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Stream on Hulu. A greedy mentality of identifying companies that can be acquired simply by where you can get away with raising prices by the largest percentage possible has real public policy and healthcare ramifications. And make no mistake, you can try to dress up this business model with do-good sounding phrases, but it is very simple. Purchase the companies that develop a drug that has little to no competition
give them a healthy profit, fire the scientists, and jack the prices up as high as you possibly can get away with. It's using patients as hostages. It's immoral. It hurts real people. It makes Americans very, very angry. That's Senator Claire McCaskill questioning officials and investors of Valiant Pharmaceuticals on April 27th, 2016.
She's describing the company's business strategy of acquiring other drug companies, cutting their costs, and drastically raising the prices of the products. A strategy viewed by most as unethical and greedy. But Valiant's shareholders loved the company's new business model because it was lucrative and perfectly legal. This controversial strategy was implemented by Valiant's new CEO, Michael Pearson, who was hired to head the company in 2008, even though he had no prior experience in the pharmaceutical industry.
He had spent the past two decades working at McKinsey & Company, a global consulting firm where his father had also worked. When Pearson took control of Valiant, it was just another pharmaceutical company investing heavily in developing new drugs of its own while hardly turning a profit. One of its first orders of business was to engineer a reverse merger with another struggling pharmaceutical company based in Canada in order to lower Valiant's tax burden. The second step of his plan was to gut the research and development activities of the company.
Pearson believed that money spent on developing new drugs was money wasted. Yeah, there's a misperception about us. It's not that we don't like R&D, we just have a different model. What we don't think is a good bet is early stage science. Most drugs get discovered by universities and entrepreneurs, not by large drug companies. Wasting money was not part of Michael Pearson's philosophy. A typical pharmaceutical company allocates about 20% of its total budget for the purpose of R&D.
The R&D budget at Valiant had been slashed to just 3%. Pearson felt that there was better earning potential through buying out rival, more established drug companies. Well, because they create even more value for shareholders, and that's my job. It's our board's job is to do whatever we can to create value for shareholders. Valiant Pharmaceuticals became the darling of Wall Street around 2010.
The company began using massive amounts of debt to rapidly acquire other pharmaceutical companies and ruthlessly firing the scientists and research departments. Valiant would then take the drugs it had acquired through these acquisitions and increase the prices. And they were mostly drugs for rare diseases without generic alternatives. Drugs like cyprene, which is used to treat Wilson's disease, an inherited and potentially fatal condition if untreated that causes copper to accumulate in vital organs.
The price of Cyprene was increased from $650 for a month's supply to more than $21,000. And Cyprene was just one example. During Michael Pearson's tenure, Valiant acquired over 100 different drug companies. In 2014 alone, the company increased the prices of 62 drugs. Some prices were increased as much as 3,000% of their original cost. Another 54 medications experienced price increases in 2015.
and Wall Street loved it. Valiant's stock price soared.
Investors really began to take notice when renowned hedge fund manager Bill Ackman, who Forbes magazine referred to as "Baby Warren Buffett," announced that he had purchased a 5% stake in Valiant. I've admired what these guys have accomplished over six years, but never really took a hard look at the company because I've not invested in healthcare before. And the reason why is healthcare is generally a business. Most pharmaceutical companies are very difficult to understand. They're black box. They rely on these pipelines where they spend enormous amounts of money.
and you wake up one day and one of the drugs doesn't get approved, the stock collapses. And I was introduced to Mike through actually a business school classmate and we spent some time together and I really liked the business model and the business itself reminds me a lot more the kind of companies we invest in. And then when you understand their operating philosophy and their approach to capital allocation discipline, cost discipline, the way they compensate their team, it fit into the purging mold of an investment and that's what got us interested in Valiant.
Valiant Pharmaceuticals, which was valued at $2.3 billion on the day that Michael Pearson took over, was now worth more than $116 billion, becoming the most valuable company in Canada. But not everybody was a believer. In October 2015, Andrew Left at Citron Research began digging deeper into the company's operations. In his report, Left compared Valiant's shady accounting practices to those of Enron,
He discovered a questionable relationship between Valiant and a specialty pharmacy named Philidor. There was evidence to suggest that Valiant was using Philidor to book fake sales and boost its revenue numbers, while appearing as two separate entities, a practice that had been kept secret from Valiant shareholders and, according to him, from the CEO himself. Well, there's lots of allegations that have been made, but nothing has been proven yet, and I was unaware of any of the allegations.
Valiant was also accused of using Philidor to change prescriptions as a way to push their higher-priced drugs onto patients without them knowing that there was more affordable alternatives available. Wall Street reacted to the allegations levied against Valiant the way Wall Street always reacts to even the slightest hint of trouble.
Valiant's stock price tanked and continued to tank for months. So while the stock market is climbing, there's one stock that is not participating, Valiant. Earlier this week, the company slashed its revenue forecast and delayed its 10K filing. But the selling in the stock began months ago on accusations by a short seller and scrutiny from Washington over drug price increases. This year alone, shares are down about 70%.
