Here on a holiday Sunday morning, the defense for Mr. Greebel has filed a “midnight oil burning” nine page PDF copy of a letter brief — trying to keep evidence of alleged conspiracy out of his trial, under Counts Seven and Eight. R.West will also enjoy this bit, I predict.
The defense argument runs that — absent an independent piece of evidence of conspiracy — the Biestek/Mulleady/Fernandez emails cannot be admitted (as hearsay) in order to prove up the alleged conspiracy. That makes sense — but my view is that accepting transfers of hundreds of thousands of shares of what became Retrophin, for fractions of pennies per share, is ITSELF fair evidence of an unlawful purpose.
Feel free to debate that notion, below in comments. Here’s the bit of the letter I do think it is okay to share (i.e., a portion that in no way jeopardizes Mt. Greebel’s defenses):
“…Count Seven: Thomas Fernandez, Kevin Mulleady, and Marek Biestek
The government will be unable to meet its burden of demonstrating by a preponderance of
the evidence that Tom Fernandez, Kevin Mulleady, and Marek Biestek all knowingly,
willfully, and intentionally joined the charged conspiracy in Count Seven. Before admitting
any hearsay statements of Messrs. Fernandez, Mulleady, and Biestek in connection with
Count Seven, the government will have to identify independent, non-hearsay, corroborating
proof that each of these individuals became knowing members of a conspiracy to defraud
It appears that the government’s sole independent, non-hearsay evidence relating to Messrs.
Fernandez, Mulleady, and Biestek in the trial record with respect to Count Seven arises out
of the November 29, 2012 transfer of 4,167 shares of stock from Mr. Biestek to Mr. Shkreli,
and the December 3, 2012 transfers of stock from Messrs. Fernandez and Mulleady to Mr.
Shkreli. However, for the reasons explained in our pretrial motion to dismiss the
government’s backdating theory relating to Mr. Shkreli’s transfer of 75,000 shares of Class B common units on or about December 3, 2012, to MSMB Capital, see Mr. Greebel’s Mem.
Law Supp. Mot. Dismiss Count Seven Superseding Indictment, Dkt. No. 327 at 18–25 (Aug.
18, 2017), the government’s theory is fundamentally flawed and the stock transfers at issue
did not and could not have defrauded Retrophin. Moreover, the trial evidence to date has demonstrated the following fundamental flaws in the government’s backdating theory: (1) all of the November 29 and December 3 stock transfers to Mr. Shkreli were transfers of stock between private individuals and thus could not have defrauded Retrophin LLC; (2) all of the November 29 and December 3 stock transfers to Mr. Shkreli were prior to Retrophin becoming a public company and thus Mr. Shkreli had the authority and power to cause these transfers to be made; (3) Mr. Shkreli’s stock transfer of 75,000 Class B common units to MSMB Capital were from Mr. Shkreli’s personal stock holdings, just as Mr. Shkreli’s stock transfer of 50,000 Class B common units to Mr. Aselage were from Mr. Shkreli’s personal stock holdings; (4) Mr. Biestek’s transfer of 4,167 shares of common stock to Mr. Shkreli was reversed by the time of the reverse merger on or about December 12, 2012; (5) Mr. Mulleady’s stock transfer emailed on December 3 could not have taken place until the time of the reverse merger because half of the 10,000 shares did not vest until the reverse merger took place. For these reasons, the government will not be able to point to independent, nonhearsay proof that Messrs. Fernandez, Mulleady, and Biestek knowingly and willfully joined the charged conspiracy in Count Seven….
Mere purchase of Fearnow shares at a deeply discounted price is insufficient evidence of having joined the charged conspiracy. Indeed, the government has not identified Mr. Pierotti as an alleged co-conspirator in Count Eight even though Mr. Pierotti purchased the Fearnow shares at a deeply discounted price….”
I will confidently conjecture that the defense will lose on most of this. I might also observe that jurors are allowed to use common sense, in evaluating evidence. 400,000 shares purchased for just $400.00 is not just “deeply discounted” — the price alone gives ample notice — that a fraud is afoot. Accepting those shares at perhaps one-five-hundred-thousandth of their market value (the jurors may properly infer) is competent evidence that both the transferor, and transferee intended some unlawful purpose. That it was not taken from Retrophin’s treasury shares (but from Shkreli’s holdings) is of no moment. The goal was to manipulate and control the per share market price of Retrophin, post public trading — and that too, is a felony.
In addition (as to the part about a transaction being harmless since it was reversed), when a stock transfer must be reversed, by the time a company goes public, it is fair to say something was hinky with that transfer.
But we shall — as ever — see. I’ll post the whole nine-page letter — when the Greebel jury has reached a verdict.