- Witness testimony in Martin Shkreli's trial is suspended until Friday.
- Prosecutors want to show jurors agreements Shkreli's company made without calling parties to those deals to the witness stand.
- Shkreli's lawyers say that move would violate his constitutional rights.
Martin Shkreli's securities trial came to a temporary halt early Wednesday afternoon after his lawyers objected heatedly to the prosecution's plans to show jurors documents they claim are evidence of fraud, without calling witnesses to back that up.
The documents detail payments that Shkreli's drug company made to investors he had allegedly previously defrauded at two hedge funds he ran, as well as supposedly bogus consulting agreements with some investors.
The trial's judge gave jurors the rest of Wednesday off, as well as Thursday, to allow both sides to file legal briefs on their arguments for and against requiring witnesses for the relevant documents.
Testimony is expected to resume Friday.
Shkreli's lawyer, Benjamin Brafman, said that if he does not get a crack at cross-examining people about their relationship to documents that prosecutors want to use, Shkreli will be denied his constitutional rights to confront witnesses against him.
Brafman suggested that prosecutors were worried that his questioning of witnesses would undercut their claims that the documents in question really show fraud.
"This trial is not open and shut, your honor," Brafman told Judge Kiyo Matsumoto.
In fact, prosecutors have, as recently as Wednesday morning, had witnesses testify about receiving the same kinds of documents that they now want to introduce to jurors without witnesses.
And defense attorneys have subjected each of those witnesses to probing cross-examination.
Brafman said he "was stunned, quite frankly," to learn Tuesday night from his co-counsel in the case that prosecutors planned from now on to show jurors the documents without witnesses.
The documents included settlement agreements that Shkreli reached with investors at two of his hedge funds, as well as consulting agreements with some of those investors.
Prosecutors claim that Shkreli scammed multiple investors in his MSMB hedge funds by lying about the poor performance of those funds, and by refusing to give back the money they believed they had in the funds when they asked him to do so.
Prosecutors also charge that Shkreli defrauded the new drug company he founded, Retrophin, by looting that firm of stock and cash to pay back the ripped-off hedge fund investors.
Prosecutors additionally claim Shkreli used sham consulting agreements from Retrophin to facilitate a number of such payoffs to defrauded investors.
The settlement agreements in dispute Wednesday included the terms of what investors received from Retrophin in exchange for dropping any claims against Shkreli and his hedge funds.
Matsumoto indicated that she was sympathetic to the defense's argument that settlement and consulting agreements should only be shown to jurors if a person who received those agreements takes the witness stand.
"I do think the fundamental right to confront the witnesses and question the witnesses is important," Matsumoto said.
She also noted that "there is a fairly limited universe" of investors whom Shkreli allegedly defrauded, suggesting that it would not be onerous to prosecutors or jurors to have those people called as witnesses.
Brafman said he believed there were fewer than 10 people whom the government argued were defrauded by Shkreli.
Prosecutors told Matsumoto that they believed they had legal grounds for such an end-run around calling those witnesses.
The judge gave them until late Wednesday afternoon to file a brief arguing that view.
Shkreli's trial began in late June. If prosecutors are allowed to introduce the documents to jurors without calling related witnesses, they could rest their case soon.
But if Matsumoto bars that method, prosecutors could be forced to call multiple people to the witness stand, meaning they would be unlikely to rest their case until sometime next week.
The surprising delay in the normal pace of the trial came after Brafman wrapped up an extensive cross-examination of a witness, Lee Yaffe, whom prosecutors had called to detail his allegedly sham consulting agreement with Retrophin.
Yaffe had testified Tuesday that Shkreli proposed paying him off for a failed investment Yaffe's father made in Shkreli's earlier hedge fund, Elea Capital, in 2007. Yaffe said he agreed to accept $200,000 and 15,000 shares in Retrophin through a consulting deal with the company that purportedly had Yaffe doing "research on cluster headaches."
Yaffe testified that he neither intended to actually do that research, and that he was not qualified to do it, in any event.
Yaffe said that on April 1, 2015, which he called the "worst April Fool's day, two FBI agents visited his home in Florida and asked him about the Retrophin consulting agreements.
Yaffe testifed that he "panicked" and claimed the deal was legitimate, as he also did at a subsequent meeting with authorities. But he ended up recanting that claim, and admitted the agreement was a sham.
Authorities gave a non-prosecution agreement with Yaffe, which required him to testify truthtfully about Shkreli, and to pay back $355,000, which represents his cash payments under the consulting deal, the Retrophin shares he received and the investment returns on those shares.
Additional reporting by Rachel Pak and Matthew Zdun.