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

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<v Speaker 1>And now to the unusual case of Martin Screlly. The

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<v Speaker 1>former pharmaceutical executive is known across social media for obnoxious insults,

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<v Speaker 1>bashing people, and broadcasting much of his life online. His

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<v Speaker 1>lawyers have had to walk him away from the media

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<v Speaker 1>at the trial and the court the judge ordered him

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<v Speaker 1>to stop discussing his case around the court house. But yesterday,

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<v Speaker 1>during hour after hour of closing arguments by prosecutors in

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<v Speaker 1>his fraud trial in Brooklyn Federal Court, Screlly could only

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<v Speaker 1>sit and listen as the prosecutor called him a liar

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<v Speaker 1>who doubled down in his crimes when the going got

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<v Speaker 1>tough and executed a brazen con joining us as Peter Henning,

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<v Speaker 1>a professor at Wayne State University Law School, Peter, let's

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<v Speaker 1>try to sum up if you can, what the prosecution's

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<v Speaker 1>case against Screlly ended up being. Well, not not surprisingly

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<v Speaker 1>in any fraud trial, yet that he was a liar.

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<v Speaker 1>And so what they brought out were a series of

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<v Speaker 1>witnesses and emails that show him saying one thing or

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<v Speaker 1>saying that one thing would happen, when in fact something

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<v Speaker 1>else happened. So really that this is like the typical

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<v Speaker 1>fraud case saying that, well, you said one thing and

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<v Speaker 1>didn't explain it fully, or you in fact did something

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<v Speaker 1>very different. Of course, the challenge is that many of

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<v Speaker 1>the investors in the hedge fund that he ran ended

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<v Speaker 1>up making a lot of money, and so what's missing

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<v Speaker 1>here are the typical fraud victims, people who can come

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<v Speaker 1>in and say I lost my life savings or I

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<v Speaker 1>at least lost all this money. So the government's pointed

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<v Speaker 1>to the lawes, the defense has said nobody lost anything.

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<v Speaker 1>So Peter, what what is the government's theory here? It

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<v Speaker 1>is sort of an unusual fraud case in the way

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<v Speaker 1>you're describing it. So what's what's their theory of why

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<v Speaker 1>he's guilty. Well, the theory is that you know that

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<v Speaker 1>the investors got a little lucky in that there is

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<v Speaker 1>a victim here, which would be the pharmaceutical company Retro Finn.

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<v Speaker 1>He used that company shares to pay off the investors

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<v Speaker 1>in the two hedge funds that he ran, so that

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<v Speaker 1>ultimately the company lost out on the use of the shares.

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<v Speaker 1>Although even there it gets fuzzy because the pharmaceutical company

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<v Speaker 1>has really done quite well, especially since he left as CEO,

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<v Speaker 1>and so in a sense they're a victim. But in

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<v Speaker 1>another sense, um, the company hasn't really been harmed in

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<v Speaker 1>its operations. So the government has pointed to the lies, saying,

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<v Speaker 1>even though this turned out all right, it's a fraud,

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

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<v Speaker 1>to portray him as a misunderstood eccentric who slept on

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<v Speaker 1>the floor of his office. Ben Braffman, his attorney, said,

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<v Speaker 1>who does that? If you're committing a fraud, you have

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

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

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

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<v Speaker 1>play with a jury, but um, when you have someone

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<v Speaker 1>who has here clearly said things that did not turn

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<v Speaker 1>out to be true, or that we're at least misleading,

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<v Speaker 1>but in fact worked very hard at an eccentric personality, UM,

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<v Speaker 1>you accentuate the human part of it. And also too,

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<v Speaker 1>And in his closing Brafman said, good faith is a defense,

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<v Speaker 1>and so maybe he was doing weird things, but he

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<v Speaker 1>was doing weird things in order to benefit everyone, and

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<v Speaker 1>good faith can be a defense to a fraud claim.

