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Speaker 1: And now to the unusual case of Martin Screlly. The

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Speaker 1: former pharmaceutical executive is known across social media for obnoxious insults,

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Speaker 1: bashing people, and broadcasting much of his life online. His

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Speaker 1: lawyers have had to walk him away from the media

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Speaker 1: at the trial and the court the judge ordered him

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Speaker 1: to stop discussing his case around the court house. But yesterday,

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Speaker 1: during hour after hour of closing arguments by prosecutors in

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Speaker 1: his fraud trial in Brooklyn Federal Court, Screlly could only

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Speaker 1: sit and listen as the prosecutor called him a liar

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Speaker 1: who doubled down in his crimes when the going got

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Speaker 1: tough and executed a brazen con joining us as Peter Henning,

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Speaker 1: a professor at Wayne State University Law School, Peter, let's

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Speaker 1: try to sum up if you can, what the prosecution's

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Speaker 1: case against Screlly ended up being. Well, not not surprisingly

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Speaker 1: in any fraud trial, yet that he was a liar.

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Speaker 1: And so what they brought out were a series of

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Speaker 1: witnesses and emails that show him saying one thing or

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Speaker 1: saying that one thing would happen, when in fact something

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Speaker 1: else happened. So really that this is like the typical

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Speaker 1: fraud case saying that, well, you said one thing and

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Speaker 1: didn't explain it fully, or you in fact did something

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Speaker 1: very different. Of course, the challenge is that many of

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Speaker 1: the investors in the hedge fund that he ran ended

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Speaker 1: up making a lot of money, and so what's missing

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Speaker 1: here are the typical fraud victims, people who can come

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Speaker 1: in and say I lost my life savings or I

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Speaker 1: at least lost all this money. So the government's pointed

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Speaker 1: to the lawes, the defense has said nobody lost anything.

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Speaker 1: So Peter, what what is the government's theory here? It

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Speaker 1: is sort of an unusual fraud case in the way

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Speaker 1: you're describing it. So what's what's their theory of why

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Speaker 1: he's guilty. Well, the theory is that you know that

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Speaker 1: the investors got a little lucky in that there is

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Speaker 1: a victim here, which would be the pharmaceutical company Retro Finn.

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Speaker 1: He used that company shares to pay off the investors

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Speaker 1: in the two hedge funds that he ran, so that

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Speaker 1: ultimately the company lost out on the use of the shares.

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Speaker 1: Although even there it gets fuzzy because the pharmaceutical company

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Speaker 1: has really done quite well, especially since he left as CEO,

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Speaker 1: and so in a sense they're a victim. But in

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Speaker 1: another sense, um, the company hasn't really been harmed in

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Speaker 1: its operations. So the government has pointed to the lies, saying,

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Speaker 1: even though this turned out all right, it's a fraud,

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Speaker 1: whether you're successful or not. Peter, the defense has tried

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Speaker 1: to portray him as a misunderstood eccentric who slept on

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Speaker 1: the floor of his office. Ben Braffman, his attorney, said,

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Speaker 1: who does that? If you're committing a fraud, you have

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Speaker 1: millions of dollars in people's money. He has no life,

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Speaker 1: he's the hermit scientist. Does that work? Well, certainly, I

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Speaker 1: guess a possibility. You're not exactly sure what's going to

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Speaker 1: play with a jury, but um, when you have someone

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Speaker 1: who has here clearly said things that did not turn

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Speaker 1: out to be true, or that we're at least misleading,

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Speaker 1: but in fact worked very hard at an eccentric personality, UM,

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Speaker 1: you accentuate the human part of it. And also too,

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Speaker 1: And in his closing Brafman said, good faith is a defense,

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Speaker 1: and so maybe he was doing weird things, but he

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Speaker 1: was doing weird things in order to benefit everyone, and

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Speaker 1: good faith can be a defense to a fraud claim.

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Speaker 1: Whether it works, it certainly we're gonna have to see,

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Speaker 1: but that is one avenue of trying to fight these charges.

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Speaker 1: Joining us now is Patricia Hurtado, a Bloomberg News legal

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Speaker 1: reporter who has been covering the trial. Pat my first

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Speaker 1: question how to be about Schrelly's behavior in the latter

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Speaker 1: part of the trial. We heard from you before about

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Speaker 1: some of his antics in the beginning. Well, he's certainly

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Speaker 1: calmed it down a little bit. I think there must

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Speaker 1: have been some kind of uh straight talk uh speak

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Speaker 1: speech given to him, um, and he's been very muted.