And as Meg Terrell reports, Valiant's creditors are starting to get antsy. One person who remained confident in Valiant was Bill Ackman. A few weeks after Citron's damning report was released, Ackman bought another $2 million in Valiant shares, even after Michael Pearson admitted during a conference call that Valiant had purchased Philidor for $100 million, which all but confirmed the allegations of its shady practices. In March of the following year,
Valiant stock continued its plunge and the board of directors demanded a change, and CEO Michael Pearson was fired. It was Bill Ackman who made the call to tell him. Even with this change of direction, investors were still leery of Valiant. The price of the company's shares continued to plummet until finally bottoming out at $8 per share, a 97% decrease from its peak.
Bill Ackman eventually lost faith too. He sold his 5% share in Valiant in 2016, losing about $4 billion in the process. Yet, with all of this change, some things remain the same, like the price of Cyprene, for instance, and almost all of the other drugs who had their prices increased by Valiant. Even after Valiant executives agreed that prices should be lowered,
People who suffered from Wilson's disease did receive some good news earlier this year though. In February, Teva Pharmaceuticals announced that an alternative to Cyprin had been approved. Patients would no longer be forced to pay 20 grand for a month's supply in order not to die. Instead, they would only have to pay $18,000 a month. Oh, meet the new boss. Same as the old boss. No charges have been filed against Michael Pearson or anyone else at Valiant.
Again, raising the price of medicine is perfectly legal. Almost every pharmaceutical company has done it and are still doing it. However, a senior official from Valiant named Gary Tanner and the former head of Philidor, Andrew Davenport, were eventually arrested and convicted on fraud and conspiracy charges. Tanner had apparently received $10 million from Davenport to help inflate Philidor's value to influence Valiant's purchase of the pharmacy. Valiant were the victims here. Poor babies.
Both Gary Tanner and Andrew Davenport are currently awaiting sentencing. Although Valiant gets credit for being the pioneers of acquiring medicines for rare diseases and jacking up the prices, the company never became the lightning rod for public outrage aimed at pharmaceutical greed. That role was reserved for someone else, someone named Martin Shkreli, a drug company CEO in his early 30s who loved the media spotlight and reveled in negative attention.
Martin Shkreli became the face of pharmaceutical price gouging and immoral capitalism. And that face featured a nauseating smirk, just like we had always imagined it would. A former hedge fund manager embodies the American dream and exposes the ugly truth about for-profit healthcare systems on this episode of Swindled. Swindled.
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Before he became the most hated man in America, Martin Shkreli was just a normal kid growing up in Brooklyn. He loved music and movies and video games and hanging out with his friends.
The only difference between Martin and the other kids in his neighborhood was that Martin was very, very smart. Born on April Fool's Day in 1983, Martin recalls being depressed as a little kid. A childhood friend of his named Frankie Gutman says that he remembers Martin being ashamed of his own upbringing. Shkreli claims his parents were physically abusive both to him and his siblings and to each other. Yet he claims to have a positive relationship with his mother and father despite any childhood trauma.
He dismisses what he calls the borderline abuse he suffered by his parents as typical disciplinarian behavior that he claims is a common occurrence in Eastern European families. Martin's parents were working class immigrants from Montenegro. His father was a doorman and on his days off he would perform janitorial services with Martin's mother in office buildings around the city, jobs which they still hold today. Martin's parents even live in the same house that he grew up in and it's not because Martin hasn't offered them help.
When he became wealthy, Martin pleaded with his mother to quit her job, but she refused. She and Martin's father just don't value wealth the same way that he does. Our family, you know, we never cared about money too much. I mean, I probably cared about it way more than everyone else, but in my family, money doesn't make you a good person. It shouldn't make you a good person in any family. They're proud of me and my accomplishments, but if I did something bad, they wouldn't be proud of me.
And if I, you know, if I did something that they felt was morally wrong, I'd be shot. Martin Skreli was also a nervous little kid who had frequent panic attacks. He found relief in math and numbers, which he studied relentlessly. His sister recalls that by the time Martin was six years old, he could calculate square roots and recite the periodic table from memory. "As a kid, my friends knew all the Yankees and Mets players' batting averages and how many home runs they hit," Skreli told CNN.
I knew everything about all the public companies. Martin bought stock in Compaq, the computer company, when he was just 12 years old. He bought shares of Amazon when he was 15. He learned about the stock market, and specifically biotech stocks, from an older man that lived in his building named Marty. Marty and Martin would play game after game of chess together while discussing the happenings on Wall Street. Martin credits his relationship with Marty as being instrumental in helping him discover what he was born to do.
Martin dropped out of Hunter College High School when he was 16 years old because he was bored and uninterested. In order to graduate, he joined a work-study program that helped land an internship at a hedge fund named Kramer, Berkowitz & Company. The Kramer in Kramer Berkowitz is Jim Kramer, the CNBC Mad Money Guy. Kramer left his hedge fund for television less than a year after Martin Shkreli started working there. He claims to hardly know him.
