Martin Shkreli Struts to Prison (Audio)

separate matter. Prosecutor said Screlly ran a Ponzi scheme, using investors money to start a drug company and siphoning off the company's assets to pay investors. He was convicted of three counts but acquitted of five others. Afterwards, Screlly declared victory. This was a witch hunt of of APICs proportions and maybe they've boald one or through broomsticks, but at the end of the day, uh, we've been appointed of the most important charge in this case. With us to talk

about the Martin Screlly verdict is Peter Henning. He's a professor at Wayne State University Law School. And Robert Hockett, he's professor at Cornell University Law School. Thanks for joining us, both of you. Peter, let let me start with you. Just let's start with the guilty counts. Tell us what exactly Screlly was convicted of doing. Well, Uh, two counts of securities fraud, and both of those related to a

hedge fund or two hedge funds that he ran. And the core of the government's case was that he lied to those investors that in fact the hedge funds were almost completely wound down. And then that he took shares from Retrofin, one of the pharmaceutical companies that he founded, essentially to pay them off, and that he lied to

them about the risk that they were enduring. And then one count of conspiracy related to fraud with regard to Retrofin, so that he was using UH shares from Retrofin to essentially pay off investors in the hedge fund when in fact Retrofin had no interest in no need to pay them. So that essentially was the fraud. And and Bob, what what tell us about the other side of that? What was UH Screlly acquitted of and what was the distinction between those things he was convicted of in those things

he was acquitted of. Sure, so he was not guilty of a number of additional conspiracy charges that have been leveled against him. Right, So, there had been charges that he had conspired to commit securities fraud in connection with both of the hedge funds, and that he had conspired to commit wire fraud with respect to both of the hedge funds. Uh and then finally there was a charge that he had conspired to commit wire fraud in connection

with Retroic and the pharmaceuticals company. So I think the best way to sort of understand the relation between what he was convicted of and what he wasn't is as follows. Essentially, he was found guilty of having committed the predicate of senses by reference to which conspiracy charges are usually defined. In other words, we got the planet, so we didn't

really have to go after the satellite anyway. Um, they did go after the satellite anyway, let's they went after the conspiracy charges that related to the underlying predicate offense charges he was Screwley was now not guilty on those, But in a certain sense that doesn't really matter, because he was found guilty on the underlying predicate offenses that would have been the predicates to the conspiracies anyway, So he really did, in my view, get convicted on what

counts on what matters most. Peter, do you agree with that and and if if so, what do we make of Screwley saying afterwards that he was acquitted of the most important charges in the case. Well, you know, I certainly agree with Bob then that you know, just for the government, any guilty verdict here is going to be

a victory. Now, Screwley says, well, you know, we were acquitted the most serious charges, the wire fraud charge uh involved looting of red trofinn so or conspiracy elude retro Finn, and that um carried the potential for a very substantial loss figure And really, uh what is underlying this case, interestingly, is that the hedge fund investors were at least it appears were compensated and got all their money back plus uh some because retrofin has turned out to be a

fairly successful company, and it's not clear that retrofin lost anything from what Screlly did. In fact, he might have set it up so that it was a success. So he had this kind of odd situation of a fraud without losses, and that may have an impact at sentencing when that comes up down the road. Yes, so, Bob, given given what Peter just said, Um, the fact that investors didn't lose money, and in fact, that was I think part of Screll's defense. Um, was there legitimate grounds

for a prosecution in this case? Um? I think there was. I think Picker is quite right that the fact that there wasn't a loss will have some possible effect on the sentencing, because loss itself is a particularly important relevant factor that a judge is meant to take into account when sentencing. At the same time, however, it's worth keeping in mind that it's not the only factor, but the judge is meant to take account up for one thing. There's a matter of the intention, right, What was the

guy actually trying to do? What was his aim? Uh? If his victims ended up profiting in a kind of accidental way, if it just so happened that they ended up profiting anyway, But that's no thanks to Martin Screwley, or at least no thanks to the offensive actions that he took, then that's not really going to help him

very much at sentencing. In addition, the apparent sort of moral turpitude or the apparent lack of contrition or even any sense that he's done anything wrong that Mr Screwley seems to be displaying every day in public is also something that I suspect the sentencing judge is apt to take account of, and it certainly warranted in taking account of. And so you could end up seeing a pretty stiff

penalty being levied. I mean, there's some people talking about how, yeah, he might only get a couple of months or suspended sentence. I have a funny feeling that's just not true. I expect he's going to get years. We're talking about the guilty verdict of Martin Screlly, the pharmaceutical executive who was convicted on Friday of the Friday hedge fund investors. Our guests are Peter Heading and Robert Hockett, law professors at

Wayne State University and Cornell University, respectively. UM Peter Uh Bob was talking about how UM Martin Screwlly may face years in prison. His lawyer uh said last week that he might actually ask for no prison time for Martin Screlly.

