[U] I Just KNEW PathoPhilia Would “Find” This! Smile…

UPDATED: 4:30 PM EDT — The company has just now been granted a TRO! Next hearing against Savant occurs August 17, 2017 — to consider a preliminary injunction. Woot! [End, updated portion.]

We add to our coverage here, now — to thank PathoPhilia for doing what she does so well:

Connecting all the little dots, teasing out the tangled threads — and weaving these once disparate narratives — into a rich tapestry, of… Shkreli-led fraud(s). likely still ongoing.

Before we post hers, here — recall that Mr. Shkreli is only (by contract, at least) prohibited from acquiring control over any Humanigen/KaloBios shares for a one year period, and that period expired at the end of July 2017 (IIRC).

Now — we turn — to the able doctor’s keyboard [with my editorializing, in brackets]:

“…On reading the [over the weekend-filed] 30-page Humanigen/KaloBios TRO brief, I was struck by this little Easter-egg footnote on page 5:

“The Shkreli-Hurst partnership remained intact even after Shkreli was arrested at the end of 2015. In August 2016, Dorsey & Whitney (i.e., Savant’s law firm in this TRO dispute, as well!) issued a press release, announcing that Shkreli and Hurst had been invited to appear at a September 2016 symposium to discuss their efforts at forging a deal as to benznidazole. The press release stated: ‘Shkreli and Hurst will discuss how the KaloBios/Savant deal came together, their observations of KaloBios’ bankruptcy process and the impact of the public eye on pricing practices by life sciences companies….'” [Of course, that “symposium” appearance was ultimately scrubbed by the higher-ups, at D&W — but not before Mr. Shkreli sought and received permission from the court to attend.]

So what’s the purpose and subtext of that? Also on page 23…

“In fact, Savant and its CEO, Stephen Hurst, previously partnered with Martin Shkreli to develop benznidazole even though Shkreli already was notorious for engaging in predatory pricing of other pharmaceuticals. Id. Were Savant and Hurst to sell to or partner with SOMEONE WITH A SIMILAR STRATEGY AGAIN, the results could be catastrophic for those suffering from Chagas [emphasis added].”

So at the very least, Humanigen/Kalobios is suggesting that Hurst and Shkreli are cut from the same predatory cloth. A more pernicious implication is that Hurst and Shkreli are still in communication, and that Savant wants to claw back its sole rights to benznidazole in an effort to partner with someone who’s perfectly willing to engage in extortion-style pricing.

Now who could that be? We certainly know that Shkreli can be extraordinarily and persistently vindictive in nature — e.g., the Pierotti harassment — and that he still has a majority stake in Turing and controls the board. It was Shkreli’s idea, after all, after his takeover of Kalobios, to initially partner with Savant and ultimately exploit the FDA approval of benznidazole….”

Indeed. And I think PathoPhilia is dead on. My take is that even if Turing DOES NOT move to partner with Savant, Judge Matsumoto will have a few things to say about all of this.

All of this is relevant conduct — a la the KaloBios bankruptcy — driven primarily by a Shkreli led securities fraud spree at that company. Lots of federal court pleadings to back up that assertion.

And in those securities suits on the West Coast, no one has agreed to release Mr. Shkreli, personally — all others have settled up, and paid their share. All but Martin Shkreli. That’s called “relevant conduct” evidence, under the federal sentencing guidelines, as we’ve discussed in comments, since the guilty verdicts, on Friday afternoon.

Now you know. Namaste, and thanks again to http://www.pathophilia.com!

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41 thoughts on “[U] I Just KNEW PathoPhilia Would “Find” This! Smile…

  1. R West says:

    Martin would have an advantage in prison, since he like’s reading and he’s got money to buy books. According to Matthew Kluger’s interview, a prisoner can get all the hardcover books they want from Amazon, and other people can send paperbacks. He also said the federal prison library gets a copy of the Wall Street Journal in hard copy. Martin would probably miss the Internet for sure, but otherwise he’ll be better off than the average prisoner who only watches TV in civilian life. Kluger said there was one TV room with limited hours and they fight over what programs to watch … that part does sound like college!