Kramer responded to accusations that he had molded the young intern with a tweet that read, "Martin Shkreli was never my protege." And anybody who said that is dreaming. "And these firms are gonna go out of business and he's nuts! They're nuts! They know nothing!" Okay, so maybe Jim Kramer's not that important to this story. He had little influence on the person that Martin Shkreli ultimately became. But it did give me an excuse to play that clip of him losing his mind before the financial recession of 2008.
That clip alone is worth mentioning his name. At Kramer Berkowitz, Martin was tasked with menial clerical work like retrieving coffee and ensuring that the coffee machine stayed full of paper. He remained in that role for over two years before getting his first taste of what a hedge fund actually does. Outside of work, Martin was enrolled in the business school at Baruch College while at the same time teaching himself biology and chemistry at home. Martin utilized his knowledge of science while researching biotech stocks in his free time.
He noticed a concerning trend in the data for an obesity drug manufactured by a company named Regeneron that had not yet received approval by the Food and Drug Administration. Shkreli fully expected the drug to deliver less than stellar results. He passed this information to his associates at Kramer Berkowitz and recommended that the hedge fund short Regeneron stock. Simply put, shorting a stock is like placing a bet that the price of the stock will decrease.
In this case, since Martin was expecting Regeneron's new drug to test poorly, he anticipated the price of Regeneron shares to fall amid the disappointing news. In order for the hedge fund to short the stock, it would borrow shares from a broker like Merrill Lynch with the promise that it would return the same number of shares at a later date. If the price of the stock rises, which is what you don't want if you're in this position, you return the shares to the broker at the newer, higher price and the difference comes out of your pocket.
If the share price decreases, you return the shares at the lower price, and you get to keep the difference, minus fees and taxes, of course. Short selling is a legitimate strategy used by hedge funds all over the world, including Kramer Berkowitz. The hedge fund took Martin's advice, shorted Regeneron stock, and watched with glee as the company's shares lost half their value in a single day. Martin Shkreli had been correct.
He was rewarded with a job, a real job, at the hedge fund, managing the money of investors like Eliot Spitzer, the former governor of New York who would eventually resign in shame amid a prostitution scandal. Shkreli worked for Kramer Berkowitz for about four years in total. He looks back fondly at those years because it was where he made his first successful trade. It was also where he had his first encounter with the Securities and Exchange Commission.
The SEC had questioned Kramer Berkowitz about the Regeneron short sale and wondered if the hedge fund had used insider information to make the trade. They hadn't, because they had Martin Shkreli, the boy wonder whom the SEC would become quite familiar with in due time. After leaving Kramer Berkowitz and Company, Martin Shkreli bounced around a couple of other wealth management companies before eventually starting his own hedge fund.
He had convinced a group of investors that he could duplicate the success he had at Kramer Berkowitz shorting biotech stocks. Elia Capital Management was born in 2006 and had died less than a year later when Shkreli bet the wrong way on a drug stock, which resulted in him losing all of his investors' money and owing millions of dollars to Lehman Brothers, the investment bank from which he borrowed the shares. Lehman Brothers sued Shkreli and Elia Capital and they were awarded a default judgment of $2.3 million dollars.
2.3 million dollars that Martin Shkreli did not have. He was screwed. The last thing he wanted to do was face his angry investors and tell them that he had lost all of their money and that the fund was bankrupt.
But luckily for him, Alia Capital wasn't the only investment company going bankrupt. Alex Deshore and thousands of other Lehman Brothers employees here in Jersey City were left shaken and helpless. The 158-year-old investment bank filed for bankruptcy Monday morning after suffering billions of dollars in losses last year.
On September 15th, 2008, as a result of the subprime mortgage crisis, Lehman Brothers failed, resulting in the largest bankruptcy filing in US history. Martin Shkreli caught a break. He would not have to pay the $2 million he owed to Lehman Brothers because Lehman Brothers ceased to exist. Shkreli was off the hook, but he was dead broke. He had moved back into his parents' house for a few years, where he took up residence in his childhood bedroom and plotted his next move.
In September 2009, Shkreli teamed up with a childhood friend to launch a new hedge fund called MSMB Capital Management, where he would again short sell biotech stock. But this time, Martin had an idea on how to influence the prices of the shares that he needed to fall. He would invade internet investing forums to criticize certain pharmaceutical companies in which he had a vested interest. He hoped his internet trolling would cause investors to sell their shares in a panic, which would result in a drop in the stock price.
His plan wasn't very effective. He was still making wrong bets left and right. He was losing so much money that the $3 million he had received from investors had dwindled to $331. In order to save his investors money and his hedge fund, he took one last gamble and borrowed 32 million shares of a company named Orexigen Therapeutics from Merrill Lynch. Orexigen's stock price was already nosediving after the FDA declined to approve its newest drug.