Does that effort have any chance of success in your mind. Well, the starting point that his lawyer, Ben Brattman is talking about is looking at the FED sentencing guidelines and the recommended sentence, and the key driver there although not the only one is Bob mentioned, But the key driver is the amount of the loss. And if the loss is zero, and certainly I would expect him to argue that the investors didn't lose anything, Retroffin didn't lose anything, then that

would likely result in a recommended sentence of UM. It could be as low as probation or home confinement or perhaps a period short period in a federal prison and then UM community corrections. So I could see him arguing for probation. It's going to be tough, and of course that judges are not bound by the sentencing guidelines and haven't been for over a decade, And so what Judge Matsumoto looks at is going to be everything that's related

to Mr Screlly. This is where his comments, his social media statements and frankly some of his denigration of the process could come into play, and she may decide that a message has to be sent here. But certainly I can see the defense asking for no time or a very short prisoner. Bob Martin Scawley isn't lawyers did not present any witnesses at trial. In retrospect, does it seem as though that might have been a mistake? Um? I

mean that's a tough one to tell. I mean that the witness that people talk most about as a prospective testifier was Mr s Fairley himself. Right, there's a live question up until the twenty four July whether he would actually testify in his own behalf or not. Um. And of course the risks were fairly obvious, right. I mean, it's not a particularly sympathetic character. He seems to be in effect unable to help himself and sort of can't help but come across as boorish and arrogant and contemptful

or contemptuous and the like. Um. And so he ultimately decided, presumably on that basis, not to testify in his own behalf. Um. I don't know that it can be said that that hurt him, right, unless had he actually testified, it would have been clear that he had some kind of organic impairment, right, some kind of problem that he has, I don't know,

Asperger's syndrome or something of that kind. Um that his lawyer was sort of suggesting that he had my way of sort of explaining his his his quirkiness, let's say, to put it in a neutral way of behavior. Um. As for other possible witnesses, Um, you know, it's it's it's hard to tell whether that would hurt or or or help. It would sort of depend on the witnesses themselves.

My understanding is that some people did, in fact to say that, yeah, I ended up coming out ahead, I ended up making money off of my investment, and so in that since I wasn't harm um, more testimony to that effect might have been helpful. But again it's kind of unclear that it would have been, because he wasn't found guilty on that ground anyway, Right, he wasn't found guilty of having done anything that tax fly incurred serious

loss to say, Retroffen investors. It was rather that he broke the rules, that he lied in a manner that could have ended up incuring significant losses. And indeed, the sentencing judges likely to look at that that very factor as well. Right, Just what might very well have happened, um had it not been for you know, just good luck? Uh in light of what he had done and by way of misleading investors. Peter, do you see any grounds

here from Martin Screwley's lawyers to successfully appeal? Um An appeal is always tough in any criminal case, especially here. The key focus was fraudulent intent, and in fact, the defense said that, you know, can you find that Screwley intended to defraud the hedge fund investors? A retro find that that is a classic jury credibility determination, and so appeals courts are very hesitant to interfere in that at

all all. And so I think that's going to make a successful appeal here very tough, because I don't think you're gonna want to hear appeals judges saying well, there wasn't enough here. The jury came back with five not guilty verdicts. So from the government's point of view, they can say, look the jury wide the evidence. We won three, we lost five. This was a jury that followed the instructions. That's going to make it even more difficult to overturn

the verdict. I want to thank our guests Peter Henning, who teaches at Wayne State University Law School, and Robert Hockett, who teaches at Cornell University Law School talking about the jury verdict in the case of Martin Screlly. UH. Screlly is still facing sec charges and civil lawsuits, so even after his criminal case, there will be more things to

talk about here on Bloomberg law coming up. Top Justice Department official says Special Council Robert Mueller has a broad mandate as he investigates possible crimes involving Russian meddling in the election. UH also said Roder Rodenstein also said this weekend that it's no fishing expedition that Robert Mueller is UH is going about looking at