Speaker 1: Martin Screlly was dubbed the most hated man in America
Speaker 1: by the BBC and a spoiled brat by Donald Trump.
Speaker 1: Now he's a convicted felon. On Friday, at jury found
Speaker 1: Screlly guilty of defrauding investors and two hedge funds. Screlly
Speaker 1: gained notoriety as a drug executive when he raised the
Speaker 1: price of a of a potentially life saving HIV treatment
Speaker 1: by five thousand percent. His smark filled congressional testimony only
Speaker 1: enhanced his controversial reputation. The criminal trial dealt with a
Speaker 1: separate matter. Prosecutor said Screlly ran a Ponzi scheme, using
Speaker 1: investors money to start a drug company and siphoning off
Speaker 1: the company's assets to pay investors. He was convicted of
Speaker 1: three counts but acquitted of five others. Afterwards, Screlly declared victory.
Speaker 1: This was a witch hunt of of APICs proportions and
Speaker 1: maybe they've boald one or through broomsticks, but at the
Speaker 1: end of the day, uh, we've been appointed of the
Speaker 1: most important charge in this case. With us to talk
Speaker 1: about the Martin Screlly verdict is Peter Henning. He's a
Speaker 1: professor at Wayne State University Law School. And Robert Hockett,
Speaker 1: he's professor at Cornell University Law School. Thanks for joining us,
Speaker 1: both of you. Peter, let let me start with you.
Speaker 1: Just let's start with the guilty counts. Tell us what
Speaker 1: exactly Screlly was convicted of doing. Well, Uh, two counts
Speaker 1: of securities fraud, and both of those related to a
Speaker 1: hedge fund or two hedge funds that he ran. And
Speaker 1: the core of the government's case was that he lied
Speaker 1: to those investors that in fact the hedge funds were
Speaker 1: almost completely wound down. And then that he took shares
Speaker 1: from Retrofin, one of the pharmaceutical companies that he founded,
Speaker 1: essentially to pay them off, and that he lied to
Speaker 1: them about the risk that they were enduring. And then
Speaker 1: one count of conspiracy related to fraud with regard to Retrofin,
Speaker 1: so that he was using UH shares from Retrofin to
Speaker 1: essentially pay off investors in the hedge fund when in
Speaker 1: fact Retrofin had no interest in no need to pay them.
Speaker 1: So that essentially was the fraud. And and Bob, what
Speaker 1: what tell us about the other side of that? What
Speaker 1: was UH Screlly acquitted of and what was the distinction
Speaker 1: between those things he was convicted of in those things
Speaker 1: he was acquitted of. Sure, so he was not guilty
Speaker 1: of a number of additional conspiracy charges that have been
Speaker 1: leveled against him. Right, So, there had been charges that
Speaker 1: he had conspired to commit securities fraud in connection with
Speaker 1: both of the hedge funds, and that he had conspired
Speaker 1: to commit wire fraud with respect to both of the
Speaker 1: hedge funds. Uh and then finally there was a charge
Speaker 1: that he had conspired to commit wire fraud in connection
Speaker 1: with Retroic and the pharmaceuticals company. So I think the
Speaker 1: best way to sort of understand the relation between what
Speaker 1: he was convicted of and what he wasn't is as follows. Essentially,
Speaker 1: he was found guilty of having committed the predicate of
Speaker 1: senses by reference to which conspiracy charges are usually defined.
