Tuesday 22 January 2019

Martin Shkreli jailed: The tearful final fall of 'the most hated man in America'

Shkreli, the former pharmaceuticals executive who became known as Pharma Bro, was sentenced on March 9, 2018, to seven years prison on charges of defrauding investors. Photo: Getty Images
Shkreli, the former pharmaceuticals executive who became known as Pharma Bro, was sentenced on March 9, 2018, to seven years prison on charges of defrauding investors. Photo: Getty Images

Mark Molloy Mike Wright

Martin Shkreli’s jailing for seven years on Friday marked the lowest ebb in a stark reversal of fortunes on a scale more reminiscent of a Euripidean tragedy than a New York courtroom.

And like all Greek tragic protagonists, the former hedge fund owner’s downfall was aided by hubris.

The former pharmaceuticals boss dubbed "Pharma Bro" was sentenced after being found guilty last year of defrauding investors in two hedge funds he ran between 2009 and 2011.

He has been ordered to pay $7.36m (£5.3m) in forfeiture, and was handed a further $75,000 fine on Friday.

"I'm not the same person I was," a tearful Shkreli said on Friday. "I know right from wrong. I know what it means to tell the truth and what it means to lie."

He also said: "The only person to blame for me being here today is me. There is no conspiracy to take down Martin Shkreli. I took down Martin Shkreli."

A courtroom sketch of the former pharmaceutical CEO, left, next to his lawyer Ben Brafman (Elizabeth Williams/AP)
A courtroom sketch of the former pharmaceutical CEO, left, next to his lawyer Ben Brafman (Elizabeth Williams/AP)

And what a downfall it was. Just a few years ago the 34-year-old was a financial prodigy and pharmaceuticals CEO who had built his $70 million (£50m) fortune through a precocious career.

Then in 2015 he shot to notoriety for hiking the price of a HIV treatment 5,000 per cent, instantly making him the public villain du jour.

Faced with widespread revulsion and condemnation, Shkreli seemed to revel in his infamy and cheerfully cultivated his “pharma bro” image.

He defended the price rise - even suggesting he should have hiked it higher - and then smirked as he pleaded the Fifth Amendment in a congressional hearing over the pricing.

Soon he was dubbed 'the most hated in America'.

But it was a separate matter that eventually led to his incarceration. In August, Shkreli was convicted of defrauding investors in two hedge funds he ran, MSMB Capital and MSMB Healthcare.

The charges included sending them fake accounts and hiding huge losses as well as scheming to prop up the stock price of a drug company he founded in 2011 called Retrophin.

Throughout the trial Shkreli seemed to maintain his brass-necked persona. Even his high-profile lawyer, Ben Brafman, acknowledged "there are times when I want to punch him in the face", according to reporters who were in the courtroom.

He only showed any remorse at he sentencing on Friday.

A modest upbringing

From a modest upbringing in a working-class area of Brooklyn, New York, by his early thirties Martin Shkreli had amassed a personal fortune of $70 million (£50m) as the “bad boy” of the pharmaceuticals industry.

The son of Albanian and Croatian immigrants who worked as caretakers, Shkreli and his three siblings grew up in a small apartment in Sheepshead Bay, an area known for its high concentration of Russian immigrants.

His prodigious intellect earned him a place at Hunter College High, a public school for intellectually gifted children he would subsequently - and controversially - donate $1m (£725,000) to.

Aged 17 he started an internship at Wall Street hedge fund Cramer, Berkowitz & Co, showing aptitude as an analyst with profit-making recommendations on short-selling biotech stock.

The brash businessman started his own hedge fund company in 2006, Ela Capital Management, that was later sued by the Lehman Brothers for $2.3million (£1.6m) over a failed bet, only for the US investment bank to collapse before he had to pay out.

He made the Forbes 30 Under 30 list of inspiring entrepreneurs in 2012, telling the magazine: “I'd like to focus on my life on creating new medicines for people who are suffering from rare disease.”

Shkreli founded Turing Pharmaceuticals in 2015 and within months became public enemy number one after hiking the price of HIV drug Daraprim by more than 5,000 per cent overnight.

His rise to notoriety: The Daraprim price hike

Turing Pharmaceuticals, named after British mathematician Alan Turing, purchased the US marketing rights to life-saving drug Daraprim from Impax Laboratories for $55m ($40m) in August 2015.

Within a month, Turing increased the price of the pills from $13.50 (£8.75) each to $750 (£545), a factor of 56, resulting in an overwhelming backlash that thrust Shkreli to global infamy and the role of arch villain of the pharmaceutical industry.

Health experts and patients were outraged by the “profit-driven” price hike for the drug which is used to treat toxoplasmosis, a parasitic infection, with treatment requiring a course of 100 pills.

He indignantly defended the company’s actions, responding: “If there was a company that was selling an Aston Martin at the price of a bicycle, and we buy that company and we ask to charge Toyota prices, I don't think that that should be a crime.”

