Friday Trial Journal Open Thread — Prosecution Witness Caroline Stewart Eviscerating Mr. Shkreli’s “No Intent” Defense…

From the keyboard of the ever-cogent (and long term deputized “second in command”) here, at the blog — Pathophilia, then — in overnight witness testimony commentary:

…“Stewart testified that ‘the implosion of MSMB Capital was the catalyst, the genesis, that gave birth to Retrophin, the biotech company.’”

It was always my impression, my suspicion, that Shkreli founded Retrophin precisely for the purpose of raising substantial venture capital so that he could make MSMB whole and ultimately pay off his hedge-fund investors (and so they wouldn’t go to the SEC, tarnish his reputation, and make general trouble). Shkreli’s surprising new-found concern for children with muscular dystrophy was a faux-altruistic cover, IMO. The report that Shkreli was concerned that Merrill Lynch would “come after Retrophin” speaks to his concern about maintaining an all-important asset pipeline from Retrophin to MSMB and his burned investors….

…According to Caroline Stewart’s LinkedIn page, she has a JD (Rutgers, 2016), an MS in molecular and cell biology and an MS chemistry (Brandeis, 1993 and 1997), and a BA in chemistry (Columbia, 1992)….

Thanks so much Dr. Martin! And in this criminal felony trial, Count Seven is proved — by the use of any Retrophin assets — to “pay off” rich former hedge fund investors. If an arms’-length, negotiated to be fair market value benefit was not received BY Retrophin, for these payoffs (and it wasn’t, as according to some testimony — the shares just… “showed up,” years later, unbidden — testimony Mr. Brafman did not repair in any way)… then, each of Mr. Brafman’s narrative lines helps the prosecution PROVE Count Seven. That’s Condor’s take on the testimony, thus far this week. [As a final side note (with much more on this in the coming weeks) where was the disclosure in the Retrophin IPO documents filed with the SEC — that the company and Mr. Shkreli would be giving away its valuable assets, to former hedge fund investors? Right. There was no such disclosure? That’s proof of Counts Three through Six.]

In the land of witness credibility, we should all keep in mind that Ms. Stewart was clearly Mr. Shkreli’s “better” — in every way: more emotionally intelligent, smarter, better education, higher purposed, greater (verifiable record of) achievements, etc….

The jury is sure to believe her — and be offended, if Mr. Brafman starts some form of bullying “jilted love interest” line of cross-examination/ attack. She is far too good for Marty, in any event. And she clearly figured that out after just a few dinners, around town.

We are in your debt — as we are running on other matters, this Friday.

Do use this thread for remaining trial testimony updates, today.



58 thoughts on “Friday Trial Journal Open Thread — Prosecution Witness Caroline Stewart Eviscerating Mr. Shkreli’s “No Intent” Defense…

  1. FTD says:

    This is a good comment from a poster on a subreddit called “Shkreli Evidence”

    There are many ways companies use to block generics. Shkreli made sure he purchased a specific type of drug which would allow the price to be hiked so much. We won’t cover that here. But he was able to make sure that his company could operate in a competition free zone. (Some free market bastion he is huh?) Remember, this drug was 60 years old. It had been off patent for a long time. So, why didn’t we all just make a Gofundme page for a generic?
    Well when a drug is found to be dangerous, or just proven to have some serious side effects, the FDA likes to enforce REMS Risk Evaluation and Mitigation Strategies, just basically as a precaution for these special meds. This could include various things, pertinent here is that it may include special or limited distribution. This can result in there being only specific pharmacies or hospitals deemed worthy to release the drug to. Now the FDA didn’t require this at all for shkreli’s drug. Rather, he simply declared that this would be the case, for “safety” reasons. Unnecessary, because again, this something the FDA usually asks the company to do because of bad data that has turned up but, OK.
    Why does this matter for generic production? Well in order to get a generic approved, you must first prove its bioequivalence. To do this you need a sample of the drug from the brand. Well if shkrelli all of a sudden does not deem you, a competitor, “worthy” because you aren’t on some determined list, that may be quite difficult to do no? So why did shkreli want hospital inventories of this stuff cleared out? Why did he want none of this sitting on hospital’s shelves? Is it for the reasons he said? Why would he force someone to tweet him if they wanted the drug because access to it was so damn difficult and locked down? The COO said on a call that she surely didn’t want to make it any easier for someone to develop a generic. So how authentic do those claims made seem to be?