Speaker 1: In other words, we got the planet, so we didn't
Speaker 1: really have to go after the satellite anyway. Um, they
Speaker 1: did go after the satellite anyway, let's they went after
Speaker 1: the conspiracy charges that related to the underlying predicate offense
Speaker 1: charges he was Screwley was now not guilty on those,
Speaker 1: But in a certain sense that doesn't really matter, because
Speaker 1: he was found guilty on the underlying predicate offenses that
Speaker 1: would have been the predicates to the conspiracies anyway, So
Speaker 1: he really did, in my view, get convicted on what
Speaker 1: counts on what matters most. Peter, do you agree with
Speaker 1: that and and if if so, what do we make
Speaker 1: of Screwley saying afterwards that he was acquitted of the
Speaker 1: most important charges in the case. Well, you know, I
Speaker 1: certainly agree with Bob then that you know, just for
Speaker 1: the government, any guilty verdict here is going to be
Speaker 1: a victory. Now, Screwley says, well, you know, we were
Speaker 1: acquitted the most serious charges, the wire fraud charge uh
Speaker 1: involved looting of red trofinn so or conspiracy elude retro Finn,
Speaker 1: and that um carried the potential for a very substantial
Speaker 1: loss figure And really, uh what is underlying this case, interestingly,
Speaker 1: is that the hedge fund investors were at least it
Speaker 1: appears were compensated and got all their money back plus
Speaker 1: uh some because retrofin has turned out to be a
Speaker 1: fairly successful company, and it's not clear that retrofin lost
Speaker 1: anything from what Screlly did. In fact, he might have
Speaker 1: set it up so that it was a success. So
Speaker 1: he had this kind of odd situation of a fraud
Speaker 1: without losses, and that may have an impact at sentencing
Speaker 1: when that comes up down the road. Yes, so, Bob,
Speaker 1: given given what Peter just said, Um, the fact that
Speaker 1: investors didn't lose money, and in fact, that was I
Speaker 1: think part of Screll's defense. Um, was there legitimate grounds
Speaker 1: for a prosecution in this case? Um? I think there was.
Speaker 1: I think Picker is quite right that the fact that
Speaker 1: there wasn't a loss will have some possible effect on
Speaker 1: the sentencing, because loss itself is a particularly important relevant
Speaker 1: factor that a judge is meant to take into account
Speaker 1: when sentencing. At the same time, however, it's worth keeping
Speaker 1: in mind that it's not the only factor, but the
Speaker 1: judge is meant to take account up for one thing.
Speaker 1: There's a matter of the intention, right, What was the
Speaker 1: guy actually trying to do? What was his aim? Uh?
Speaker 1: If his victims ended up profiting in a kind of
Speaker 1: accidental way, if it just so happened that they ended
Speaker 1: up profiting anyway, But that's no thanks to Martin Screwley,
Speaker 1: or at least no thanks to the offensive actions that
Speaker 1: he took, then that's not really going to help him
Speaker 1: very much at sentencing. In addition, the apparent sort of
Speaker 1: moral turpitude or the apparent lack of contrition or even
Speaker 1: any sense that he's done anything wrong that Mr Screwley
Speaker 1: seems to be displaying every day in public is also
Speaker 1: something that I suspect the sentencing judge is apt to
Speaker 1: take account of, and it certainly warranted in taking account of.
Speaker 1: And so you could end up seeing a pretty stiff
Speaker 1: penalty being levied. I mean, there's some people talking about how, yeah,
Speaker 1: he might only get a couple of months or suspended sentence.
Speaker 1: I have a funny feeling that's just not true. I
Speaker 1: expect he's going to get years. We're talking about the
Speaker 1: guilty verdict of Martin Screlly, the pharmaceutical executive who was
Speaker 1: convicted on Friday of the Friday hedge fund investors. Our
Speaker 1: guests are Peter Heading and Robert Hockett, law professors at
Speaker 1: Wayne State University and Cornell University, respectively. UM Peter Uh
Speaker 1: Bob was talking about how UM Martin Screwlly may face
Speaker 1: years in prison. His lawyer uh said last week that
Speaker 1: he might actually ask for no prison time for Martin Screlly.
Speaker 1: Does that effort have any chance of success in your mind. Well,
Speaker 1: the starting point that his lawyer, Ben Brattman is talking
Speaker 1: about is looking at the FED sentencing guidelines and the
Speaker 1: recommended sentence, and the key driver there although not the
Speaker 1: only one is Bob mentioned, But the key driver is
Speaker 1: the amount of the loss. And if the loss is zero,
Speaker 1: and certainly I would expect him to argue that the
Speaker 1: investors didn't lose anything, Retroffin didn't lose anything, then that
Speaker 1: would likely result in a recommended sentence of UM. It
Speaker 1: could be as low as probation or home confinement or
Speaker 1: perhaps a period short period in a federal prison and
Speaker 1: then UM community corrections. So I could see him arguing
Speaker 1: for probation. It's going to be tough, and of course
Speaker 1: that judges are not bound by the sentencing guidelines and
Speaker 1: haven't been for over a decade, And so what Judge
Speaker 1: Matsumoto looks at is going to be everything that's related
Speaker 1: to Mr Screlly. This is where his comments, his social
Speaker 1: media statements and frankly some of his denigration of the
Speaker 1: process could come into play, and she may decide that
Speaker 1: a message has to be sent here. But certainly I
Speaker 1: can see the defense asking for no time or a
Speaker 1: very short prisoner. Bob Martin Scawley isn't lawyers did not
Speaker 1: present any witnesses at trial. In retrospect, does it seem
Speaker 1: as though that might have been a mistake? Um? I
Speaker 1: mean that's a tough one to tell. I mean that
Speaker 1: the witness that people talk most about as a prospective
Speaker 1: testifier was Mr s Fairley himself. Right, there's a live
Speaker 1: question up until the twenty four July whether he would
Speaker 1: actually testify in his own behalf or not. Um. And
Speaker 1: of course the risks were fairly obvious, right. I mean,
Speaker 1: it's not a particularly sympathetic character. He seems to be
Speaker 1: in effect unable to help himself and sort of can't
Speaker 1: help but come across as boorish and arrogant and contemptful
Speaker 1: or contemptuous and the like. Um. And so he ultimately decided,
Speaker 1: presumably on that basis, not to testify in his own behalf. Um.
