This was a delicious come-down for Shkreli, who recently shot to fame when a private company he controlled, Turing Pharmaceutical, bought the rights to a specialty drug and then, just because it could, raised the price by a gadillion percent.
But charges also were lodged against a lawyer, Kaye Scholer
partner Evan
Greebel, shown below when he was with Katten Muchin Rosenman (where he
was when he allegedly broke the law by assisting Shkreli).
Greebel has also been arrested and indicted for aiding part of Shkreli's alleged frauds. Both have also been sued by the SEC. The charges, although serious, are pretty straight-forward and garden-variety. Nothing too subtle.
Shkreli was indicted and sued for committing fraud against investors in two hedge funds that he apparently ran into the ground with crappy investments, while lying to new investors about such things as AUM, whether the funds had auditors or administrators, and the like. Then, he offered to pay out the investors out with cash and shares from a public company he controlled, Retrophin, Inc. To do this, both the indictment and the SEC complaint allege, he created allegedly phony consulting agreements between Retrophin and the hedge fund investors, under which the investors would be entitled to Retrophin shares as their compensation for services rendered. Supposedly, he did this with the knowledge and assistance of Greebel.
According to the indictment, Greebel's assistance ran deeper and longer than what the SEC alleged. The indictment alleges that the "consulting agreements" were created only after Shkreli, with Greebel's assistance, had backdated documents designed to show that one of Shkreli's hedge funds had previously invested in Retrophin, arranged for the payment of cash and Retrophin stock to seven hedge fund investors, created promissory notes to Retrophin from the hedge funds. Apparently the auditors were not satisfied, so Greebel and Shkreli allegedly went the consulting agreement way.
Query: why did the SEC not go into the gory background leading up to the pre-consulting- agreement shenanigans charged in the indictment? Since to prove the allegations in the indictment will require proof beyond a reasonable doubt, while proof of the SEC's allegations will require proof by a preponderance of the evidence (more likely than not), one would expect the SEC to go far and wide to include alleged violations and for the prosecutors to focus their allegations more narrowly.
There's more: Greebel might have some explaining to do about the fact that, according to an August 2015 SEC filing by Retrophin, Katten apparently received over $500,000 in legal fees from Retrophin for work the firm did for Shkreli's hedge funds. Meanwhile, did the Katten firm's accounting department notice that Company A was paying the legal bills of Company B? If so, was Katten management told? What happened then? One can assume this will come out in Katten's internal investigation, which The American Lawyer says has started.
Two observations:
1.Sleazy client, overeager lawyer hungry for fees and Macher-dom?
According to the AML article, "[an unnamed Katten] partner who worked with Greebel on Retrophin-related matters told The Am Law Daily that they had concerns about Greebel's relationship with Shkreli, whose forceful personality includes a penchant for making public statements and pushing outside counsel to bend to his will. The lawyer admitted to being shocked at the way Shkreli spoke to Greebel, a lawyer 10 years his senior, and said that Greebel seemed overwhelmed trying to placate Shkreli and meet his demands." Say what?
2.Who the hell would invest millions of dollars with this schmendrick?
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