This company was heading for the bottom, so Martin decided to jump on the sinking ship and shorted his borrowed shares. This was as sure of a bet as any, or so he thought. Shkreli was already counting the profits in his head when something strange happened. The price of Erexigen shares had recovered and were rising quickly. Martin's sure bet had turned into a huge loss. A $7 million loss, to be exact.
Although he was able to settle the $7 million debt he owed to Merrill Lynch for only $1.35 million, Martin's latest gamble proved to be the death blow to his latest investment venture. Ilm S.M.B. Capital was bankrupt, but he never told his investors. In fact, he told them the opposite. He sent out fake charts and reports to his shareholders as evidence that he had doubled their money.
He also sent out a letter announcing a new company called MSMB Healthcare that was in need of additional capital to invest in pharmaceutical companies. Investors didn't hesitate to send Shkreli more money, especially after seeing the handsome returns generated by his other fund. In total, 13 investors sent Martin Shkreli over $5 million, $1.35 of which he used to settle his debt with Merrill Lynch.
The remainder was used to invest in a brand new biotech company called Retrophin, a company that Martin Shkreli was very familiar with because Martin Shkreli was the one who founded it. As CEO of Retrophin, Shkreli continued to remain primarily focused on shorting biotech stocks as a way to generate funds to research and develop treatments for rare diseases. He took the company public to generate even more capital and he used that capital to partake in a practice that would later make him a villain in the eyes of the entire country.
Shkreli purchased the rights to market a drug named Theola, which was used to treat a rare disease that causes persistent kidney stones called cystinuria. Before Martin acquired it, Theola was priced at $1.50 per pill. As a product of Ritrophin, Theola would cost $30 per pill, and patients were required to take up to 15 pills per day, and there were no alternatives. The strategy was fruitful.
Retrophin was rolling in the profit, and Martin Shkreli was excited about the future, because he was aware of a few other drugs that he could acquire and do the exact same thing. But he would never have the chance, at least not at Retrophin. In September 2014, Retrophin's board of directors voted to remove Shkreli as CEO, after the company was sued by a former employee of MSMB Healthcare, who claimed he was being harassed by Martin Shkreli.
Martin had accused Timothy Perotti of stealing $3 million from him, and he had contacted every member of Tim's family trying to collect. Skrulli sent Facebook messages to Perotti's brother, his elderly father, and both of his teenage sons. He sent text messages and letters to Perotti's wife, one of them which read, "'I hope to see you and your four children homeless, and will do whatever I can to assure this.'" Retrophin settled the suit with Perotti out of court to avoid having the company's computers analyzed.
They then sued Skreli for $65 million, accusing him of repaying the MSMB investors whose money he had lost with Retrophin stock. Martin denied these allegations as preposterous, saying, The company hasn't paid me close to $50 million that it owes me in severance. They're sort of concocting this wild and crazy and unlikely story to swindle me out of the money. Even though Martin Skreli and Retrophin parted ways unceremoniously, his legacy at the company lives on.
The price of Diola, the kidney stone drug, remains at $30 per pill. 2015 was the year that Martin Shkreli became a household name. He founded another drug company named Turing Pharmaceuticals and raised $90 million in funding almost immediately. Investors liked his new strategy of acquiring these orphan drugs, these medicines without patents, and re-evaluating their prices. Shkreli initially pursued purchasing the rights to two drugs used to treat Wilson's disease from Valiant Pharmaceuticals.
but Valiant refused to sell because they had plans of their own. So he turned his attention to another drug whose patent was expired named Daraprim. Daraprim is used to treat toxoplasmosis, an infection that causes flu-like symptoms that can be especially dangerous, even fatal, to people with compromised immune systems, like pregnant women, unborn children, and AIDS and cancer patients. Daraprim had been around for over 60 years, and it was the only drug available to treat toxoplasmosis.
The process to obtain FDA approval to manufacture generic versions of the drug would be painstaking and expensive. There was no competition in sight, and Martin Shkreli knew that. In August 2015, he arranged to purchase the rights to the life-saving drug for $55 million.
Yeah.
And we also feel that this is the more appropriate price for Daraprim. At this price, Daraprim is still actually on the low end of what orphan drugs cost. And we're certainly not the first company to raise drug prices. You know, at the end of the day, there have been much larger drug price increases by much bigger drug companies that actually...
You would argue large multibillion-dollar companies with lots of cash don't necessarily need to do something like this. Turing is a very small company. It's a new company, and we're not a profitable company. So for us to try to exist and maintain a profit, I think, is pretty reasonable. I think profits are a great thing to sustain your corporate existence. The backlash was almost immediate. Members of the media, government officials, and the public were outraged.
Presidential candidate Bernie Sanders, one of Shkreli's most vocal critics, made lowering prescription drug prices one of his primary campaign issues. Shkreli responded by donating $2,700 to Bernie's campaign. Sanders refused the contribution, saying he would not accept money from the "poster boy of drug company greed," and he redirected the funds to an HIV clinic. Presidential candidate Donald Trump disapproved of Shkreli's actions as well.