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Speaker 1: He has not really said much. I mean he's still

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Speaker 1: live blogging after court and making postings on Facebook, but

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Speaker 1: um after court that nothing in the courtroom, and mainly

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Speaker 1: what he's done is basically sometimes rolling his eyes or mugging,

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Speaker 1: you know, disbelief for mock and credulity. When the government

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Speaker 1: was speaking yesterday during a four hour so nation, pat

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Speaker 1: given his sort of inability to restrate himself from rolling

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Speaker 1: his eyes in the rest, it's a little interesting, isn't

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Speaker 1: it that he didn't take the witness stand. Yeah. I

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Speaker 1: think his um, you know, stronger heads prevailed on that

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Speaker 1: that he was there's too much exposure. I mean, there's

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Speaker 1: multiple statements he gave. He gave stay Moss to the

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Speaker 1: SEC under oath that contradict um what he told investors.

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Speaker 1: There's also statements he made to the FBI in a

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Speaker 1: three or two So all of that would have been

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Speaker 1: opened the door. You know, what did he say an emails,

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Speaker 1: What did he tell UM investor clients, what did he

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Speaker 1: tell uh retrofend drug company officials, and what did he

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Speaker 1: tell the SEC? And what did he tell the FBI

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Speaker 1: and the government. So all of those are contradictory, and

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Speaker 1: that would have opened up a host of issues for

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Speaker 1: him had he taken the stand. Peter also, by not

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Speaker 1: taking the stand, the jury wasn't told about what he's

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Speaker 1: notorious for raising the price of a potentially life saving

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Speaker 1: drug by five thousand percent. But knowing jurors, they sometimes

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Speaker 1: know things that they're not supposed to. Is there a

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Speaker 1: likelihood or a high probability that some of these jurors

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Speaker 1: do know that chance of that, I'm sorry, Pat, I

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Speaker 1: didn't mean to cut you off, So there's certainly a chance.

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Speaker 1: But the judge is going to emphasize that don't consider

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Speaker 1: anything except what you heard at the trial. And so, um,

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Speaker 1: you know, will that be an issue for the jury,

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Speaker 1: and certainly hopeful it's not. If that were to emerge,

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Speaker 1: it would be a problem if there were to be

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Speaker 1: a conviction. Pat, did you want to come in on that. Yeah,

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Speaker 1: I was just going to say, is the judges all

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Speaker 1: Peter's right, that judge has instructed them you can't consider

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Speaker 1: and every day, Um she asked him, you know, have

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Speaker 1: you read anything outside and what Please don't consider it.

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Speaker 1: It's not part of the evidence. But what Um Screlli's

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Speaker 1: defense team has done is they've hitched their star to

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Speaker 1: this argument that Screlli wasn't really trying to defraud people.

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Speaker 1: He was so busy creating this company, retro Find, and

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Speaker 1: he wanted to make it a success, to create life

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Speaker 1: saving drugs. So that's the kind of narrative the defense

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Speaker 1: has put out there to the jury. Here's a guy

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Speaker 1: that was just like this crazy, brilliant genius creating life

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Speaker 1: saving drugs and so um, and he was doing right

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Speaker 1: by the world, So he wasn't intending to fraud. That's

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Speaker 1: just sort of like happenstance. Well, Pat, the government did

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Speaker 1: put in a lot of evidence of emails and things

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Speaker 1: that he has said wives or what was kind of

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Speaker 1: the more dramatic stuff that really made the government's point

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Speaker 1: for them in terms of the evidence. Well, one of

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Speaker 1: the things that was quite stunning to me was, um,

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Speaker 1: they compared what he told the each investor he would get.

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Speaker 1: He promised daily updates on their returns as smart as

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Speaker 1: a hedge fund clients, and then it dwindled down to weekly,

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Speaker 1: and then it dwindled down to some for monthly and

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Speaker 1: then some at time it wouldwindle down to quarterly reports.

