The Poster Boy for Corporate Greed
By John Lawrence
Martin Shkreli, CEO of Turing Pharmaceuticals, who bought the drug, Daraprim and then raised the price from $13.50 to $750. a pill was arrested on December 17 by the FBI on fraud charges having nothing to do with his price gouging with Daraprim. Shkreli seemed to back off on his 5000% increase for a life-saving drug after he received a lot of negative publicity but later said that he wished that he had raised the price of the drug even more. A silent chorus went up all over America, “He’s getting what he so richly deserves!” It does seem like Karma, doesn’t it?
Earlier this month Shkreli talked about his second thoughts at a health care conference sponsored by Forbes. “I probably would have raised the price higher. That’s probably what I would have done. I think health care prices are inelastic. I could have raised the price higher and made more profits for my shareholders which is my primary duty. And again no one wants to say it, no one’s proud of it, but this is a capitalist society, capitalist system and capitalist rules and my investors expect me to maximize profits, not minimize them or go half or go 70% but to go to 100% of the profit curve …”
So the ultimate solution for this capitalist is maximizing value for his shareholders (and for himself, by the way) and if a few people who can’t afford this life-saving drug have to die along the way that’s just the cost of dong business, collateral damage, because what’s most important is profit maximization. The Ultimate Solution becomes synonymous with Hitler’s Final Solution.
This is from Nation of Change:
“As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a web of lies and deceit. His plots were matched only by efforts to conceal the fraud, which led him to operate his companies, including a publicly traded company, as a Ponzi scheme, where he used the assets of the new entity to pay off debts from the old entity. When regulators and auditors questioned Shkreli’s decisions, he joined forces with Evan Greebel, who used his law license and training to conceal and further the scheme,” stated U.S. Attorney Robert Capers on Thursday. “The charges and arrests announced today reflect our commitment to hold accountable corporate executives and licensed professionals who betray their positions of trust in order to fraudulently enrich themselves.”
According to the seven-count indictment, between September 2009 and September 2014, Shkreli and his co-conspirators orchestrated three multimillion-dollar schemes to defraud investors and potential investors in MSMB Capital, MSMB Healthcare, and Retrophin. Between September 2009 and January 2011, Shkreli failed to disclose to investors that he had lost all the money he managed in Elea Capital, his prior hedge fund, and that Lehman Brothers had a $2.3 million default judgment against him. Shkreli lied to his largest investor telling him that MSMB Capital had $35 million in assets under management, when in fact it had less than $700 in its bank and brokerage accounts.
After Shkreli bilked approximately $3 million from eight investors, MSMB Capital failed to settle a trade of over 11 million shares of Orexigen Therapeutics, Inc. (OREX) that Merrill Lynch ultimately closed at a loss of over $7 million. While providing investors with fabricated performance updates, Shkreli also allegedly misappropriated more than $200,000 from MSMB Capital to cover his personal and professional debts.
Following the subsequent collapse of MSMB Capital, Shkreli began soliciting investments for MSMB Health while concealing his disastrous past performance, including the $7 million liability that Shkreli owed Merrill Lynch for the February 2011 OREX trades. From approximately February 2011 to November 2012, Shkreli also falsely represented that MSMB Healthcare had $55 million in assets under management. After acquiring $5 million from 13 investors, Shkreli improperly used MSMB Healthcare assets to pay for obligations that were not its responsibility, including the failed OREX trades.
Trifecta: Lies, Deceit, Greed
In an effort to pay off Shkreli’s personal and professional debts, Shkreli, Greebel, and their co-conspirators engaged in a scheme to defraud Retrophin by misappropriating its assets between March 2011 and September 2014. After reportedly lying to the U.S. Securities and Exchange Commission (SEC), Shkreli and Greebel caused Retrophin to pay more than $3.4 million in cash and stocks to settle claims with seven MSMB Capital and MSMB Healthcare investors.
“The charges announced today describe a securities fraud trifecta of lies, deceit, and greed. As charged, Martin Shkreli targeted investors and retained their business by making several misrepresentations and omissions about key facts of the funds he managed. He continued to lie about the success of the investments and used assets from Retrophin to pay off MSMB investors. In the end, Shkreli and Greebel used a series of settlement and sham consulting agreements that resulted in Retrophin and its investors suffering a loss in excess of $11 million. While the charges announced today are significant, they are but one example of what’s left to come as the FBI continues this investigation,” stated FBI Assistant Director-in-Charge Diego Rodriguez.
In 2014, Retrophin’s board fired Shkreli and later sued him for breaching his duty of loyalty to the company. After purchasing the exclusive rights to sell Daraprim, Shkreli gained notoriety by suddenly raising the price of the drug by 5,500%. He also recently bought an unreleased Wu-Tang Clan album for $2 million and sent a campaign contribution to Sen. Bernie Sanders, but the presidential candidate refused to accept the dirty money.
Never one to let grass grow under his feet, Shkreli gained control of another company, KaloBios in November by buying its stock on the open market. KaloBios owned the rights to an inexpensive drug used for decades to treat Chagas’ disease in South America. UC Davis has suspended its clinical trials of the drug, KB003, used to fight Leukemia after Shkreli was arrested. Shkreli’s probable plan was to get the drug approved for use in the US and then jack up the price as he had done with Daraprim. KaloBios shares plunged 53 percent on December 18, the day after the arrest before trading was halted.
Clearly, no one feels sorry for Martin Shkreli. You live by the sword, you die by the sword. Or we might say that if you live by the rules of capitalism, you’ll die by those same rules and no one will mourn your death. The uber-capitalist has made his bed; now he will have to lie in it. He could get 20 years in prison for his failed approach to capitalism. It still might have worked out OK for Shkreli if only he had not attracted such negative attention. Probably lots of other guys are doing the same thing. In fact, all of Wall Street is based on fraud and Ponzi schemes. Bernie Sanders said, “The business model of Wall Street is greed and fraud.”
Earlier this year five major Wall Street banks pleaded guilty to fraud and agreed to pay $5.6 billion in fines. The biggest global banks have paid more than $60 billion in penalties over the past two years to resolve allegations of wrongdoing. So what Shkreli was doing was nothing more than what the business model for Wall Street consists of. They’re all doing it, but this won’t constitute much of a defense for Shkreli. He’s being made an example out of just like Bernie Madoff was.
A few weeks ago I reported on Shkreli in a piece entitled A Greedy Capitalist Gets His Comeuppance. One San Diego Drug company, Imprimis, developed a generic pill that would accomplish the same results as Daraprim, and they would sell it for a dollar a pill closer to the actual manufacturing costs and still make a profit. I said at that time that this would be the downfall of Martin Shkreli and Turing Pharmaceuticals.
Adios, you Greedy Bastard.
However, it seems that now Shkreli has fallen even farther. He might even have to turn over his Wu Tang Clan album in order to pay off his debts. No one is crying for him. He called himself “the world’s most eligible bachelor.” Now he might have to find his romantic partners in a jail cell. It’s not a pretty picture, but he deserves it. He might even be in the position of commiserating with Ponzi scheme king, Bernie Madoff.
The lede to satirist Andy Borowitz’s take down of Shkreli posits: “It’s been reported that Shkreli’s lawyers have raised their fees 5000%.” Tongue in cheek, but all is fair and square under the rules of capitalism. Now that the shoe’s on the other foot, Shkreli will have to live with the rules he so loved and endorsed.
Correction: This line in the original post “It’s been reported that Shkreli’s lawyers have raised their fees 5000%.” was not attributed to satirist Andy Borowitz.