Shkreli Falls Silent as Prosecutors Wrap Up Fraud Case (Audio)

to stop discussing his case around the court house. But yesterday, during hour after hour of closing arguments by prosecutors in his fraud trial in Brooklyn Federal Court, Screlly could only sit and listen as the prosecutor called him a liar who doubled down in his crimes when the going got tough and executed a brazen con joining us as Peter Henning, a professor at Wayne State University Law School, Peter, let's try to sum up if you can, what the prosecution's

case against Screlly ended up being. Well, not not surprisingly in any fraud trial, yet that he was a liar. And so what they brought out were a series of witnesses and emails that show him saying one thing or saying that one thing would happen, when in fact something else happened. So really that this is like the typical fraud case saying that, well, you said one thing and didn't explain it fully, or you in fact did something

very different. Of course, the challenge is that many of the investors in the hedge fund that he ran ended up making a lot of money, and so what's missing here are the typical fraud victims, people who can come in and say I lost my life savings or I at least lost all this money. So the government's pointed to the lawes, the defense has said nobody lost anything. So Peter, what what is the government's theory here? It is sort of an unusual fraud case in the way

you're describing it. So what's what's their theory of why he's guilty. Well, the theory is that you know that the investors got a little lucky in that there is a victim here, which would be the pharmaceutical company Retro Finn. He used that company shares to pay off the investors in the two hedge funds that he ran, so that ultimately the company lost out on the use of the shares.

Although even there it gets fuzzy because the pharmaceutical company has really done quite well, especially since he left as CEO, and so in a sense they're a victim. But in another sense, um, the company hasn't really been harmed in its operations. So the government has pointed to the lies, saying, even though this turned out all right, it's a fraud, whether you're successful or not. Peter, the defense has tried to portray him as a misunderstood eccentric who slept on

the floor of his office. Ben Braffman, his attorney, said, who does that? If you're committing a fraud, you have millions of dollars in people's money. He has no life, he's the hermit scientist. Does that work? Well, certainly, I

guess a possibility. You're not exactly sure what's going to play with a jury, but um, when you have someone who has here clearly said things that did not turn out to be true, or that we're at least misleading, but in fact worked very hard at an eccentric personality, UM,

you accentuate the human part of it. And also too, And in his closing Brafman said, good faith is a defense, and so maybe he was doing weird things, but he was doing weird things in order to benefit everyone, and good faith can be a defense to a fraud claim. Whether it works, it certainly we're gonna have to see, but that is one avenue of trying to fight these charges. Joining us now is Patricia Hurtado, a Bloomberg News legal

reporter who has been covering the trial. Pat my first question how to be about Schrelly's behavior in the latter part of the trial. We heard from you before about some of his antics in the beginning. Well, he's certainly calmed it down a little bit. I think there must have been some kind of uh straight talk uh speak speech given to him, um, and he's been very muted.

He has not really said much. I mean he's still live blogging after court and making postings on Facebook, but um after court that nothing in the courtroom, and mainly what he's done is basically sometimes rolling his eyes or mugging, you know, disbelief for mock and credulity. When the government was speaking yesterday during a four hour so nation, pat given his sort of inability to restrate himself from rolling his eyes in the rest, it's a little interesting, isn't

it that he didn't take the witness stand. Yeah. I think his um, you know, stronger heads prevailed on that that he was there's too much exposure. I mean, there's multiple statements he gave. He gave stay Moss to the SEC under oath that contradict um what he told investors. There's also statements he made to the FBI in a three or two So all of that would have been

opened the door. You know, what did he say an emails, What did he tell UM investor clients, what did he tell uh retrofend drug company officials, and what did he tell the SEC? And what did he tell the FBI and the government. So all of those are contradictory, and that would have opened up a host of issues for him had he taken the stand. Peter also, by not taking the stand, the jury wasn't told about what he's notorious for raising the price of a potentially life saving

drug by five thousand percent. But knowing jurors, they sometimes know things that they're not supposed to. Is there a likelihood or a high probability that some of these jurors do know that chance of that, I'm sorry, Pat, I didn't mean to cut you off, So there's certainly a chance. But the judge is going to emphasize that don't consider anything except what you heard at the trial. And so, um, you know, will that be an issue for the jury,

and certainly hopeful it's not. If that were to emerge, it would be a problem if there were to be a conviction. Pat, did you want to come in on that. Yeah, I was just going to say, is the judges all Peter's right, that judge has instructed them you can't consider and every day, Um she asked him, you know, have you read anything outside and what Please don't consider it.

It's not part of the evidence. But what Um Screlli's defense team has done is they've hitched their star to this argument that Screlli wasn't really trying to defraud people. He was so busy creating this company, retro Find, and he wanted to make it a success, to create life saving drugs. So that's the kind of narrative the defense has put out there to the jury. Here's a guy that was just like this crazy, brilliant genius creating life saving drugs and so um, and he was doing right

by the world, So he wasn't intending to fraud. That's just sort of like happenstance. Well, Pat, the government did put in a lot of evidence of emails and things that he has said wives or what was kind of the more dramatic stuff that really made the government's point for them in terms of the evidence. Well, one of the things that was quite stunning to me was, um, they compared what he told the each investor he would get.

He promised daily updates on their returns as smart as a hedge fund clients, and then it dwindled down to weekly, and then it dwindled down to some for monthly and then some at time it wouldwindle down to quarterly reports. But he was promising, like you got forty nine percent returns, I've grown you. So they compared what he claimed their

investments were doing versus what they were actually doing. So he claimed to have up to fifty million dollars of assets under management and his hedge fund when it was really just three and thirty dollars. So when they've compared the bank records and his personal statements or that Rechefen was on the verge of going bankrupt, well he's claiming that it as a wonderful company and it was doing

so well, and that's really why he was helping. The argument the government has made is he used retrofend after you know his hedge fund collapses and he creates retrofend and that he loots retrofend to repay investors of the hedge fund. And the government was pointing out today that Richard fen wasn't doing so well either, So if he was giving away shares in that new drug company, it wasn't such a great deal that they were getting. Peter.