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<v Speaker 1>Whether it works, it certainly we're gonna have to see,

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<v Speaker 1>but that is one avenue of trying to fight these charges.

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<v Speaker 1>Joining us now is Patricia Hurtado, a Bloomberg News legal

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<v Speaker 1>reporter who has been covering the trial. Pat my first

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<v Speaker 1>question how to be about Schrelly's behavior in the latter

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<v Speaker 1>part of the trial. We heard from you before about

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

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<v Speaker 1>calmed it down a little bit. I think there must

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<v Speaker 1>have been some kind of uh straight talk uh speak

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

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<v Speaker 1>He has not really said much. I mean he's still

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<v Speaker 1>live blogging after court and making postings on Facebook, but

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<v Speaker 1>um after court that nothing in the courtroom, and mainly

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

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<v Speaker 1>you know, disbelief for mock and credulity. When the government

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<v Speaker 1>was speaking yesterday during a four hour so nation, pat

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<v Speaker 1>given his sort of inability to restrate himself from rolling

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

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<v Speaker 1>it that he didn't take the witness stand. Yeah. I

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<v Speaker 1>think his um, you know, stronger heads prevailed on that

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<v Speaker 1>that he was there's too much exposure. I mean, there's

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<v Speaker 1>multiple statements he gave. He gave stay Moss to the

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<v Speaker 1>SEC under oath that contradict um what he told investors.

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<v Speaker 1>There's also statements he made to the FBI in a

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<v Speaker 1>three or two So all of that would have been

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<v Speaker 1>opened the door. You know, what did he say an emails,

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<v Speaker 1>What did he tell UM investor clients, what did he

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<v Speaker 1>tell uh retrofend drug company officials, and what did he

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<v Speaker 1>tell the SEC? And what did he tell the FBI

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<v Speaker 1>and the government. So all of those are contradictory, and

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<v Speaker 1>that would have opened up a host of issues for

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<v Speaker 1>him had he taken the stand. Peter also, by not

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<v Speaker 1>taking the stand, the jury wasn't told about what he's

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<v Speaker 1>notorious for raising the price of a potentially life saving

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<v Speaker 1>drug by five thousand percent. But knowing jurors, they sometimes

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<v Speaker 1>know things that they're not supposed to. Is there a

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<v Speaker 1>likelihood or a high probability that some of these jurors

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<v Speaker 1>do know that chance of that, I'm sorry, Pat, I

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

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<v Speaker 1>But the judge is going to emphasize that don't consider

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<v Speaker 1>anything except what you heard at the trial. And so, um,

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<v Speaker 1>you know, will that be an issue for the jury,

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

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<v Speaker 1>it would be a problem if there were to be

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

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<v Speaker 1>I was just going to say, is the judges all

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

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<v Speaker 1>and every day, Um she asked him, you know, have

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<v Speaker 1>you read anything outside and what Please don't consider it.

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<v Speaker 1>It's not part of the evidence. But what Um Screlli's

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<v Speaker 1>defense team has done is they've hitched their star to

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<v Speaker 1>this argument that Screlli wasn't really trying to defraud people.

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<v Speaker 1>He was so busy creating this company, retro Find, and

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<v Speaker 1>he wanted to make it a success, to create life

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<v Speaker 1>saving drugs. So that's the kind of narrative the defense

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<v Speaker 1>has put out there to the jury. Here's a guy

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<v Speaker 1>that was just like this crazy, brilliant genius creating life

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<v Speaker 1>saving drugs and so um, and he was doing right

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

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<v Speaker 1>just sort of like happenstance. Well, Pat, the government did

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<v Speaker 1>put in a lot of evidence of emails and things

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<v Speaker 1>that he has said wives or what was kind of

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<v Speaker 1>the more dramatic stuff that really made the government's point

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<v Speaker 1>for them in terms of the evidence. Well, one of

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<v Speaker 1>the things that was quite stunning to me was, um,

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<v Speaker 1>they compared what he told the each investor he would get.