    Liked by 1 person

    • bmartinmd says:

      A fascinating interview (http://fortune.com/2014/07/07/matthew-kluger-talks/), but I don’t envision Shkreli having an easy time in prison — even a white-collar prison. There would be no fawning fan base, no virtual audience to bullshit. Just your fellow prisoners — most of which are just as sociopathic and un-empathetic as Shkreli — and the prison staff. There’s no such thing as “Club Fed.” Moreover, there’s no guarantee that Shkreli would be imprisoned anywhere near New York and his family.

      Liked by 1 person

      • R West says:

        It looks like Kluger was just moved to a prison in Texas. After he said the BOP usually keeps you close to home, that’s surprising! He seems like a nice guy and I don’ want to say anything derogatory, but it’s really interesting to read his appeal of the sentence … in the appellate opinion, they get into his family situation, which one might say was a little … ahem … unusual.

        Liked by 1 person

      • condor says:

        What I found most interesting about the appellate court’s opinion was the suggestion that the panel would not second guess a very long sentence since the “relevant conduct” evidence indicated Mr. Kluger was making plenty of money legitimately, in salary from these prestigious law firms — yet spent essentially his entire career commiting fraud (as a tipper in an insider trading scheme) — and he didn’t personally make much for doing so.

        So too (in the defense version of) Mr. Shkreli’s story: according to Mr. Brafman, Mr. Shkreli didn’t really profit much from his frauds — was clearly a genius able to make bank legitimately (Picasso; Enigma machine), and yet… from about 2009 through to today — via Humanigen, and Retrophin — his frauds continue.

        His career is one on fraud — not science. With zero remorse or even a passing nod — that what he did across at least six companies… was felonious and unerringly criminal.

        Mr. Kluger got 12; he’ll get a decade.

        Namaste

        Liked by 2 people

      • FTD says:

        Imagine thinking your company is going to get funding with a description like that. No one is going to invest anything. 2 people work at the company?Good luck, Marty. Maybe hire some of your trolls for Fruit by the Foot snacks. 🙂

        Liked by 1 person

    • bmartinmd says:

      “Martin is a serial entrepreneur [he’s a serial something alright] who was the Founder and Chief Executive Officer of Turing Pharmaceuticals AG and Retrophin, Inc. (NASDAQ: RTRX). He built both businesses ‘from scratch’ into successful organizations with billion dollar valuations.”

      Retrophin’s current valuation (ie, enterprise value) is about $800M. (Not bad for selling 3 old drugs, but at extortionist prices.) When Shkreli left Retrophin in September of 2014, it was worth about $300M. Turing’s value is an unknown, but I’d have a hard time believing that it’s worth more than $100M. There’s no way it can be worth anywhere near a billion.

      It looks like the “Request a Demo” option is really just a way to get someone to beta-test their products without getting paid. Or I should really say product — as in singular.

      Why would anyone jump on this ship?

      Liked by 1 person

      • condor says:

        In addition, this (per Law360) would also be “relevant conduct” under the sentencing guidelines:

        Law360, New York (August 8, 2017, 6:43) By Dani Kass …three pharmaceutical law experts say the Turing Pharmaceuticals founder’s real problem could be that he limited the distribution network of the antiparasitic drug in a likely illegal move to block generic competition.

        In a Berkeley Technology Law Journal article from July, three professors and researchers outlined a potential antitrust lawsuit against Shkreli and Turing based on their limiting the distribution of Daraprim, or pyrimethamine…”

        That’s federal antitrust law — and the damages might run into the middle hundreds of millions of dollars… as a civil matter. This where I personally think the sentencing guidelines are… unfair (particularly as to other defendants).

        But they are the law, as it exists.

        Yes, ALL of his violations of law may be considered in the pre-sentencing report.

        Hilarious!

        Like

      • bmartinmd says:

        I remember reading that article. I don’t know what became of the NYAG’s investigation into Turing’s (alleged) anticompetitive practices.

