Martin Shkreli Banned Again – This Time from Running Public Companies
Martin Shkreli has received his second lifetime ban from the pharmaceutical industry. One month after U.S. District Court Judge Denise Cotes banned the “Pharma Bro” from future involvement in the industry, a second judge handed down a similar order and ordered him to pay a $1.39 million fine.
On Wednesday, U.S. District Judge Kiyo Matsumoto handed down her ruling in a civil trial brought by the U.S. Securities and Exchange Commission. Her verdict was over charges of Shkreli violating securities law between 2009 and 2014 when he was at the helm of Retrophin, Inc.
In 2017, Shkreli was found guilty on two charges of securities fraud and one charge of conspiracy to commit conspiracy fraud. He was found guilty of orchestrating three interrelated fraudulent schemes—a scheme to defraud investors and potential investors in MSMB Capital; a scheme to defraud investors and potential investors in MSMB Healthcare; and a scheme to defraud Retrophin, the company Shkreli founded.
The government’s indictment said Shkreli’s scheme, which caused his investors to suffer a loss of more than $11 million, was carried out over five years, from 2009 to 2014. He is serving seven years in federal prison and is eligible for release in November of this year.
Shkreli’s legal team had sought a 10-year ban for the former head of Retrophin and Turing Pharmaceuticals, which is now known as Vyera. His lawyers argued the seven years he was sentenced to in federal prison and the $7.8 million he forfeited was sufficient punishment.
In her Wednesday ruling, Matsumoto called Shkreli a “chaotic, dishonest, and untrustworthy corporate leader” who was more than likely to violate the law again if allowed to run a public company.
In December 2021, Vyera agreed to pay a $40 million fine to settle federal allegations over its attempts to prevent generic competition for Daraprim. That charge was brought after the Federal Trade Commission and several states filed a complaint against Vyera the prior year. In its complaint, the commission alleged an “elaborate anticompetitive scheme to preserve a monopoly” for the toxoplasmosis. From there, Turing, under the direction of Shkreli prior to his incarceration, increased the price of the drug by 5,000% from $17.50 per pill to more than $300.
In 2015, Retrophin sued Shkreli for $65 million over his use of company funds while he was CEO. Retrophin said Shkreli used company funds for personal use, enriched himself through false consulting contracts and referred to Shkreli as “the paradigm faithless servant” who “is not entitled to compensation or post-separation benefits.” Shkreli settled the lawsuit with Retrophin, whose shares he used to pay back investors in his hedge funds. He, in turn, filed his own lawsuit against the company over his ouster, which was settled out of court.
Cotes’ ruling was handed down in a criminal trial against Shkreli in January. Not only was he permanently barred from the pharmaceutical industry, but he and Vyera were also ordered to return $64.6 million in profits reaped from Daraprim. During the trial against Shkreli, the government prosecution showed that Shkreli was still exerting control over Vyera Pharmaceuticals from behind bars.
In 2019, Shkreli was sent to solitary confinement after discovering that he was using a contraband cell phone to conduct business while still behind bars. Some of that business included using the phone to terminate the CEO who had been running the company in his absence. During the trial, the government introduced recordings that indicate Shkreli was advising the company on ways in which to prevent generic versions of Daraprim from hitting the markets. In 2020, a generic version was finally approved for Daraprim after that drug enjoyed exclusivity on the market for decades.