You're talking about where this young guy, where this young guy raised the price to a level that's absolutely ridiculous and he looks like a spoiled brat to me. You want to know the truth? He looks like a spoiled brat. And he's a hedge fund guy who, as you know, the only one that I'm raising taxes, they are going to be paying up. But I thought it was a disgusting thing what he did. I thought it was a disgrace.
Martin Shkreli took offense to being called a spoiled brat, telling Vanity Fair, quote, My parents were immigrants and janitors. Trump inherited wealth. Fuck him. Presidential candidate Hillary Clinton encouraged Shkreli to do the right thing and lower the price of Daraprim. She also sent out a tweet that read, quote, Price gouging like this in the specialty drug market is outrageous. Tomorrow, I'll lay out a plan to take it on.
Just about 45 minutes, maybe an hour ago, we started to see the Nasdaq biotech index take a hit. And that's right around the same time, look there, down 2.6% now, the IVV. That's right around the time Hillary Clinton tweeted out a New York Times story about a drug whose price was increased 5,000% after its company, Turing Pharmaceuticals, acquired it.
without really changing the drug at all. She tweeted a link to that story and said, "Price gouging like this in the specialty drug market is outrageous. Tomorrow I'll lay out a plan to take it on." Now, I've been talking with analysts and industry experts today who have been saying that Hillary Clinton's candidacy could potentially
put a damper on these high drug industry valuations. Folks are really worried that she'll potentially advocate for the U.S. government to have the ability to negotiate on drug prices, and that could really put a damper on this wild and crazy biotech market, Carl. Hillary's comments had spooked investors. The biotech index dropped 5% because they expected her to win the presidency and enforce tighter restrictions on the drug market. It has gotten to the point where people are being asked to pay...
Not just hundreds, but thousands of dollars for a single pill. And I can tell you that is not the way the market is supposed to work. That is bad actors making a fortune off of people's misfortune. Some of you may have read about an egregious example of this that was in the news yesterday.
A drug that has been around for decades, it wasn't just invented with new research and new dollars backing that up, it's been around for decades, that went from costing $13.50 a pill to $750 a pill literally overnight. That's price gouging, pure and simple. Martin Shkreli continued to defend the price of Daraprim.
He even promised that patients who could not afford the drug would receive it for free through Turing's financial assistance program. However, the pressure continued to mount and at one point it seemed like Shkreli was going to reverse course. We've agreed to lower the price of Daraprim to a point that is more affordable and is able to allow the company to make a profit, but a very small profit, and we think these changes will be welcome. But Martin changed his mind a few weeks after he made that statement.
Turing announced that there would be no reduction in price after all. After a few months had passed, after he had a little time to reflect on his decision, Shkreli was asked if he could do it all over, would he raise the price of Daraprim again? Of course, shareholders, and in fact you've seen Valiant, you know, castigated for their price increases. They raised prices after the Senate committee.
Pfizer raised prices of Viagra 13%. I look at Bloomberg for inflation. I don't see anywhere they need to keep up with 13% inflation. So it's not like I'm surprising and saying I'd do it again. Everybody's doing it. In capitalism, you try to get the highest price that you can for a product. I probably would have raised the price higher is probably what I would have done. Why?
I think healthcare prices are inelastic. I could have raised it higher and made more profits for our shareholders, which is my primary duty. And again, no one wants to say it. No one's proud of it. But this is a capitalist society, capitalist system, and capitalist rules. And my investors expect me to maximize profits, not to minimize them or go half or go 70%, but to go to 100% of the profit curve that we're all taught in MBA.
It seemed as if Martin Shkreli had successfully weathered the storm. The media spotlight was finally off of him, and he had millions of dollars that he didn't have before the scandal. His investors were happy. He was happy. But he did kind of miss the attention. Little did he know, there would be much more attention headed his way in just a few short months. Support for Swindled comes from SimpliSafe.com.
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On Thursday, December 17th, 2015, just a few weeks removed from spending $2 million on a one-of-a-kind Wu-Tang Clan album, Martin Shkreli was awakened at 6:30 a.m. by a knock on the door of his Manhattan apartment.
He was escorted out of his building through a swarm of photographers wearing a gray hoodie and handcuffs. Prosecutors were alleging that he had been running his companies like a Ponzi scheme, using each new iteration to pay off defrauded investors from the last. Like how he had used investments in MSMB Healthcare and Retrophin stock to pay off what he owed as a result of his lousy bets at MSMB Capital. There were backdated transactions that made it appear as if MSMB had invested in Retrophin when it really hadn't.
Prosecutors also alleged that he lied to his investors and to Retrofen's board of directors and auditors. Martin's lawyer, Evan Grable, who was also arrested, helped Shkreli pull off the scheme. But the two immediately began pointing their finger at the other. Grable pleaded not guilty and filed a motion to be tried separately from Martin. The lawyer claimed that any illegal action he had taken was based on lies told to him by the young CEO.
