Biotech and Pharma

Martin Shkreli fraud trial could go to jury next week; judge slams lawyers for arguing 'like two little children'

Key Points
  • Prosecutors are expected to rest their case against the "pharma bro" on Monday or Tuesday.
  • The trial judge reprimanded lawyers for sniping at one another during arguments.
  • Shkreli's lawyer said prosecutors "have not established ... that Mr. Shkreli did anything wrong."
Martin Shkreli arrives to federal court in Brooklyn on July 21st, 2017.
Dan Mangan | CNBC

Jurors in the Martin Shkreli securities fraud trial could begin considering his fate late next week, as prosecutors indicated Friday that their case is winding down.

If jurors do begin deliberations, it might be just in time given the fraying nerves that have become evident among prosecutors and defense attorneys during the long trial of the notorious "pharma bro" Shkreli.

The trial judge twice in the past two days has reprimanded lawyers on both sides for making snarky comments about one other.

"Look, this is like two little children arguing," Judge Kiyo Matsumoto snapped Friday in Brooklyn, New York, federal court, where one of Shkreli's lawyers, Marc Agnifilo, and Assistant U.S. Attorney Alixandra Smith had exchanged verbal digs.

"You can be the adult in the room," Agnifilo replied, trying to make light of the moment.

"You be the adult in the room," Matsumoto shot back.

"It doesn't do anything good," Matsumoto said of the lawyers' bickering.

The judge added that she found "some of the language" in legal filings both sides made on Thursday was "in my mind ... really unacceptable."

Prosecutors and defense lawyers have squabbled in recent days over the prosecution's bid to introduce multiple documents into evidence without having to call witnesses to explain the relevance of those documents.

Shkreli's lawyers have said in legal papers that the prosecution is "deathly afraid" of calling those witnesses to testify because, "like its earlier witnesses, their credibility will not withstand cross examination."

Prosecutors indicated they might rest their case on Monday, or Tuesday at the latest.

The defense, in turn, implied it may just call several witnesses, at the most.

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That would set the stage for closing arguments to be held by the latter part of next week.

Although the defense did not say Shkreli will not testify, it seems very unlikely that the 34-year-old former pharmaceuticals executive will take the witness stand in his own defense.

Shkreli's trial began the last week of June, almost two years after he first came to public light and sparked widespread outrage for raising the price of an anti-parasite drug by more than 5,000 percent. The price hike, at his former drug company Turing Pharmaceuticals, is not related to the current case.

Shkreli is accused of defrauding multiple investors at two hedge funds he ran in New York City by misleading them about the performance of those funds.

Prosecutors claim that when Shkreli was issuing glowing financial statements to investors, the funds were actually running on fumes, at best.

Shkreli also is accused of siphoning off stock and cash from the drug company he subsequently founded, Retrophin, to pay the hedge fund investors back their money, despite the fact Retrophin had no such legal obligation to do so.

Shkreli's defense team, in cross-examining the hedge fund investors, has repeatedly highlighted the fact that those investors actually ended up earning a profit compared with what they initially invested.

The profits largely came in the form of the value of Retrophin stock, as opposed to cash redemptions from the funds that Shkreli had promised them, and then failed to make.

The judge has told defense lawyers they cannot argue to jurors that there was no fraud by Shkreli on the investors just because they happened to make a profit, in the end.

Prosecutors have underscored how long it took for those investors to obtain the return of their funds. In some cases, it took investors years to get their money back.

Prosecutors have shown how Shkreli had Retrophin stock and cash distributed to the investors in his hedge funds at the time they were repeatedly asking for their money.

As evidence of that, prosecutors have introduced a series of settlement agreements reached with the investors and Shkreli, as well as several consulting agreements with some of those investors.

Prosecutors contend that those consulting agreements, which call for the investors to provide services to Retrophin, were shams, and were created to provide the illusion that the payments were proper.

Shkreli's lead lawyer, Benjamin Brafman, told Matsumoto on Friday that prosecutors "have not established in the trial evidence the notion that Mr. Shkreli did anything wrong."

"He may have done some things they don't like," Brafman added.

Brafman argued there is evidence that shows that Shkreli's settlement and consulting agreements reached with investors were approved by Retrophin's board of directors.

Prosecutors argue otherwise.

In testimony earlier Friday, the manager of a stock transfer company said that on several occasions she was asked to transfer Retrophin shares to investors in Shkreli's funds, and that the request included a copy of the consulting agreement the investors had with Retrophin.

"Did you receive any Retrophin board resolutions confirming this consulting agreement," prosecutor G. Karthik Srinivasan asked the manager, Amy Merrill, about one of those transfer requests.

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"No," Merrill replied.

She gave the same answer when asked about another transfer linked to a Retrophin consulting agreement.

Merrill also detailed multiple instances involving Retrophin stock, or that of that the shell company that it used to complete a reverse merger, being transferred or issued to investors in Shkreli's hedge funds.

Most of those investors have testified that they were told by Shklreli that they could get their investments in the funds redeemed in cash when he decided to close them in late 2012.

They have said they only later learned from him, after being stonewalled for months, that their investments had supposedly been rolled over into Retrophin.

Merrill said that her transfer company's records show that when Retrophin completed its merger with the shell company, Shkreli personally owned 2,557,755 shares as of Dec. 13, 2012.

He officially owned the exact same number of shares more than a year later, on Jan. 15, 2014, Merrill said.

She wasn't asked the significance of that fact by the prosecutor. But the implication for jurors was that Shkreli did not use any of his own shares to satisfy the claims of multiple investors whose money he had either lost at his hedge funds without their knowledge, or had rolled over into capitalizing Retrophin.

Merrill also testified about several transfers of Retrophin stock to investors from people other than Shkreli.

Prosecutors claim that despite those shares being held in the names of other people, Shkreli secretly controlled them without disclosing that fact as required, and used the shares to pay back defrauded investors.

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