    Liked by 1 person

    • condor says:

      The FDA’s new guidance, amended and re-issued during day two of jury selection last week, will end most of Turing’s business model. I may make this whole issue a new post tomorrow.

      But as PathoPhilia and I opined last week — this whole business model (gouging) is… being regulated to… extinction. Largely thanks to Mr. Shkreli’s so brazenly “gaming” the system.

      Now you know.



      • aldt440 says:

        Condor, I’m not as familiar with this industry as you or Dr. Martin, but from my perspective, the FDA’s new guidance is worthless politically expedient BS. It just isn’t going to work.

        Competition in any industry continually works to drive down the rate of return on invested capitol toward the competitive floor rate of return, or the return that would be earned by the economist’s “perfectly competitive” industry. This competitive floor, or “free market” return, is approximated by the yield on long-term government securities adjusted upward by the risk of capitol loss.

        If production costs are theoretically zero and the only expenditures are related to distribution and licensing, what’s the point of entering into a new market or horizontally integrating? Competitive rivalry will always drive down the market price to the floor. In Shkreli’s case, the highest rate of return a new entrant could expect is the price of Daraprim at $57 million plus distribution costs plus licensing. If licensing plus distribution setup costs more than $57 million for a new entrant, there is no inducement for a company to invest because they can’t beat Shkreli’s price. How is anyone going to make a profit? Why would any company enter into a market like this? Keep in mind that both companies would be theoretically selling the same product at a fixed demand to professional consumers.

        Shkreli might be a weasel, but he’s a smart weasel and his due diligence on Daraprim is meticulous.

        Liked by 1 person

      • condor says:

        I do not mean to be disrespectful here… but “Schoolhouse Rock” speeches about middle school theories of capitalism are misplaced, here.

        In sum, you don’t know much about the drug industry. It is not an Adam Smith free market. It is a reimbursement-driven oligopoly market. The consumer is not the paying party. That is where your analogy breaks down, and irretrievably so.

        Now if he decided to, Mr. Trump could simply freeze or roll back drug prices. See Nixon in 1969.

        I think 45 is an idiot, but he says he will end drug price gouging. This is one area where he actually has enough delegated Constituional power to do something meaningful.

        The FDA may be the way he does it. This FDA idea grew out of the ACA of 2010. We shall see whether Team Orange can focus long enough on any one shiny object to get it done — but it certainly can be done.

        Another wrinkle: FDA may by policy and rule making favor a generic entrant in any market. Generics ending Mr. Shkreli’s closed distribution (on Daraprim) is something he didn’t figure in: he assumed the law would stay the same. [That’s not great diligence, BTW.]

        It never does, when someone rapaciously, repeatedly and excessively games a market.

        This is a wrinkle your academic capitalism version of “how it might work”… simply does not account for.

        Namaste — do stop back!

        Liked by 1 person

      • aldt440 says:

        Well OK then… My argument is a good place to start if you really want to dig into this. I’m calling your bluff here Condor. Post your diatribe tomorrow and I’ll shred it. Please provide copious evidence. This should be really fun!!

        Regarding this:

        “Another wrinkle: FDA may by policy and rule making favor a generic entrant in any market. Generics ending Mr. Shkreli’s closed distribution (on Daraprim) is something he didn’t figure in: he assumed the law would stay the same. [That’s not great diligence, BTW.]”

