Shkreli sentence turns on antics,
investor impact of crime
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[August 07, 2017]
By Nate Raymond
(Reuters) - Former drug company executive
Martin Shkreli could spend years in prison for Friday's investor fraud
conviction if the judge focuses on the intended impact of his crime and
his "Pharma Bro" social media antics, according to legal experts.
Shkreli, widely criticized after he acquired rights to an infection
treatment and then raised prices 5,000 percent in 2015, hopes to avoid
prison because of an unusual twist to his case: defrauded investors
suffered no loss from his crime.
That could favor Shkreli, because investor harm is the main factor in
determining a sentence for securities fraud. However, a law enforcement
source said prosecutors will challenge Shkreli's underlying assumption
of how to calculate the investor losses.
Hours after his conviction, Shkreli proclaimed on YouTube the mixed
verdict by the federal jury in Brooklyn as an "astounding victory."
"I'm one of the richest New Yorkers there is, and after today's outcome
it's going to stay that way," he said, showing no sign of contrition.
Lawyers unconnected with the case said comments on YouTube and other
social media by the famously outspoken 34-year-old could backfire at
"He seems to lack any remorse so this will likely cause the judge to
avoid appearing lenient when she sentences him," said James Cox, a law
professor at Duke University.
Shkreli was convicted of defrauding investors in his two failed hedge
funds, MSMB Capital Management and MSMB Healthcare Management, by
concealing trading losses behind fake account statements.
Prosecutors said he eventually paid investors back with stock or cash
from Retrophin Inc, a biopharmaceutical company he managed, by having
them sign settlement or consulting agreements with the company.
But while Shkreli was convicted on three securities fraud and conspiracy
counts, he was acquitted of other charges, including that he conspired
to steal $11 million in assets from Retrophin.
Benjamin Brafman, Shkreli's lawyer, said because the hedge fund
investors ultimately profited, his client's sentencing range should be
zero to six months, which allows for probation in lieu of prison.
Brafman in an email on Saturday acknowledged Shkreli's social media
habits are "not helpful" and hoped the court would focus on the facts of
the case and the law.
"My hope is that the court will ignore the childish and compulsive
tweeting of Mr. Shkreli that is his right to do," Brafman said.
[to top of second column]
Former drug company executive Martin Shkreli exits U.S. District
Court after being convicted of securities fraud in the Brooklyn
borough of New York City, U.S., August 4, 2017. REUTERS/Carlo
Shkreli could benefit from steps he took to repay investors before
he caught the attention of authorities.
"As long as the investors were paid back before he knew there was a
criminal investigation that is subtracted from any loss figure,"
said Sarah Walters, a lawyer at the law firm McDermott Will & Emery.
Prosecutors are expected to argue the intended losses of the fraud
were much higher, noting the millions of dollars that investors lost
before they were repaid, according to the law enforcement source,
who requested anonymity to discuss the case.
That could allow for a lengthier sentence, as under federal
sentencing guidelines, judges are to consider the actual or intended
loss, whichever is higher.
Legal experts also said prosecutors could argue for a lengthier
sentence by asking U.S. District Judge Kiyo Matsumoto to factor in
the conduct involving Retrophin despite the acquittals.
While juries must find wrongdoing under the high standard of proof
beyond a reasonable doubt, judges at sentencing may consider facts
proven by the lower standard of preponderance of the evidence.
The guidelines are advisory only, and Matsumoto can factor in other
issues, including Shkreli's trash-talking habits.
"In this case, I imagine they will focus more on that he is a liar,
he disparages people, he is a disruptive force and he has a complete
lack of remorse," said John Zach, a lawyer at Boies, Schiller &
(Reporting by Nate Raymond in Boston, additional reporting by
Brendan Pierson in New York; Editing by Tom Hals and Lisa Shumaker)
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