- Two investors said they had to badger Shkreli for months to pay them out for their stakes in his hedge funds.
- Both investors said that they wanted cash, but instead got cash combined with restricted stock in Shkreli's new drug company, Retrophin.
- Shkreli is accused of looting and using Retrophin stock to repay defrauded hedge fund investors.
Martin Shkreli reminded an investor of the autistic savant character from the movie "Rain Man" — but that was because of his intense "focus" on the stock market and not a belief that Shkreli is autistic, that investor testified Monday.
"If your main question is, 'Did Martin Shkreli remind me of the Dustin Hoffman character in 'Rain Main', the answer would be yes," said Schuyler Marshall at Shkreli's securities fraud trial in Brooklyn, New York, federal court.
"That was the impression I had," said Marshall, who is chairman of the Rosewood Corporation, an investment company owned by the Caroline Hunt Trust Estate, which itself was established by legendary oil man H.L. Hunt and his wife, Lyda.
Marshall said he formed that impression during a meeting Shkreli in Texas in 2010, when Shkreli pitched him on having Rosewood invest in his hedge fund MSMB Capital.
"I did not at the meeting conclude that Martin Shkreli was autistic or on the autism spectrum, or make any kind of diagnosis," Marshall told Shkreli's defense attorney, Benjamin Brafman.
Instead, Marshall said, he thought that Shkreli resembled the deeply autistic character, Raymond Babbitt, that Hoffmann played in the movie because, "This was a person who was intensely focused on one small segment of the stock market, and just lived it day and night, and that was his investing advantage."
"My recollection of the movie was that the character was very, very focused on one area ... and he could come up with answers that other people couldn't come up with."
"This," Marshall said, referring to Shkreli, "was an intensively focused, bright guy, who knew his stuff."
When Brafman asked if thought Shkreli was "brilliant," Marshall repeated, "I'd say he impressed me as being smart and highly focused."
Brafman during opening arguments two weeks ago cast Shkreli as a victim of investors and others who called him "Rain Man" behind behind his back because of his eccentric nature.
During an exchange with a courtroom sketch artist days after opening arguments, Shkreli wryly referred to himself as "Rain Man," saying he doesn't forget anything.
Marshall, who ended up personally investing $200,000 in Shkreli's hedge fund, did so after Shrekli made a number of stock recommendations that panned out for Marshall.
But Marshall, as did another investor who testified Monday, later spent months trying to withdraw his investments from Shkreli's fund after Shkreli announced he was ceasing operations.
Shkreli in September 2012 offered Marshall and investors either a cash pay out for their investment, stock in the new drug company he was founding, Retrophin, or some combination of both.
Marshall and the other investor who testified Monday, New Jersey builder Richard Kocher, said they were impressed by Shkreli's promise when they first invested that they would be able to get their money out on just 30-days' notice.
What they got instead were long delays, excuses and, in Kocher's case, he testified, "insulting" counter-offers of "untradeable stock."
Both Kocher and Marshall, testified that instead of getting their cash back a month after they requested, it took months of badgering Shkreli to obtain some form of financial settlement.
When they did, those settlements, in addition to some cash, included shares of Retrophin. That was despite the fact that both had asked for cash, and only cash, when they were told Shkreli's hedge funds were winding down.
Marshall said he was surprised in early 2013 to receive almost 38,000 restricted shares of Retrophin stock, without asking for it while they were still negotiating their settlement.
"I was surprised because we hadn't discussed either receiving any stock or amount of stock," Marshall said.
He also said it was "pretty shocking" to learn later from Shkreli that all of Marshall's stake in MSMB Capital had been rolled into funding Retrophin's startup, without either his permission or his knowledge.
Marshall, after months of wrangling, signed a settlement that called for him to receive $300,000 in cash — which was about equal to what he was told his share in MSMB Capital was worth — plus another 6,300 shares of Retrophin.
While that money was promptly wired to him in the latter half of 2013, Marshall said, he never received a stock certificate for the promised 6,300 Retrophin shares.
Marshall estimated he received another $40,000 to $100,000 from eventually selling off the other shares of Retrophin that Shkreli gave him unprompted before they reached their settlement.
The indictment against Shkreli claims he defrauded investors by misleading them about the performance of his hedge funds, which were money losers, and not money winners. It also claims to repay these investors, he looted Retrophin, which became a public company, of stock to settle their claims against him and the hedge funds.
Kocher testified that Shkreli, in March 2013, while he sought repayment of his investment in the hedge funds, gave him 23,654 shares of Retrophin, which "were restricted, so essentially worthless to me."
They were worthless, Kocher said, because "you couldn't sell the stock," and in any case were on paper worth just one-quarter of the $280,000 Shkreli had told him his initial investments had grown to.
In an email to Shkreli soon afterward, Kocher called the shares "this insulting, untradeable stock." He also in that email warned the hedge fund operator about his failure to pay Kocher, saying that "I will make sure that this goes public and to the appropriate agencies."
"I was just getting the runaround," Kocher testified about his months of pestering Shkreli to get his money.
He also testified "I never got straight answer" when he asked what the actual value if his investment in MSMB Healthcare was at the time he was trying to get his money back.
Kocher eventually obtained a settlement that paid him almost $128,000 in cash, and more than 47,000 shares of Retrophin.
Kocher said it took him up to seven months of selling small blocks of Retrophin shares, 1,000 to 2,000 shares at a time, to get rid of the holding and convert it to cash. Kocher said he could not sell larger blocks of shares because it would drive down the price of the then-thinly traded Retrophin, and hence the value of this settlement.
Shkreli's lawyer, Marc Agnifilo, during cross-examination, noted to Kocher that "you made $150,000" from investing with Shkreli.
Agnifilo then asked if he had ever paid Shkreli "a fee" for making him so much money.
"I don't know that I would pay him a fee," Agnifilo said. "Why would I."
When Agnifilo suggested it would be for the profit Kocher had realized, Kocher dismissed that idea.
"I spent five months trying to get a settlement, and then I spent as much as five months trying to sell the stock," Kocher said. "I'm sure my time is not worth as much as your time," Kocher said to Agnifilo, but added that his time nonetheless is worth money.
"I'm away from my business," Kocher said. "It's costing me money now."