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<v Speaker 1>He promised daily updates on their returns as smart as

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<v Speaker 1>a hedge fund clients, and then it dwindled down to weekly,

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<v Speaker 1>and then it dwindled down to some for monthly and

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<v Speaker 1>then some at time it wouldwindle down to quarterly reports.

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<v Speaker 1>But he was promising, like you got forty nine percent returns,

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<v Speaker 1>I've grown you. So they compared what he claimed their

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<v Speaker 1>investments were doing versus what they were actually doing. So

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<v Speaker 1>he claimed to have up to fifty million dollars of

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<v Speaker 1>assets under management and his hedge fund when it was

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<v Speaker 1>really just three and thirty dollars. So when they've compared

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<v Speaker 1>the bank records and his personal statements or that Rechefen

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<v Speaker 1>was on the verge of going bankrupt, well he's claiming

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<v Speaker 1>that it as a wonderful company and it was doing

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

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<v Speaker 1>argument the government has made is he used retrofend after

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<v Speaker 1>you know his hedge fund collapses and he creates retrofend

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<v Speaker 1>and that he loots retrofend to repay investors of the

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<v Speaker 1>hedge fund. And the government was pointing out today that

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<v Speaker 1>Richard fen wasn't doing so well either, So if he

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<v Speaker 1>was giving away shares in that new drug company, it

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<v Speaker 1>wasn't such a great deal that they were getting. Peter.

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<v Speaker 1>The defense rested its case without calling any witnesses. As

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<v Speaker 1>Pat mentioned, Screlly did not take the stand himself, and

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<v Speaker 1>the judge will instruct about that not having an impact

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<v Speaker 1>on the jury. But does it have an impact on

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<v Speaker 1>the jury the fact that he didn't take the stand

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<v Speaker 1>and that there was no witnesses in his test in

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<v Speaker 1>his case in chief well, certainly that the defendant not

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<v Speaker 1>taking the witness stand but proclaiming or the lawyer proclaiming

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

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<v Speaker 1>in the juror's minds. But really, the defense here is

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<v Speaker 1>putting out the proposition that everything the government said doesn't

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<v Speaker 1>prove the crime, and so it is a high risk,

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<v Speaker 1>high reward approach, saying we're not going to put on

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<v Speaker 1>any evidence. I'm not exactly sure what evidence they would

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<v Speaker 1>have been able to put on. They made their point

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<v Speaker 1>through the various investors who either couldn't say how much

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<v Speaker 1>money they made or admitted, look, yeah, I ended up

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<v Speaker 1>making money the hedge fund investors. And so what they

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<v Speaker 1>just want to do is plant a few seeds. If

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<v Speaker 1>you don't put on a defense case, you can't have

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<v Speaker 1>the jury react negatively to your case in that regard.

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<v Speaker 1>So it's a strategy. Um, it's risky, and you know,

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<v Speaker 1>we'll see how it plays out. Pat given that the

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<v Speaker 1>defense didn't put on any case, you know, you've just

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<v Speaker 1>got the prosecution's evidence. And then they give a pretty

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<v Speaker 1>fiery summation. How confident did the government appear in putting

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<v Speaker 1>on its case against Grelly? The I think they basically

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<v Speaker 1>they did. Um. Summations were very workmanlike, albeit there were

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<v Speaker 1>four hours long. And so when you see the evidence

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<v Speaker 1>sort of amassed in front of you with these emails

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<v Speaker 1>where Screwlly seems to be mocking people behind their back

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<v Speaker 1>and telling one person one thing, and yet the bank

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<v Speaker 1>account says something completely different. And then at one point

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<v Speaker 1>they showed jurors an email yesterday that said, um, can

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<v Speaker 1>you tell telling an associate of his can you vouch

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<v Speaker 1>for me for this new hedge fund client. It doesn't

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<v Speaker 1>really effing matter what you know really happened, Just just

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<v Speaker 1>say good things about me, basically. And that kind of

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<v Speaker 1>thing shows that, you know, I mean, the government seems

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<v Speaker 1>to be donn to say we're going to be happy

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<v Speaker 1>to rely on our the totality of our evidence. You know,

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<v Speaker 1>we don't need to be as fiery and dramatic as

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<v Speaker 1>Ben Brafman is obviously very effective and um, the prosecutor

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<v Speaker 1>had a really good, an interesting point today. She said,

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<v Speaker 1>you know, some people have said, well, Screwlly made these

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<v Speaker 1>people whole after the fraud and after this fun collapse.