Shkreli claimed at the time he wanted to use the profits to create “better, safer and more effective” alternatives to treat toxoplasmosis.

In 2016, Shkreli was subpoenaed to testify before Congress over the controversy but refused to answer questions by invoking his Fifth Amendment rights, angering congressmen by smirking and displaying a bored demeanour during his appearance, later branding them “imbeciles” on his Twitter page.

During the 2016 presidential election campaign, Donald Trump attacked Shkreli by lambasting him as a “spoiled brat”. After Vermont senator Bernie Sanders’ camp called him a “poster boy for drug company greed”, Shkreli responded with a tongue-in-cheek application to become his intern.

“That guy is nothing,” added Mr Trump. “He’s zero. He’s nothing. He ought to be ashamed of himself.”

The Pharma Bro persona

The vilified former pharmaceutical CEO, who boasted about his wealth and lavish lifestyle on Instagram, was disparagingly dubbed the “Pharma Bro” by critics.

He bragged about drinking £9,000 bottles of 1969 Petrus and 1982 Chateau Latife-Rothschild wine on social media and shared photos of extravagant boat and helicopter rides.

In a series of TV interviews following the controversy, he refused to apologise for increasing prices of the drug on the World Health Organisation’s (WHO) Lists of Essential Medicines, saying: “This isn’t the greedy drug company trying to gouge patients, it is us trying to stay in business.”

Asked by Forbes in December 2015 if he would have done the same thing again following the backlash, he created more controversy by unrepentantly insisting: “I would’ve raised the prices higher.”

“I think health care prices are inelastic, I could have raised it higher and made more profits for or shareholders,” he added. 

His $1m (£720,000) donation to his Hunter College High in 2015was criticised by alumni of the school, with one calling it “blood money”. 

Wu Tang-Clan album purchase

Shkreli purchased the only available copy of Wu Tang-Clan’s Once Upon a Time in Shaolin double album for $2million (£1.4m) before subsequently threatening to destroy it before fans could listen to it.

After Wu Tang member Ghostface Killah insulted him, Shkreli responded with a “diss” video, calling the rapper “an old man that’s lost his relevance” and demanded an apology letter.

He promised to leak the one-of-a-kind album if Mr Trump won the US election and to the delight of fans played a selection of unreleased Wu Tang tracks on streaming app Periscope following his victory.

Shkreli listed the album on eBay following his clash with Ghostface Killah, with the bids exceeding $1m ($720,000), yet its eventual sale was never confirmed.

“I decided to purchase this album as a gift to the Wu-Tang Clan for their tremendous musical output. Instead I received scorn from at least one of their (least-intelligent) members, and the world at large failed to see my purpose of putting a serious value behind music,” he posted.

“At any time I may cancel this sale and I may even break this album in frustration.”

The rap enthusiast also offered Kanye West $10m (£7.2m) for exclusive rights to his seventh studio album, The Life of Pablo, but later claimed he was scammed for $15m (£10.8m) after transferring bitcoin funds to someone purporting to be a friend of the hip hop star.

Twitter controversy

Last year, Shkreli’s Twitter account was suspended for the alleged “targeted harassment” of Teen Vogue columnist Lauren Duca.

He invited the journalist to President Trump’s inauguration, with Ms Duca responding: “I would rather eat my own organs.”

Twitter confirmed the account violated its policies after Ms Duca shared grabs from Shkreli’s profile which featured a photo collage of the journalist and a profile photo of his face photoshopped over her husband’s.

“Martin Shkreli is an insufferable troll, who has been harassing me for weeks,” said Ms Duca.  “He doesn't even deserve the attention he got from my tweet.”

Fraud charges

The 34-year-old was found guilty last year on charges he cheated investors in two failed hedge funds, using the money to start a drug company, however his defence argued he eventually made investors a profit.

Prosecutors claimed he “engaged in multiple schemes to ensnare investors through a web of lies and deceit”, however Shkreli claimed he was targeted by authorities because of his drug price hikes.

“At its core, this case is about Shkreli's deception of people who trusted him,” wrote prosecutors.

“Indeed, he compounded the lies with a pattern of corrupt behaviour designed to cover up those lies. He lied to get investors' money, he lied to keep them invested in his funds and he lied once those investors wanted their money back.”

His bail ahead of sentencing was revoked in September last year after he offered a $5,000 (£3,600) bounty to anyone who could get a lock of Hillary Clinton's hair.

During his time in prison, Shkreli has reportedly been mentoring his fellow inmates by teaching them “some ways to change their lives”.

In a letter to the judge asking for leniency, he wrote, “I was wrong. I was a fool. I should have known better.”

The judge has ruled that Shkreli must forfeit more than $7.3 million (£5.2m) in a brokerage account and personal assets which could include his Wu-Tang Clan album, a Picasso painting and a rare Lil' Wayne album, The Carter V.


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