Screlly fired back, saying that if he had done anything illegal, it was based on advice given to him by Evan Grable, his legal counsel, and that if Grable hadn't been advising him, maybe he should return the millions of dollars that he was paid to do so. Regardless, Martin Screlly wasn't afraid. He cashed in an E-Trade investment account and bailed himself out of jail for $5 million.
He labeled the prosecuting attorneys as the Junior Varsity, and he hired Ben Brafman, a high-powered criminal defense attorney that had represented Charles Kushner, Jared Kushner's father, and Sean Puffdaddy Combs.
Well, the trial is going to start in June. I'm looking forward to it. It's going to be quite a circus, an exciting circus. We're going to win by a landslide. I've got my attorney, Ben Brafman, and the evidence is clear that I did nothing wrong. There's no victims in my crime, unlike the allegations revealed on Monday in Platinum Partners where there's 600 investors out a billion dollars. A billion dollars goes missing. That's fraud. My investors send me Christmas cards.
The day after his arrest, Martin Shkreli conducted a livestream on his YouTube channel from his home office. He sat in front of his computer in a bare white room playing guitar, chatting with his audience, and surfing online dating profiles for over five hours. These marathon livestreams would become a common occurrence in the following months leading up to his trial. Without a job and a year and a half to wait until his trial date, Martin Shkreli had some time to kill.
Martin did leave his house one afternoon in February when he was summoned to testify in front of the House Oversight and Government Reform Committee. The members of Congress who sat on the committee had some questions about the Daraprim Prize hike, and for maybe the first time in his life, Martin Shkreli did not have much to say. On the advice of counsel, I will not be giving an opening statement. Representative Jason Chaffetz opened up the questioning. I want to ask you a few questions. What do you...
What do you say to that single pregnant woman who might have AIDS, no income, and she needs Daraprim in order to survive? What do you say to her when she has to make that choice? What do you say to her? On the advice of counsel, I invoke my Fifth Amendment. Privilege against self-incrimination and respectfully decline to answer your question. You were quoted as saying on Fox 5 in New York, you were quoted as saying...
If you raise prices and you don't take that cash and put it back into research, I think it's despicable. I think you should not be in the drug business. We take all of our cash, all of our extra profit, and spend it on research for these patients, for other patients who have terrible life-threatening, life-ending diseases. Did you say that? On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question. Do you think you've done anything wrong?
Next up was Congressman Trey Gowdy, who attempted to get Shkreli to speak by asking him simple questions like how to pronounce his name. Thank you, Mr. Chairman. Is it pronounced Shkreli? Yes, sir. See there, you can answer some questions. That one didn't incriminate you.
I just want to make sure you understand, you are welcome to answer questions and not all of your answers are going to subject you to incrimination. You understand that, don't you? I intend to follow the advice of my counsel, not yours. So do you understand you can waive your Fifth Amendment right? On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question. Well, Mr. Chairman, I'm vexed.
He's been willing to answer at least one question this morning. That one didn't subject him to incrimination. I don't think he's under indictment for the subject matter of this hearing. So the Fifth Amendment actually doesn't apply to answers that are not reasonably calculated to expose you to incrimination. And even if it did apply, he's welcome to waive it.
And I listened to his interview, and he didn't have to be prodded to talk during that interview. He doesn't have to be prodded to tweet a whole lot or to show us his life on that little webcam he's got. So this is a great opportunity if you want to educate the members of Congress about drug pricing or what you call the fictitious case against you, or we can even talk about the purchase of a, is it Wu-Tang Clan? Is that the name of the album?
Name of the group? On the advice of counsel, I invoke my Fifth Amendment privilege against self-incrimination and respectfully decline to answer your question. Mr. Chairman, I am stunned. Since Martin was obviously refusing to speak, Representative Elijah Cummings hoped that at the very least, maybe he would listen. Mr. Torelli, since I have you in front of me, after trying to get you in front of this committee for so long, let me say this. I want to ask you to... No, I want to plead with you.
to use any remaining influence you have over your former company to press them to lower the price of these drugs. You can look away if you like, but I wish you could see the faces of people who cannot get the drugs that they need. And by the way, it's the taxpayers. Somebody's paying for these drugs. Somebody's paying. It's the taxpayers that end up paying for some of them. And so, and those are our constituents.
People's lives are at stake because of the price increases you impose and the access problems that have been created. You are in a unique position. You really are, sir. Rightly or wrongly, you've been viewed as a so-called bad boy, a farmer. You have a spotlight and you have a platform. You could use that attention to come clean, to right your wrongs, and to become one of the most effective farmers
patient advocates in the country and one that can make a big difference in so many people's lives. I know you're smiling, but I'm very serious, sir. The way I see it, you can go down in history as the poster boy for greedy drug company executives, or you can change the system. Yeah, you. You've detailed the knowledge about drug companies and the system we have today. And I truly believe, I truly believe, are you listening?
