Twitter and often livestreams his work day over the Internet, inviting people to chat with him at his desk.

Capers, the chief federal prosecutor, sidestepped a question about whether authorities had seized Shkreli’s album, and said: “We’re not aware of how he raised the funds to buy the Wu-Tang album.” Last month, Shkreli was named chairman and CEO of KaloBios Pharmaceuticals after buying a majority stake in the struggling cancer drug developer. Finally, much of the innovation is taking place at biotech companies, rather than traditional drug manufacturers, which used to produce hundreds of drugs. “When you’re a biotech company,” he says, “you may only have one product – you may not have another product – and you feel obligated to extract the maximum that you can.” Shkreli and Turing represent another dimension of the drug-pricing crisis, one that prompted the Senate Special Committee on Aging to hold a Dec. 9 hearing as part of a wider investigation.

Last October, Retrophin’s board simultaneously credited Shkreli for creating “a thriving biopharmaceutical company that has improved the lives of patients with rare disease” and fired him. His new firm, Turing, bought the rights to Daraprim, a generic drug used to treat a parasitic infection called toxoplasmosis, which poses severe risks for patients with weakened immunity, including pregnant women and their fetuses and patients with HIV and cancer. He in turn provoked his critics, and was often vocal on Twitter and other online platforms about his business strategies, politics and even musical tastes. He said he would price the drug, benznidazole – which is available in many Latin American countries for $60 to $100 – to a price structure similar to Hepatitis C drugs that can cost $94,000, according to a statement from the Drugs for Neglected Diseases Initiative.

In one, he can be seen sitting at a computer in a plain white room with two electric guitars and an amplifier visible behind him while he answers infrequent questions from viewers. He is an executive of a team of players, called Team Imagine, which participates in the online multiplayer game League of Legends, according to various media reports.

Thursday’s charges relate to Shkreli’s management of MSMB Capital Management, whose closure he announced in 2012, and his time as CEO of Retrophin from 2012 to 2014. After MSMB suffered devastating trading losses in 2011 and ceased trading, Shkreli for months sent fabricated updates to investors touting profits of as high as 40 percent since inception, the indictment said.

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