- Caroline Stewart wrote in a chat: "I'm done trusting Martin. I can't believe a word that comes out of his mouth,' during an online chat with a hedge fund executive.
- "He 'a scam artist ... I can't just deal with somebody who lies all the time," Stewart wrote.
- Stewart wrote that Shkreli was lying to investors during phone calls.
A former employee of "pharma bro" Martin Shkreli's hedge fund, during an online chat with a co-worker in 2011, called him "mentally unstable," "a scam artist," and threatened that she would "expose him" and his many lies to investors about the fund's financial health.
'"I'm a bit short on belief here," Caroline Stewart wrote in an AIM chat with MSMB Capital executive Kevin Mulleady in the early summer of 2011, when she was working as a stock analyst at that hedge fund.
"I'm done trusting Martin. I can't believe a word that comes out of his mouth,' Stewart wrote, according to a transcript of that chat read aloud to jurors at Shkreli's securities fraud trial in Brooklyn, New York, federal court.
"If he f---s me over with respect to money one more time, I'm going to expose him," Stewart wrote Mulleady.
She was referring to Shkreli allegedly repeatedly shorting her on what he owed her on salary, paying her irregularly, and then not paying her when he promised.
"What do you say to a guy who shoots off at the mouth and has no intention of delivering," she wrote. "He 'a scam artist ... I can't just deal with somebody who lies all the time."
At the time, Stewart said, Shkreli was pitching investors to get them to place money with him, and in the process of starting up a new drug company, Retrophin.
Prosecutors accuse Shkreli of defrauding investors at his hedge funds by lying to them about their performance, which in contrast to his sunny claims, was poor. They also charge him with looting Retrophin of stock to repay a number of those allegedly ripped-off investors.
Shkreli, 34, denies the charges.
Stewart later testified, when asked by Shkreli's lawyer why she thought he was "mentally unstable," that she said that because, "In my opinion it's crazy to lie so much, particularly about things that are easily uncovered."
Stewart's lengthy diatribe online came about four months or so after she said MSMB Capital "imploded" from a short sale trade of Orexigen Therapeutics stock that left Shkreli's hedge fund owing Bank of America/Merrill Lynch $10 million, according to what he had told her.
Stewart testified Friday that she originally tried to support a morose Shkreli after the failed Orexigen trade, but the AIM chat reveals her deep frustration after he paid her less than her salary entailed, and paid her irregularly at that.
Stewart said that the day of the trade, Feb. 1, 2011, "started out like any other day" at Shkreli's fund.
"Heads down, [people] doing their work, working away," she said.
"As the day went on, it was just becoming kind of a deathly quiet," Stewart testified. "It was a stillness that was eerie."
"Things were just very quiet, very funereal, I definitely sensed there was something wrong, but there was no talk."
The next day, "Martin told me that he had shorted more shares than were outstanding and that he owed Bank of America/Merrill Lynch $10 million," she said.
For the next several days, she said, MSMB Capital "just stopped dead in its tracks."
"It was like somebody had died, in essence that somebody was the fund," Stewart said. "It was very quiet, very morose, somber, and other people were not bothering to show up in the office anymore, except Martin and myself."
Shkreli, who before the failed trade was "normally very energetic, very hyper," now "was different," she said.
"He was very dejected, very down, and nice," Stewart testified.
A day before, when she first took the witness stand, Stewart had said Shkreli could be "cutting" and "nasty" in the office.
Stewart sent Shkreli an email a day after the trade in an effort to cheer him up. "I know things must seem bleak to you," she wrote, but she added that he was the "smartest, most ambitious person I know."
She added that he was "also kindest person I have ever met," in that same electronic missive.
"You're a long-term hold," Stewart wrote, using stock market jargon for a company one expects to hold shares of for a long time in the belief its price will eventually rise
"I felt a little bit bad for him," Stewart said. "He was normally full of energy and sort of larger than life, and he seemed beaten, and I felt grateful for him for giving me a job in the first place when I didn't have a job in the first place, and I wanted to cheer him up."
Within days, Shkreli did cheer up, as he began "brainstorming about what his next move would be."
"After a couple of days ... he bounded back, and he bounced back with the idea of the biotech company Retrophin, that would work on rare disease," Stewart said.
She said she worked on Retrophin from then on.
But by late June, or early July, Stewart had grown sick of Shkreli for not paying her as promised.
"He was still paying, at irregular times, as well as irregular amounts," Stewart said. She said that at times, her paycheck would reflect a salary of $100,000 annually, as opposed to the $150,000 they had agreed on.
In her chat with Mulleady, Stewart complained at length about Shkreli's failure to pay her as promised.
She wrote that she knew about several other workers who Shkreli had allegedly shorted on promised pay.
And she said a new worker had been hired at double what he asked Shkreli for.
"I so sick of hearing all his canned s--- on the phone" during calls with investors, Stewart wrote in her chat. "'Nobody knows the FDA better than we do,'" she quoted Shkreli as saying to those investors.
"'Nobody's smarter or better funded than we are,'" Shkreli also was saying to people at the time, Stewart wrote.
"What utter crap," she wrote.
Stewart also wrote to Mulleady that Shkreli closed MSMB Capital "when it blew up" and started another fund.
That appeared to surprise Mulleady in the chat.
"This is not a conversation to be had on AIM," wrote Mulleady.
Mulleady then suggested he and Stewart have coffee together the next day to continue their conversation.
Stewart said the AIM chat occurred shortly before Shkreli fired her.