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Speaker 1: But he was promising, like you got forty nine percent returns,

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Speaker 1: I've grown you. So they compared what he claimed their

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Speaker 1: investments were doing versus what they were actually doing. So

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Speaker 1: he claimed to have up to fifty million dollars of

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Speaker 1: assets under management and his hedge fund when it was

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Speaker 1: really just three and thirty dollars. So when they've compared

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Speaker 1: the bank records and his personal statements or that Rechefen

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Speaker 1: was on the verge of going bankrupt, well he's claiming

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Speaker 1: that it as a wonderful company and it was doing

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Speaker 1: so well, and that's really why he was helping. The

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Speaker 1: argument the government has made is he used retrofend after

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Speaker 1: you know his hedge fund collapses and he creates retrofend

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Speaker 1: and that he loots retrofend to repay investors of the

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Speaker 1: hedge fund. And the government was pointing out today that

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Speaker 1: Richard fen wasn't doing so well either, So if he

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Speaker 1: was giving away shares in that new drug company, it

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Speaker 1: wasn't such a great deal that they were getting. Peter.

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Speaker 1: The defense rested its case without calling any witnesses. As

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Speaker 1: Pat mentioned, Screlly did not take the stand himself, and

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Speaker 1: the judge will instruct about that not having an impact

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Speaker 1: on the jury. But does it have an impact on

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Speaker 1: the jury the fact that he didn't take the stand

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Speaker 1: and that there was no witnesses in his test in

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Speaker 1: his case in chief well, certainly that the defendant not

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Speaker 1: taking the witness stand but proclaiming or the lawyer proclaiming

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Speaker 1: his good faith. Um, it's going to cause a question

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Speaker 1: in the juror's minds. But really, the defense here is

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Speaker 1: putting out the proposition that everything the government said doesn't

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Speaker 1: prove the crime, and so it is a high risk,

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Speaker 1: high reward approach, saying we're not going to put on

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Speaker 1: any evidence. I'm not exactly sure what evidence they would

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Speaker 1: have been able to put on. They made their point

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Speaker 1: through the various investors who either couldn't say how much

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Speaker 1: money they made or admitted, look, yeah, I ended up

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Speaker 1: making money the hedge fund investors. And so what they

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Speaker 1: just want to do is plant a few seeds. If

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Speaker 1: you don't put on a defense case, you can't have

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Speaker 1: the jury react negatively to your case in that regard.

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Speaker 1: So it's a strategy. Um, it's risky, and you know,

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Speaker 1: we'll see how it plays out. Pat given that the

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Speaker 1: defense didn't put on any case, you know, you've just

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Speaker 1: got the prosecution's evidence. And then they give a pretty

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Speaker 1: fiery summation. How confident did the government appear in putting

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Speaker 1: on its case against Grelly? The I think they basically

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Speaker 1: they did. Um. Summations were very workmanlike, albeit there were

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Speaker 1: four hours long. And so when you see the evidence

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Speaker 1: sort of amassed in front of you with these emails

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Speaker 1: where Screwlly seems to be mocking people behind their back

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Speaker 1: and telling one person one thing, and yet the bank

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Speaker 1: account says something completely different. And then at one point

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Speaker 1: they showed jurors an email yesterday that said, um, can

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Speaker 1: you tell telling an associate of his can you vouch

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Speaker 1: for me for this new hedge fund client. It doesn't

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Speaker 1: really effing matter what you know really happened, Just just

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Speaker 1: say good things about me, basically. And that kind of

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Speaker 1: thing shows that, you know, I mean, the government seems

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Speaker 1: to be donn to say we're going to be happy

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Speaker 1: to rely on our the totality of our evidence. You know,

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Speaker 1: we don't need to be as fiery and dramatic as

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Speaker 1: Ben Brafman is obviously very effective and um, the prosecutor

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Speaker 1: had a really good, an interesting point today. She said,

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Speaker 1: you know, some people have said, well, Screwlly made these

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Speaker 1: people whole after the fraud and after this fun collapse.

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Speaker 1: So what's the harm there they quote unquote walking away money?

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Speaker 1: And she said, basically, if you rob a bank and

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Speaker 1: then you rob another bank to pay off the first bank,

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Speaker 1: you still robbed the first bank. And she said, that's

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Speaker 1: fraud and under the law, you should be held he

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Speaker 1: should be held accountable. So Pat, where, just as a

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Speaker 1: matter of where we are procedurally, where does this trial

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Speaker 1: stand right now? Well, the judge is getting legal instruction

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Speaker 1: to um the jury right now. It started about an

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Speaker 1: hour and a half ago, and uh, it's supposed to

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Speaker 1: going to take hours. There's eight counts and it's a

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Speaker 1: ninety three page charge, so I think we're in page

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Speaker 1: twenty something of it right now. So the jury could

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Speaker 1: get the case later today, which means they would start deliberations. Um,

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Speaker 1: probably early after late afternoon. Peter. Let's switch to another