        So Congress is going to subsidize entrants with taxpayer money to save taxpayers money? That’s not a good argument.

        And here’s correspondence from Shkreli regarding his diligence. It’s posted on the Committee on Oversight & Government Reform website.

        On August 27, 2015, Mr. Shkreli sent an email to another outside contact, writing: “I think it will be huge. We raised the price from $1,700 per bottle to $75,000… So 5,000 paying bottles at the new price is $375,000,000 almost all of it is profit and I think we will get 3 years of that or more. Should be a very handsome investment for all of us. Let’s all cross our fingers that the estimates are accurate.”

        So, he did figure some backlash into his modeling and expected at least 3 years. I don’t think I was wrong by saying his diligence is meticulous. Regardless, it’s all profit according to him so what difference does it make? Honestly, I’m pissed too that he gamed the system, but at least I’ll look at it objectively.

        *For an added bonus, I thought it would be a good idea to randomly select some drugs from the list of Off-Patent Exclusivity that you provided and model them. So far, I haven’t found one that costs over $200 for the entire course after Googling twenty!!. Most of them average between $10 and $100. Wait, Teniposide costs $330 from a PBM for a 5ml bottle. Unfortunately, it’s for terminally ill patients and $330 is probably the least of their problems. Miglustat is expensive at $27,000.. Not sure why it’s on this list and why FDA didn’t approve it.

        Liked by 1 person

      • condor says:

        Gosh — so feisty!

        Do try the decaf… I have a rather full billable office day, today — but suffice it to say that gouging is no business model at all.

        And I am no fan of government intervention — but when even just a few brazen crooks (yes I mean Mr. Shkreli; and Mylan Pharma, and Valeant — primarily) abuse the system… Congress, or the President occasionally acts to retrench against… the gouging.

        Whether I like it or not is irrelevant. It is simply a fact of life, now.

        But let’s not make this just about ole’ Marty.

        Let us have the discussion in the abstract, more general case: please explain why the EpiPen (Mylan) price increase was good for America. Please further explain why you think it is permissible to make life-taking/life-saving decisions (and that is what these are — life taking/saving decisions) available only to the very top of what the market will bear… or perhaps even beyond it.

        There are some goods and services that should be subject to compassionate care rules — not just retreaded Adam Smith clap-trap. That is my thesis. Even so, I am in general, an ardent capitalist — in most other markets.

        Do chew on that today, whilst I am away — doing… capitalist thingies. Heh.



      • aldt440 says:

        Mylan? EpiPen good for America? Really??? This is too easy. Hahahahah!! First, you should do some research on the EpiPen and other methods of administering the drug because your outrage is misdirected. Yes, Mylan is bad for America and so is the FDA. If you want to get into capitalism and rent seeking, we can do that too. First let me school you on EpiPen and the FDA. 🙂

        My assessment is that Mylan and the FDA colluded to thwart competition. You should blame the FDA for price gouging just as much as Mylan! In other words, there used to be options but they all mysteriously disappeared as a result of the FDA’s own policies – the same post ACA FDA you claim is going to spruce things up real nice for the little people.

        The reason Mylan can charge so much isn’t because of the manufacturing cost of Epinephrine or rights associated with the drug. The complications come from producing the easy auto-injecting devices. Mylan has patent rights to their auto-injector device design, so competitors must find alternative methods of administration to deliver the Epinephrine into the patient’s body. Competitors must also find their way around the oppressive FDA policies too!

        In 2010, there were other methods of administration available for patients. I’m not an expert on the efficacy of inhalation in anaphylaxis related complications, but I think it’s safe to assume that metered dose inhalers did work for lots of people. Unfortunately, metered dose inhalers contained CFC’s and were banned to save the environment, effective Jan 1, 2012. So there’s one form of competition that was phased out without any replacement.

        Adrenalclick has come back, but it is still not covered by many insurance plans, and the FDA HAS MADE IT ILLEGAL for pharmacies to substitute Adrenalclick as a generic alternative to EpiPen.