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

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<v Speaker 1>And she said, basically, if you rob a bank and

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<v Speaker 1>then you rob another bank to pay off the first bank,

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

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<v Speaker 1>fraud and under the law, you should be held he

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<v Speaker 1>should be held accountable. So Pat, where, just as a

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<v Speaker 1>matter of where we are procedurally, where does this trial

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<v Speaker 1>stand right now? Well, the judge is getting legal instruction

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<v Speaker 1>to um the jury right now. It started about an

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<v Speaker 1>hour and a half ago, and uh, it's supposed to

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<v Speaker 1>going to take hours. There's eight counts and it's a

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<v Speaker 1>ninety three page charge, so I think we're in page

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<v Speaker 1>twenty something of it right now. So the jury could

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

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<v Speaker 1>probably early after late afternoon. Peter. Let's switch to another

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

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

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<v Speaker 1>were you surprised by, I'm sorry, five years in prison

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

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<v Speaker 1>I mean it was down a little bit from what

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<v Speaker 1>the sentencing guidelines recommended. Um. The judge I think made

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<v Speaker 1>it clear when he turned down the request for a

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<v Speaker 1>new trial that he just did not believe Walters and

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<v Speaker 1>the whole claim that Walters was just a great gambler

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<v Speaker 1>and got a good read on a stock much like

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<v Speaker 1>he did at the poker table. And so when the

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<v Speaker 1>judge thinks you're a liar, the judge isn't going to

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<v Speaker 1>cut you a lot of slack. So, uh, you know

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<v Speaker 1>that this was something I think it was certainly within

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<v Speaker 1>the range that he was likely to receive given the

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<v Speaker 1>dollar figures. Involved. Pat I was surprised at what the

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<v Speaker 1>judge said. He said, Billy Walters is a cheater and

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<v Speaker 1>a criminal, and not a very clever one. The crime

0:12:52.200 --> 0:12:56.120
<v Speaker 1>was amateursually simple. And here's a man who was known

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<v Speaker 1>as Las Vegas is most successful gambler. You know. The

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<v Speaker 1>judge I think was probably swayed by, I mean the evidence,

0:13:06.160 --> 0:13:09.600
<v Speaker 1>even though he was quite a problematic witness, was this

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<v Speaker 1>friend of Billy Walters and golfing buddy deean foods co chairman,

0:13:14.880 --> 0:13:18.760
<v Speaker 1>company's chairman Tom Davis. And Davis had a whole litany

0:13:18.800 --> 0:13:24.040
<v Speaker 1>of problems, including to failed marriages and angry ex wife,

0:13:24.320 --> 0:13:28.400
<v Speaker 1>horrible emails. Um, but you know the evidence really the

0:13:28.440 --> 0:13:31.520
<v Speaker 1>story that Davis told was he had been corrupted by

0:13:31.559 --> 0:13:36.080
<v Speaker 1>Walter's because he loaned the money and wal Walters sort

0:13:36.080 --> 0:13:39.280
<v Speaker 1>of held out, carried out to promise that Davis could

0:13:39.320 --> 0:13:42.120
<v Speaker 1>maybe earn more money in the future and do deals

0:13:42.160 --> 0:13:45.200
<v Speaker 1>with him because Billy was so successful. So I think

0:13:45.240 --> 0:13:48.680
<v Speaker 1>the judge seemed really troubled by what happened to Davis.