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Speaker 1: case which you've both covered, and that's Billy Walters who

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Speaker 1: was convicted of insider trading and given four years in prison. Um,

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Speaker 1: were you surprised by, I'm sorry, five years in prison

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Speaker 1: for insider trading? Were used to prized by that number? Uh? No,

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Speaker 1: I mean it was down a little bit from what

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Speaker 1: the sentencing guidelines recommended. Um. The judge I think made

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Speaker 1: it clear when he turned down the request for a

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Speaker 1: new trial that he just did not believe Walters and

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Speaker 1: the whole claim that Walters was just a great gambler

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Speaker 1: and got a good read on a stock much like

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Speaker 1: he did at the poker table. And so when the

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Speaker 1: judge thinks you're a liar, the judge isn't going to

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Speaker 1: cut you a lot of slack. So, uh, you know

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Speaker 1: that this was something I think it was certainly within

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Speaker 1: the range that he was likely to receive given the

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Speaker 1: dollar figures. Involved. Pat I was surprised at what the

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Speaker 1: judge said. He said, Billy Walters is a cheater and

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Speaker 1: a criminal, and not a very clever one. The crime

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Speaker 1: was amateursually simple. And here's a man who was known

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Speaker 1: as Las Vegas is most successful gambler. You know. The

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Speaker 1: judge I think was probably swayed by, I mean the evidence,

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Speaker 1: even though he was quite a problematic witness, was this

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Speaker 1: friend of Billy Walters and golfing buddy deean foods co chairman,

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Speaker 1: company's chairman Tom Davis. And Davis had a whole litany

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Speaker 1: of problems, including to failed marriages and angry ex wife,

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Speaker 1: horrible emails. Um, but you know the evidence really the

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Speaker 1: story that Davis told was he had been corrupted by

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Speaker 1: Walter's because he loaned the money and wal Walters sort

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Speaker 1: of held out, carried out to promise that Davis could

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Speaker 1: maybe earn more money in the future and do deals

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Speaker 1: with him because Billy was so successful. So I think

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Speaker 1: the judge seemed really troubled by what happened to Davis.

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Speaker 1: And while Davis was a problematic witness, who's his friend,

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Speaker 1: but Billy Walters, who you know, corrupted his position and Peter,

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Speaker 1: people may know this case as it's had a connect

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Speaker 1: into Phil Mickelson, So why don't you explain what how

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Speaker 1: Phil Nicholson escaped from the clutches of the prosecutors here. Well,

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Speaker 1: interestingly enough, Michelson the government described generally and he settled

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Speaker 1: by repaying the sec um as a tippy. But the

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Speaker 1: government didn't have enough evidence to connect him. And then

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Speaker 1: when he got on the witness list for the Walters trial,

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Speaker 1: his lawyer asserted the Fifth Amendment on his bath and

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Speaker 1: said he's not coming in to testify. And so what

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Speaker 1: really made this case famous more than just Billy Walters

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Speaker 1: being a well known gamblers the fact that you had

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Speaker 1: um a Master's champion who got tied up in this

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Speaker 1: in a very sordid tale. Um. So Michelson was able

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Speaker 1: to skirt the edges of the law, although he did

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Speaker 1: have to pay the sec about a million dollars to

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Speaker 1: essentially square it with them and I'm sure avoid being

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Speaker 1: charged civilly by them. I want to thank you both

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Speaker 1: for being on Bloomberg Law and covering two cases that's

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Speaker 1: beyond the call. Bets Peter Handing, a professor at Wayne

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Speaker 1: State University, and Patricia Hurtado. She's the Bloomberg News legal

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Speaker 1: reporter who's been covering these trials. That's it for this

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Speaker 1: edition of Bloomberg Law. We'll be back tomorrow at one

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Speaker 1: pm Wall Street Time, and thanks to our producer David

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Speaker 1: Suckerman and our technical director, you can always find the

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Speaker 1: latest legal news at Bloomberg Law dot com and Bloomberg

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Speaker 1: Bayna dot com, plus a website for the legal community

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Speaker 1: at Big Law Business dot com. Coming up, we're going

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Speaker 1: to be going as soon as a President Trump appears

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Speaker 1: on stage at the Van Nostrian Theater in Brentwood, New York,

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Speaker 1: to speak about efforts to curb the activities of an

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Speaker 1: international gang to law. Enforcement. Will be going live to that.

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Speaker 1: This is Bloomberg