        Next up is Teva..

        Sanofi’s Auvi-Q was recalled..

        Adamis got strong armed…

        There’s also this:

        But hey, markets are fair right???

        Liked by 1 person

      • condor says:

        Perfect. So you agree — Mr. Shkreli (and his gouging model) — they are bad for America. Cool. Thanks for that! Q.E.D.


    • bmartinmd says:

      I certainly have some thoughts on this subject, which I’ll try to express at greater length in another post. I’m generally not as optimistic, though, as condor on the demise of Shkreli’s extortive drug-pricing business model.

      Liked by 1 person

  2. FTD says:

    All quiet on a Sunday, which one of these close confidents of Martin is going to turn? I’m making a bet that someone doesn’t want to go down with the ship with Martin. 🙂

    Liked by 1 person

  3. bmartinmd says:

    A Washington Post write-up that pretty nearly misses the entire crux of the government’s case and Shkreli’s ultimate undoing (IMO):

    Again, it’s not simply a matter of Shkreli losing MSMB investors’ money and then lying about it. It’s about how he made them “whole” and then some, BY GIVING THEM RETROPHIN STOCK WITHOUT THE BOARD’S PERMISSION AND UNDER SHAM CONSULTING AGREEMENTS (all alleged).

    From the WaPo article:

    “It’s like if a burglar broke into a house while its owners were out of town, threw a rager, and then left a note saying, ‘no worries — yeah, I broke in, but I cleaned up and left you flowers’,” he said. “The positive outcome of a clean house and flowers doesn’t negate the underlying crime.”

    This analogy misses the all-important second part of the story, about how Shkreli raided Retrophin’s assets to pay off his investors. I can only assume that the AUSAs will get to this vital part of the case in their presentation to the jury.

    Liked by 1 person

    • aldt440 says:

      I think you’re a little bit optimistic regarding the collective intelligence of the general public. Most people don’t even know what a board is, much less why you wold need permission of a board if you “own” the company.

      Liked by 1 person

  4. bmartinmd says:

    A few more comments on Retrophin. Its current business model, repeated by Shkreli at Turing, is to build revenue by charging extortive prices for old drugs for rare diseases. However, the company does have a small pipeline, including development of RE-024 or fosmetpantotenate for a rare genetic (autosomal recessive) neurodegenerative disease, known as pantothenate kinase-associated neurodegeneration (mercifully abbreviated as PKAN). Shkreli is one of 3 people on a patent for this compound and other chemical derivatives. (The first named inventor is Andrew Vaino, a PhD in organic chemistry and former MSMB analyst who was named in the Retrophin complaint* regarding the alleged “parking” of the Fearnow shares–see,
    The other named inventor is longtime Shkreli crony Marek Biestek, the “MB” of MSMB.)

    RE-024 is set to undergo phase 3 evaluation in a Retrophin-sponsored randomized, double-blind, placebo-controlled multicenter US study (, after its assessment in only a handful of case studies (to my knowledge). The estimated study completion date is December 2020, with an estimated primary completion date of December 2018. The drug may well work in PKAN; its rationale for use in this disease as replacement therapy for the metabolic defect appears sound. But obviously a placebo-controlled trial is in order to prove that. Certainly if there are any positive data from the trial, Shkreli would likely crow about them–perhaps from jail. He certainly tweeted something to the effect about how he made a PKAN patient walk, after results were published from a single (non-placebo-controlled) case study of the drug. I have no idea of the arrangement between Retrophin and Shkreli, should RE-024 become FDA approved. (Shkreli certainly didn’t take the investigative compound with him to Turing as part of his negotiations when leaving Retrophin.) In addition to bragging rights for Shkreli, there might be some financial windfall as well–especially if Retrophin charges an extortive price for the drug, which it is likely to do.