0:13:48.760 --> 0:13:51.319
<v Speaker 1>And while Davis was a problematic witness, who's his friend,

0:13:51.360 --> 0:13:55.439
<v Speaker 1>but Billy Walters, who you know, corrupted his position and Peter,

0:13:56.400 --> 0:13:59.880
<v Speaker 1>people may know this case as it's had a connect

0:14:00.040 --> 0:14:03.000
<v Speaker 1>into Phil Mickelson, So why don't you explain what how

0:14:03.080 --> 0:14:08.400
<v Speaker 1>Phil Nicholson escaped from the clutches of the prosecutors here. Well,

0:14:08.440 --> 0:14:13.120
<v Speaker 1>interestingly enough, Michelson the government described generally and he settled

0:14:13.840 --> 0:14:18.720
<v Speaker 1>by repaying the sec um as a tippy. But the

0:14:18.800 --> 0:14:21.560
<v Speaker 1>government didn't have enough evidence to connect him. And then

0:14:21.600 --> 0:14:25.440
<v Speaker 1>when he got on the witness list for the Walters trial,

0:14:26.360 --> 0:14:29.880
<v Speaker 1>his lawyer asserted the Fifth Amendment on his bath and

0:14:29.920 --> 0:14:33.280
<v Speaker 1>said he's not coming in to testify. And so what

0:14:33.440 --> 0:14:36.320
<v Speaker 1>really made this case famous more than just Billy Walters

0:14:36.360 --> 0:14:38.960
<v Speaker 1>being a well known gamblers the fact that you had

0:14:39.480 --> 0:14:43.280
<v Speaker 1>um a Master's champion who got tied up in this

0:14:43.320 --> 0:14:48.640
<v Speaker 1>in a very sordid tale. Um. So Michelson was able

0:14:48.680 --> 0:14:51.760
<v Speaker 1>to skirt the edges of the law, although he did

0:14:51.800 --> 0:14:54.960
<v Speaker 1>have to pay the sec about a million dollars to

0:14:55.120 --> 0:14:58.560
<v Speaker 1>essentially square it with them and I'm sure avoid being

0:14:58.640 --> 0:15:01.200
<v Speaker 1>charged civilly by them. I want to thank you both

0:15:01.280 --> 0:15:03.960
<v Speaker 1>for being on Bloomberg Law and covering two cases that's

0:15:04.040 --> 0:15:06.960
<v Speaker 1>beyond the call. Bets Peter Handing, a professor at Wayne

0:15:07.040 --> 0:15:10.360
<v Speaker 1>State University, and Patricia Hurtado. She's the Bloomberg News legal

0:15:10.400 --> 0:15:14.160
<v Speaker 1>reporter who's been covering these trials. That's it for this

0:15:14.280 --> 0:15:16.680
<v Speaker 1>edition of Bloomberg Law. We'll be back tomorrow at one

0:15:16.760 --> 0:15:20.040
<v Speaker 1>pm Wall Street Time, and thanks to our producer David

0:15:20.080 --> 0:15:23.320
<v Speaker 1>Suckerman and our technical director, you can always find the

0:15:23.360 --> 0:15:26.080
<v Speaker 1>latest legal news at Bloomberg Law dot com and Bloomberg

0:15:26.080 --> 0:15:28.720
<v Speaker 1>Bayna dot com, plus a website for the legal community

0:15:28.720 --> 0:15:32.280
<v Speaker 1>at Big Law Business dot com. Coming up, we're going

0:15:32.320 --> 0:15:35.560
<v Speaker 1>to be going as soon as a President Trump appears

0:15:35.600 --> 0:15:39.120
<v Speaker 1>on stage at the Van Nostrian Theater in Brentwood, New York,

0:15:39.200 --> 0:15:41.760
<v Speaker 1>to speak about efforts to curb the activities of an

0:15:41.800 --> 0:15:46.160
<v Speaker 1>international gang to law. Enforcement. Will be going live to that.

0:15:46.640 --> 0:15:47.880
<v Speaker 1>This is Bloomberg