        Liked by 1 person

      • condor says:

        Conduct — relevant conduct — crowed about, in tweets and streams — by Mr. Shkreli as controlling shareholder — continued at Turing, right?

        Still violates antitrust law — allegedly. No chance of getting off on that theory.

        Like

  2. R West says:

    Interesting thing is that Martin is talking about the sentencing guidelines himself. He needs to make an Excel spreadsheet and start plugging in all the point factors. He says it’s base level 7 and that’s it (where he gets the 0 – 6 months). When he finishes his spreadsheet and clicks on sum … he’ll probably say “yikes, it’s level 37!”

    Liked by 2 people

      • bmartinmd says:

        For counts 3 and 6, his base level should be 7. For count 8 — which reportedly has a max sentence of 5 years — his base level should be 6.

        “(a) Base Offense Level: (1) 7, if (A) the defendant was convicted of an offense referenced to this guideline; and (B) that offense of conviction has a statutory maximum term of imprisonment of 20 years or more; or (2) 6, otherwise.”

        Add to that the fact his offenses fulfill the following criteria (per the 2016 guidelines):

        “(19) If the offense involved—(A) a violation of securities law and, at the time of the offense,
        the defendant was (i) an officer or a director of a publicly traded company; (ii) a registered broker or dealer, or a person associated with a broker or dealer; or (iii) an investment adviser, or a person associated with an investment adviser; or
        (B) a violation of commodities law and, at the time of the offense, the defendant was (i) an officer or a director of a futures commission merchant or an introducing broker; (ii) a commodities trading advisor; or (iii) a commodity pool operator, increase by 4 levels.”

        So his offense levels for counts 3 and 6 should be 11. For count 8, his offense level is 10, again according to my read of the guidelines.

        The latest sentencing table (https://www.federalcharges.com/what-are-federal-sentencing-guidelines/) recommends a sentence of 8-14 months for base level 11 and 6-12 months for base level 10. This is undoubtedly what Shkreli is hoping for.

        But depending on the calculated losses, the offense levels could be jacked up considerably. If the judge decides that Retrophin lost millions of dollars in share value, either as a result of Shkreli’s parked shares or the “sham” consulting agreements, Shkreli could easily get the maximum sentence for count 8. And even if the judge decides that Shkreli only misappropriated $250K from his hedge funds, that alone could increase his offense level for counts 3 and 6 by 12 levels –> to offense level 22 (41-51 months, or 3-4 years approximately).

        As well, the sentencing guidelines add this important caveat re Ponzi schemes:
        “Ponzi and Other Fraudulent Investment Schemes.—In a case involving a fraudulent investment scheme, such as a Ponzi scheme, loss shall not be reduced by the money or the value of the property transferred to any individual investor in the scheme in excess of that investor’s principal investment (i.e., the gain to an individual investor in the scheme shall not be used to offset the loss to another individual investor in the scheme).”

        Note the parenthetical clarification. In other words, it’s NOT a zero-sum game, and that’s to Shkreli’s detriment, as I read it.

        And none of this takes into consideration his post-verdict behavior, apparent lack of remorse, etc.

        Liked by 1 person

      • condor says:

        Nor his other relevant conduct — in the guidelines, what happened at Kalobios (and in every civil securities suit and arbitration)… is “relevant conduct”.

        R West is right — just like the Jones case I earlier quoted — the able judge may and likely will make an upward departure for the number of concurrent, overlapping and bi-coastal frauds — on at least two public companies (as CEO, to boot!)… over close to four years.

        Ten it is! Smile!

        Liked by 1 person

      • R West says:

        Initially, I didn’t focus on the commentary in the sentencing guidelines. I see that’s where Ponzi schemes are mentioned, and there’s also this:

        “(E) Credits Against Loss.—Loss shall be reduced by the following:
        (i) The money returned, and the fair market value of the property returned and the
        services rendered, by the defendant or other persons acting jointly with the
        defendant, to the victim before the offense was detected. The time of detection of
        the offense is the earlier of (I) the time the offense was discovered by a victim or
        government agency; or (II) the time the defendant knew or reasonably should have
        known that the offense was detected or about to be detected by a victim or
        government agency.”