    * Note also that Thomas Fernandez and Kevin Mulleady–to whom Su and Stewart confided, respectively, their concerns about Shkreli, per their trial testimony–are mentioned in this context as well. I wonder if Vaino, Fernandez, and Mulleady are on the witness list, either for the defense or prosecution.

    Liked by 2 people

    • condor says:

      Excellent, Dr. Martin — as ever.

      I would be shocked if Retrophin would ever owe Mr. Shkreli additional amounts, at least assuming he is convicted on any one of the felony counts.

      The gist of it is that anything Retrophin gained from his efforts was more than wiped out by his felony theft convictions — that’s basically what the securities fraud charges are: theft by deception.

      It will be fascinating to see who all get called as witnesses — and by whom.

      Thanks so much — for your first rate analysis here!


      Liked by 1 person

  5. FTD says:

    Silence from Martin on the livestream, I wonder if the phone is ringing off the hook on his personal phone line. Lying will always get you into the darkest places imaginable. I think he thought his fed case would be a circus like OJ, but with no cameras, it stays in NY Courts. Brafman doesn’t get his spectacle case either. You can’t compete with the president for media time anyways. 🙂

    Liked by 2 people

  6. FTD says:

    Man, this livestream tonight is going to be revealing to see his face & that stress that’s building. The reality of knowing your ship is sinking & no one wants to save you. I think the feds are going to nail someone from Turing & Retrophin. The bad hold overs that Martin selected, they must be pretty nervous & looking for a way out.

    Liked by 1 person

    • bmartinmd says:

      “Su testified that he filed a later SEC complaint, in 2014, when he saw that Retrophin, which was in the process of trying to raise capital, did not disclose to the SEC in regulatory filings that Shkreli was the subject of an ongoing investigation by that agency.”

      Is this another potential securities violation, not yet charged?

      Liked by 2 people

      • FTD says:

        Oh boy, this dovetails into my theory that Turing & Retro are going to fold pretty soon. The structure that is in place just can’t stand for very much longer. Good riddance to sham companies, the mental projection of shorting companies that Martin thought were frauds, he didn’t seem to see how much of a fraud he was building with his two companies.

        Liked by 1 person

    • condor says:

      Wow. He’s buried; there is no way out now — except jury nullification. And that only happens when the jury likes the accused… not likely!


      • FTD says:

        This goes back to my point, how bad is it business wise at both of these companies he founded? Are his researches made up out of cloth as well? I can’t imagine what the live stream is going to be like this week.

        Liked by 1 person

  7. bmartinmd says:

    And to your commentary, condor, the ultimate point is not that Shkreli’s MSMB investors lost their initial investments but, nevertheless, realized an ultimate good (if not stupendous) ROI. It’s that Shkreli, as Retrophin CEO, (allegedly) raided his company’s assets (without board permission) to pay off his initially burned hedge-fund investors. Whatever MSMB investors’ ROIs were through the hedge fund equaled lost equity for Retrophin and its shareholders. These were company assets that Shkreli had a fiduciary responsibility to protect–but didn’t (allegedly).

    Liked by 1 person

    • aldt440 says:

      Are there any updates on this? I’m speculating that tampering with payroll and capriciously modifying the terms and conditions of Ms. Stewart’s employment contract is going to sink him. If he did this to other employees too…. WOW!

      Just wait until they call whomever was in charge of payroll. If he fraudulently tied performance to pay… big trouble in the eyes of the jury! It’s going to be sure death if funds were actually available to pay but Shkreli chose to punish.


  8. FTD says:

    Today we relaxing on a friday listening to this for the first time: 🙂

    Look at the lineup:
    Hank Garland – guitar
    Gary Burton – vibraphone
    Buddy Harman – drums
    Bob Moore – bass
    Boots Randolph – alto and tenor saxophone
    Brenton Banks – piano, violin
    Chet Atkins – guitar
    Floyd Cramer – piano

    Liked by 1 person

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