Congressman Cummings' impassioned speech failed to resonate. Hours after leaving the hearing, Martin took to Twitter and tweeted, quote,
Hard to accept that these imbeciles represent the people. I think it's also important to point out that many of those imbeciles he was referring to had received enormous campaign contributions from pharmaceutical companies during the 2016 campaign season alone. Drug companies donated almost $30 million to congressional candidates. Is it any wonder why regulations are lax and price gouging remains legal? Martin returned home to his toys and his computer.
It continued to livestream on YouTube, giving out relationship and career advice to thousands of its fans. People from all over the world would tune in to watch Martin play video games and chess, to watch him discuss music and politics and the pharmaceutical industry. Martin would even teach in-depth classes on finance, complete with Excel spreadsheets and demonstration files. These livestreams might be the only glimpse of who Martin Shkreli actually is, or was.
Even for him, it became harder and harder to separate the villain he played on TV from the affable and funny guy that his friends and fans claimed him to be. He would sometimes discuss his upcoming trial and remain defiant. I do think that they were totally just a witch hunt, you know? Sometimes you can just... If you want to look through...
50 million pages of emails and you know try your hardest and coerce people like they they just like had FBI agents knocking on people's doors that are like You don't testify against Martin will arrest you and it's like oh, okay This is supposed to be fair. You know, you know, it's a witch hunt and you know The good thing is that I'm not scared of witch hunts and I'm not scared of the FBI and I'm not scared of the DOJ and I'm one of the few people who will stand up to them and
They expect plea deals. They expect people to get scared and give up. That's just not the kind of person Martin Ciavelli is. So I'll fight them and we'll see who wins. But there were moments where it seemed like the realization of a possible prison stay was setting in. But, you know, as I was pondering, you know, my old life and my new life, you know, my old life in the streets of Brooklyn and how...
blue collar crime is prosecuted unfairly. Now in this life, white collar crime is prosecuted unfairly. Fucking all crime is prosecuted unfairly. You know, sitting there thinking like, everyone's like, oh, you know, it's, you know, I was in the, I was doing my pretrial services checkup and I took a photo of those two black guys I was with who were there for crack, for selling rocks. And they were like, man, you're not going to go to prison. You got money. It's going to be no problem. I was like, bro, it's not like that.
And I just explained to them that like, you know, our prosecution system, our whole criminal justice system is so fucked. And it was during these live streams where Martin would really put the bro in Pharma Bro. Let me be real, if you fat girl, you can suck my dick. That's all good. That's the best that will ever happen to you. That's it. You can catch some dick, but yo, 15 minutes later, you best be out of my place.
Martin would tell you that he was joking in those clips. He would tell you that extreme sarcasm makes up a large portion of his personality, and that's probably true. But it doesn't change the fact that his views and treatment towards women has always been a bit disturbing.
In January 2017, he began harassing a female journalist named Lauren Duca on social media. Martin changed his Twitter background to a photo of Lauren and her husband with Martin's face superimposed on his body. He made a post on Facebook that claimed that if he were acquitted in the upcoming trial, he would finally be able to have sex with her.
Martin also sent Lauren a private message on Twitter, inviting her to be his plus one to the inauguration of Donald Trump, to which she responded, Lauren Duca eventually reported Shkreli for his harassment and he was banned from Twitter permanently, but Martin Shkreli didn't have to resort to social media to harass somebody. In September 2016, a few months before he was banned from Twitter,
Martin had tracked down Hillary Clinton after she had left a 9/11 memorial service early due to illness. He found her a few blocks from where he lived in Manhattan, leaving her daughter Chelsea's apartment. As she walked down the street towards her car, Martin heckled her. Do you need Farmer Bros help? Drop out! Drop out! Drop out! What happened?
What happened? Drought found. Martin also yelled out, go Trump, and why are you so sick to the presidential candidate? And he bragged about it later on social media. Later that month, Shkreli would raffle off a chance to punch him in the face. He loved being the bad guy. The trial started on June 26, 2017 and lasted over a month. It was a struggle to find jurors who could promise to be impartial because his media presence was so repugnant.
At one point, even his lawyer, Ben Brafman, told the judge that sometimes he wants to give Martin a hug, and other times he wants to punch him in the face. As the trial neared the end, Martin livestreamed from his apartment where he joked that if he were convicted, he would be playing Xbox at Club Fed with other white-collar criminals. And if he were acquitted, he told his fans what he was looking forward to the most. Trial's over tomorrow, bitches. And if I'm acquitted, I get to fuck Lauren Duca.
The jury deliberated for five days and convicted Skreli on two counts of securities fraud and a single count of conspiracy.