The defense rested its case without calling any witnesses. As Pat mentioned, Screlly did not take the stand himself, and the judge will instruct about that not having an impact on the jury. But does it have an impact on the jury the fact that he didn't take the stand and that there was no witnesses in his test in his case in chief well, certainly that the defendant not taking the witness stand but proclaiming or the lawyer proclaiming his good faith. Um, it's going to cause a question

in the juror's minds. But really, the defense here is putting out the proposition that everything the government said doesn't prove the crime, and so it is a high risk, high reward approach, saying we're not going to put on any evidence. I'm not exactly sure what evidence they would have been able to put on. They made their point through the various investors who either couldn't say how much money they made or admitted, look, yeah, I ended up

making money the hedge fund investors. And so what they just want to do is plant a few seeds. If you don't put on a defense case, you can't have the jury react negatively to your case in that regard. So it's a strategy. Um, it's risky, and you know, we'll see how it plays out. Pat given that the defense didn't put on any case, you know, you've just got the prosecution's evidence. And then they give a pretty fiery summation. How confident did the government appear in putting

on its case against Grelly? The I think they basically they did. Um. Summations were very workmanlike, albeit there were four hours long. And so when you see the evidence sort of amassed in front of you with these emails where Screwlly seems to be mocking people behind their back and telling one person one thing, and yet the bank

account says something completely different. And then at one point they showed jurors an email yesterday that said, um, can you tell telling an associate of his can you vouch for me for this new hedge fund client. It doesn't really effing matter what you know really happened, Just just say good things about me, basically. And that kind of thing shows that, you know, I mean, the government seems to be donn to say we're going to be happy

to rely on our the totality of our evidence. You know, we don't need to be as fiery and dramatic as Ben Brafman is obviously very effective and um, the prosecutor had a really good, an interesting point today. She said, you know, some people have said, well, Screwlly made these people whole after the fraud and after this fun collapse. So what's the harm there they quote unquote walking away money? And she said, basically, if you rob a bank and then you rob another bank to pay off the first bank,

you still robbed the first bank. And she said, that's fraud and under the law, you should be held he should be held accountable. So Pat, where, just as a matter of where we are procedurally, where does this trial stand right now? Well, the judge is getting legal instruction to um the jury right now. It started about an hour and a half ago, and uh, it's supposed to going to take hours. There's eight counts and it's a ninety three page charge, so I think we're in page

twenty something of it right now. So the jury could get the case later today, which means they would start deliberations. Um, probably early after late afternoon. Peter. Let's switch to another case which you've both covered, and that's Billy Walters who was convicted of insider trading and given four years in prison. Um, were you surprised by, I'm sorry, five years in prison for insider trading? Were used to prized by that number? Uh? No, I mean it was down a little bit from what

the sentencing guidelines recommended. Um. The judge I think made it clear when he turned down the request for a new trial that he just did not believe Walters and the whole claim that Walters was just a great gambler and got a good read on a stock much like he did at the poker table. And so when the judge thinks you're a liar, the judge isn't going to

cut you a lot of slack. So, uh, you know that this was something I think it was certainly within the range that he was likely to receive given the dollar figures. Involved. Pat I was surprised at what the judge said. He said, Billy Walters is a cheater and a criminal, and not a very clever one. The crime was amateursually simple. And here's a man who was known

as Las Vegas is most successful gambler. You know. The judge I think was probably swayed by, I mean the evidence, even though he was quite a problematic witness, was this friend of Billy Walters and golfing buddy deean foods co chairman, company's chairman Tom Davis. And Davis had a whole litany of problems, including to failed marriages and angry ex wife,

horrible emails. Um, but you know the evidence really the story that Davis told was he had been corrupted by Walter's because he loaned the money and wal Walters sort of held out, carried out to promise that Davis could maybe earn more money in the future and do deals with him because Billy was so successful. So I think the judge seemed really troubled by what happened to Davis.

And while Davis was a problematic witness, who's his friend, but Billy Walters, who you know, corrupted his position and Peter, people may know this case as it's had a connect into Phil Mickelson, So why don't you explain what how Phil Nicholson escaped from the clutches of the prosecutors here. Well, interestingly enough, Michelson the government described generally and he settled by repaying the sec um as a tippy. But the

government didn't have enough evidence to connect him. And then when he got on the witness list for the Walters trial, his lawyer asserted the Fifth Amendment on his bath and said he's not coming in to testify. And so what really made this case famous more than just Billy Walters being a well known gamblers the fact that you had um a Master's champion who got tied up in this

in a very sordid tale. Um. So Michelson was able to skirt the edges of the law, although he did have to pay the sec about a million dollars to essentially square it with them and I'm sure avoid being charged civilly by them. I want to thank you both for being on Bloomberg Law and covering two cases that's beyond the call. Bets Peter Handing, a professor at Wayne State University, and Patricia Hurtado. She's the Bloomberg News legal reporter who's been covering these trials. That's it for this

edition of Bloomberg Law. We'll be back tomorrow at one pm Wall Street Time, and thanks to our producer David Suckerman and our technical director, you can always find the latest legal news at Bloomberg Law dot com and Bloomberg Bayna dot com, plus a website for the legal community at Big Law Business dot com. Coming up, we're going to be going as soon as a President Trump appears on stage at the Van Nostrian Theater in Brentwood, New York, to speak about efforts to curb the activities of an

international gang to law. Enforcement. Will be going live to that. This is Bloomberg