Speaker 1: I don't know that it can be said that that
Speaker 1: hurt him, right, unless had he actually testified, it would
Speaker 1: have been clear that he had some kind of organic impairment, right,
Speaker 1: some kind of problem that he has, I don't know,
Speaker 1: Asperger's syndrome or something of that kind. Um that his
Speaker 1: lawyer was sort of suggesting that he had my way
Speaker 1: of sort of explaining his his his quirkiness, let's say,
Speaker 1: to put it in a neutral way of behavior. Um.
Speaker 1: As for other possible witnesses, Um, you know, it's it's
Speaker 1: it's hard to tell whether that would hurt or or
Speaker 1: or help. It would sort of depend on the witnesses themselves.
Speaker 1: My understanding is that some people did, in fact to
Speaker 1: say that, yeah, I ended up coming out ahead, I
Speaker 1: ended up making money off of my investment, and so
Speaker 1: in that since I wasn't harm um, more testimony to
Speaker 1: that effect might have been helpful. But again it's kind
Speaker 1: of unclear that it would have been, because he wasn't
Speaker 1: found guilty on that ground anyway, Right, he wasn't found
Speaker 1: guilty of having done anything that tax fly incurred serious
Speaker 1: loss to say, Retroffen investors. It was rather that he
Speaker 1: broke the rules, that he lied in a manner that
Speaker 1: could have ended up incuring significant losses. And indeed, the
Speaker 1: sentencing judges likely to look at that that very factor
Speaker 1: as well. Right, Just what might very well have happened,
Speaker 1: um had it not been for you know, just good luck?
Speaker 1: Uh in light of what he had done and by
Speaker 1: way of misleading investors. Peter, do you see any grounds
Speaker 1: here from Martin Screwley's lawyers to successfully appeal? Um An
Speaker 1: appeal is always tough in any criminal case, especially here.
Speaker 1: The key focus was fraudulent intent, and in fact, the
Speaker 1: defense said that, you know, can you find that Screwley
Speaker 1: intended to defraud the hedge fund investors? A retro find
Speaker 1: that that is a classic jury credibility determination, and so
Speaker 1: appeals courts are very hesitant to interfere in that at
Speaker 1: all all. And so I think that's going to make
Speaker 1: a successful appeal here very tough, because I don't think
Speaker 1: you're gonna want to hear appeals judges saying well, there
Speaker 1: wasn't enough here. The jury came back with five not
Speaker 1: guilty verdicts. So from the government's point of view, they
Speaker 1: can say, look the jury wide the evidence. We won three,
Speaker 1: we lost five. This was a jury that followed the instructions.
Speaker 1: That's going to make it even more difficult to overturn
Speaker 1: the verdict. I want to thank our guests Peter Henning,
Speaker 1: who teaches at Wayne State University Law School, and Robert Hockett,
Speaker 1: who teaches at Cornell University Law School talking about the
Speaker 1: jury verdict in the case of Martin Screlly. UH. Screlly
Speaker 1: is still facing sec charges and civil lawsuits, so even
Speaker 1: after his criminal case, there will be more things to
Speaker 1: talk about here on Bloomberg law coming up. Top Justice
Speaker 1: Department official says Special Council Robert Mueller has a broad
Speaker 1: mandate as he investigates possible crimes involving Russian meddling in
Speaker 1: the election. UH also said Roder Rodenstein also said this
Speaker 1: weekend that it's no fishing expedition that Robert Mueller is
Speaker 1: UH is going about looking at