He was acquitted on the five other counts of conspiracy. It was a verdict that Martin and his lawyers viewed as a win. Thanks very much. I think Ben said it all. You know, we're, I think, delighted in many ways with this verdict. Count 7 was the government's attempt to theorize that it robbed Peter to pay Paul, and the jury has spoken conclusively that Retrophin was not defrauded in this case.
My investors made three to five times their money without any aid of any settlement agreement. Some made 10 times or more than that of their original investment after they did receive settlements. I'm delighted the jury did their job. They saw the facts as they were, and this was a witch hunt of epic proportions, and maybe they found one or two broomsticks, but at the end of the day, we've been acquitted of the most important charges in this case, and I'm delighted to report that.
Martin returned home to await sentencing. If he kept his nose clean, he would have seven months of freedom before he had to appear in court again to find out his fate. But just a month after his conviction, Shkreli logged onto Facebook and posted, quote, The Clinton Foundation is willing to kill to protect its secrets. So on Hillary's book tour, try to grab a hair from her. I must confirm the DNA sequences that I have. We'll pay $5,000 per hair obtained from Hillary Clinton.
When Judge Kiyo Matsumoto heard about Shkreli's antics, she revoked his bail on the basis that his post was a solicitation of assault. Shkreli issued a written letter apologizing and arguing that it was just a joke, just political satire. He asked the judge to give him another chance. Judge Matsumoto denied his request and Shkreli was taken to a federal jail in Brooklyn to await his sentencing.
While in jail, Martin Shkreli wrote a letter to a friend where he shared how he was spending his time. Quote, Things are not that awful here. There are some bright sides. I am teaching these prisoners some new things and hopefully some ways to change their lives. Shkreli also continued his internet trolling by having a friend on the outside post on his social media accounts. On March 9th, 2018, the day of his sentencing, Martin Shkreli's lawyer suggested that prison time was not necessary because his investors had been paid back.
Braffin argued that the only person to lose any money in Martin's scheme was Martin. Other supporters of Shkreli wrote letters that described him as a bright and nerdy child who became consumed with internet fame. While wiping tears away from his eyes, Martin Shkreli himself appeared as an actual human being and offered a heartfelt quote: "I was never motivated by money. I wanted to grow my stature and my reputation. I am here because of my gross, stupid, and negligent mistakes I made.
Judge Matsumoto agreed that Martin seemed genuinely remorseful, but he had minimized any goodwill with his post-conviction behavior. She ordered Shkreli to forfeit $7.36 million to cover his fraud, and she authorized the government to seize his assets, including his prized Wu-Tang album. She levied an additional fine of $75,000 and sentenced him to seven years in prison.
Evan Grable, Shkreli's former lawyer who had also been charged, was found guilty a month later. He is currently waiting sentencing. So when the guidelines are 25 years and the government is demanding 15 years, one would think that a seven-year sentence is good, but I'm disappointed. I thought the sentence should have been less than seven years, but...
You know, Martin's fine and he will be fine and, you know, obviously it could have been a lot worse. The government did not get what they wanted. We did not get what we wanted either. This is a good judge who I think spent a great deal of time trying to examine the facts and all of the letters that were written on behalf of Mr. Shkreli and she made her decision and we all have to live with it.
Martin Shkreli is convinced that the only reason he was charged for the unrelated fraud is because he opened his mouth about drug pricing. He truly was the most hated man in America at one point in time. Even people in the pharmaceutical industry hated him because he was attracting attention to their money grab. Martin Shkreli contends that his heart was in the right place, at least part of it. He really was passionate about developing new drugs, but doing so requires playing within the rules of the game of a capitalistic society.
Besides, if money was his sole motivation, wouldn't he have been better served by just keeping his mouth shut? Martin Shkreli has the kind of personality that America loves to hate, the kind of personality that thrives on attention whether it be positive or negative. The public is continually distracted by theatrics and cults of personality, and we take the bait every time just to be entertained, while the issues that truly matter remain unresolved.
After all the angry political speeches and public posturing and media attention that had been directed at Martin Shkreli, the price of Daraprim remains at $750 per pill. In my Albanian community, people look up to me for making it in America. And I think they understand the sort of drug pricing thing. If you look at the drug inventions I've come up with, for instance, I think they more than outweigh the
sort of reality of high drug prices in this country that I'm not, I didn't start and I'm not gonna finish. I'm just a part of. But I am making drugs for rare diseases. They're proud of that before this, you know, I was here before the drug price increased and I was doing good things, I think. But this got a lot of attention and it is what it is. I'm dealing with it the way I'm dealing with it, which is a little bit of denial, a little bit of frustration, not a lot of poise or grace. But, you know, I'm 33 years old and
Life's happened a little too fast for me sometimes to deal with, and this is the way I'm dealing with it, and it's a little bit immature, and it's a little bit silly, but it's the best way for me to process it, and I think it's working to a small extent. Swindled is written, researched, produced, and hosted by me, a concerned citizen. For more information about the show, you can visit swindledpodcast.com or connect with us on Facebook, Twitter, and Instagram at swindledpodcast.
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