Posted by on July 20, 2017 6:00 am
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Categories: Benjamin Brafman Business Economy Finance Hedge fund Law Martin Shkreli money Securities Fraud Shkreli Testimony Turing Pharmaceuticals

The trial of former Turing Pharmaceuticals CEO Martin Shkreli has been temporarily halted by Judge Kiyo Matsumoto after Shkreli’s lawyer objected emphatically as the prosecution planned to show jurors documents it claims are evidence of fraud committed by Shkreli, without calling witnesses to back them up, according to CNBC.

The documents allegedly detail payments that Shkreli’s drug company made to investors in two hedge funds he ran, as well as supposedly bogus consulting agreements he signed with some of his former investors entitling them to a salary and shares in Retrophin, a pharmaceutical company he co-founded and briefly led, according to CNBC. Jurors were given the rest of Wednesday off, as well as Thursday, to allow both the defense and prosecution time to file legal briefs on their arguments for and against requiring witnesses for the relevant documents. Testimony is expected to resume Friday, CNBC reported.
Benjamin Brafman, the celebrity defense attorney representing Shkreli, said denying him the opportunity to cross examine people involved with the documents would be tantamount to denying Shkreli his constitutional right to confront witnesses against him.

The documents included settlement agreements that Shkreli reached with investors at two of his hedge funds, as well as consulting agreements with some of those investors. Among the settlement agreements in dispute Wednesday included the terms of what investors received from Retrophin in exchange for dropping any claims against Shkreli and his hedge funds.

Shkreli is facing eight counts of wire and securities fraud stemming from his brief stint as a hedge-fund manager. Specifically, the prosecution is examining communications between Shkreli and several former investors in his fund for evidence Shkreli misled them about his qualifications, investment returns and other details like his investing track record and the amount of money he managed.  The prosecution also alleges that Shkreli falsified documents and backdated payments to corroborate his lies. Finally, prosecutors claim Shkreli defrauded Retrophin, which he founded in late 2012 just as his career as a money manager, CNBC reported.

Many of the witnesses called by the prosecution so far have described feeling betrayed by Shkreli. Some described Shkreli’s repeated evasions – he allegedly told one witness that he was “too busy” to give him his money back after starting Retrophin. Judging by the witnesses who’ve testified so far, it appears that many of Shkreli’s investors were small business owners who had invested between $100,000 and $300,000. After several investors threatened to sue, Shkreli allegedly offered to repay them using Retrophin’s resources. In addition to criticizing Shkreli for his dishonesty and strange behavior, many of the witnesses also admitted that they ultimately made money investing with Shkreli.

Matsumoto, the judge, indicated that she was sympathetic to the defense’s argument that settlement and consulting agreements should only be shown to jurors if a person who received those agreements takes the witness stand.

“I do think the fundamental right to confront the witnesses and question the witnesses is important,” Matsumoto said.

If prosecutors are allowed to introduce the documents to jurors without calling related witnesses, they could rest their case soon. The trial began late last month, and is expected to last as long as six weeks. But if Matsumoto bars that method, prosecutors could be forced to call additional witness stand, meaning they would be unlikely to rest their case until next week sometime.

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