        The victims obviously discovered the fraud before they were repaid, so I think the Judge will say the loss was their initial investment in the hedge funds, which went to zero. Seems pretty clear, does it not?

        Liked by 1 person

      • bmartinmd says:

        Yes, that’s where I think many reporters and Shkreli (as well as Shkreli fans) are completely missing the boat. It doesn’t matter that Shkreli’s investors ultimately saw (an ill-gotten) gain on their ROI. In fact, that’s the whole point. Otherwise, you could only assess a convicted felon’s sentencing on the basis of the group of investors who actually lost money in the Ponzi scheme or Ponzi-like scheme. Sentencing should be assessed on ALL of the investors who were sucked into investing and deceived. I suspect Judge Matsumoto will spell that out in her sentencing order.

        Liked by 1 person

      • bmartinmd says:

        Plus it’s not like Shkreli was returning his investors’ money (that went poof because of his mismanagement and bad trades). Shkreli was paying his investors back with Retrophin’s equity in the form of company shares.

        Liked by 1 person

      • condor says:

        I will say that I see no journalistic purpose (other than to prove she’s been inside) for the photos depicted on her feed… and like Billy, I don’t think that per force means her relationship has skewed to romance.

        All I know for certain, from all of this — by her — is that I won’t buy her book. It seems designed to pander.

        Namaste — good sleuthing FTD!

        Like

      • bmartinmd says:

        Yeesh, there is a certain lack-of-boundaries creepiness going on here. It certainly undermines her credibility, in my view. We definitely don’t need to see a photo of the bedroom.

        Liked by 1 person

  3. bmartinmd says:

    Oh, gee. I forget about the 1-year moratorium on Shkreli’s ownership of Kalobios/Humanigen shares. Yup, that would be up about now, wouldn’t it? At $2 a share, could Shkreli snap up again (with other cronies) a sufficient number of outstanding shares in a publicly traded company to overtake Kalobios AGAIN, even if he’s a convicted felon X3 (and regardless of whether he’s pending appeal)? Or would he use a rudderless Turing to partner with Savant again — while Savant withholds funds and watches Kalobios die of asphyxiation? This looks potentially brutal.

    Condor, it ain’t over:
    https://nerdinthecity.files.wordpress.com/2016/07/g6m0rhy.gif?w=633&h=272

    Liked by 1 person

    • condor says:

      The SEC would likely move to enjoin any and all open attempts — as they will have him banned shortly (as a convicted felon, under securities fraud statutes and rules, he cannot directly acquire control of a public company).

      But as we know, from the Friday conviction on the Retrophin fraud, Count Eight — he likes to acquire control of public companies by secret (i.e., fraudulent) schemes…

      So this all may be quite entertaining — once they catch him — assuming he is behind the Savant posturing in Delaware.

      This is likely part of the ongoing DoJ investigation!

      You’ve struck ongoing felony gold here!

      Namaste!

      Liked by 1 person

  4. FTD says:

    Condor,BMartin,Billy,Mr Rhymes, here’s a interesting tidbit.

    So Shkreli bought stolen property, isn’t that against the law? He told a reporter? He has a stolen album which he played snippets on a livestream on youtube? This fits Marty’s m.o. 🙂

    Like

    • aldt440 says:

      I’ve never heard this before! I don’t remember how chattels transfer in this type of scenario. If it wasn’t itemized in a bill of sale is it considered abandoned or a trespass? Lil’ Wayne might have a good case.

      Liked by 1 person

      • condor says:

        Shkreli first told a media interview that he bought it without notice of any problems related to title… then he told another reporter that he knew it was stolen from the Bugatti… then he told a third reporter he got it lawfully.

        I’m the end, he agreed with Weezy’s people that he would not play it over his stream, on threat of a civil lawsuit.

        In my view, and defense of good faith as to its provenance… in Mr. Shkreli’s (clearly unclean) hands… is toast.

        All of that is in the archives here — or at the KaloBios blog… now called Humanigen… as of this morning.

        Onward…

        Like

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