Martin Shkreli was Charged For Everything But His Real Crime

23 Dec 2015 | Author: | No comments yet »

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

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.Martin Shkreli, a boastful pharmaceutical executive who came under withering criticism for price gouging vital drugs, denied securities fraud charges on Thursday following an early morning arrest, and was freed on a $5 million bond.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.

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. While the 32-year-old has earned a rare level of infamy for his brazenness in business and his personal life, what he was charged with had nothing to do with skyrocketing drug prices. He is accused of repeatedly losing money for investors and lying to them about it, illegally taking assets from one of his companies to pay off debtors in another. “Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company,” Brooklyn U.S. Agents of the Federal Bureau of Investigation arrested Shkreli at his Midtown Manhattan apartment at about 6:30 a.m. and forced him to walk through a gaggle of photographers outside FBI headquarters.

He is also accused of lying to investors about one of the fund’s size and performance by claiming returns of nearly 36 percent when it had really generated a loss of 18 percent and saying the fund had $35 million in assets when it really had less than $7,000. “It is no coincidence that these charges, the result of investigations which have been languishing for considerable time, have been filed at the same time of Shkreli’s high-profile, controversial and yet unrelated activities,” said a statement on his behalf. 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.

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.” Disclaimer: Comments do not represent the views of INQUIRER.net.

The 62-year-old drug is the only approved treatment for toxoplasmosis, a rare parasitic disease that mainly strikes pregnant women, cancer patients and AIDS patients. 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.

The son of immigrants from Albania and Croatia who did janitorial work and raised him and his brothers in working-class Brooklyn, Shkreli seemed at first to embody the American dream and then to mock it. 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. After dropping out of an elite Manhattan high school, he worked as an intern for Jim Cramer’s hedge fund as a 17-year-old and quickly impressed with his ability to call stocks. 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. It is the preferred treatment for a parasitic condition known as toxoplasmosis, which can be deadly for unborn babies and patients with compromised immune systems including those with HIV or cancer.

Said Capers, the chief federal prosecutor: “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.

He takes often to Twitter and message boards, bragging about his business strategies, musical tastes and politics; he live-streams from his office for long stretches. 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. He backdated records, manufactured a phony loan agreement between Retrophin and a hedge fund, and created sham consulting agreements with Retrophin as a way to route the company’s cash to his earlier investors.

I’m licking my chops over the suits I’m going to file against them.” Earlier, he had denied wrongdoing in a post on InvestorsHub after Retrophin disclosed it had received a subpoena from federal prosecutors and the preliminary findings from its own investigation of Shkreli. He called the company’s allegations “completely false, untrue at best and defamatory at worst.” “Every transaction I’ve ever made at Retrophin was done with outside counsel’s blessing,” he said on the investment blog in February, without identifying the lawyers. After recommending successful trades, Shkreli eventually set up his own hedge fund, quickly developing a reputation for trashing biotechnology stocks in online chatrooms and shorting them, to enormous profit. Widely admired for his intellect and sharp eye, he set up Retrophin to develop drugs and acquire older pharmaceuticals that could be sold for higher profits. Turing, which is less than a year old and has raised $90 million in financing, has followed a similar strategy with the purchase of drugs, including Daraprim.

KaloBios recently acquired the license for benznidazole, a standard treatment for Chagas, a deadly parasitic infection most common in South and Central America. The firm announced plans to increase the cost from a couple hundred dollars for two months to a pricing structure like that for hepatitis-C drugs, which can run to nearly $100,000 for 12 weeks. With the federal charges and regulatory actions, Shkreli could be banned from running a public company, which could put the future of KaloBios into question. The charges suggest that a small group of health-care firms—ones that acquire the rights to drugs and significantly increase their prices—is drawing the scrutiny of regulators and prosecutors, with a possible chilling effect on aggressive drug-pricing strategies.

Here you can write a commentary on the recording "Martin Shkreli was Charged For Everything But His Real Crime".

* Required fields
Twitter-news
Our partners
Follow us
Contact us
Our contacts

About this site