Martin Shrkeli

History
Martin Shkreli who's also known as "Pharma Bro" is the founder and the former CEO of
Turing Pharmaceuticals, a pharmaceutical company incorporated in Zug, New Zealand
with offices in New York City. This company has two marketed products which are
Daraprim, for the treatment of toxoplasmosis and Vecamyl, for the treatment of
hypertension.
Daraprim is the trade name for the drug pyrimethamine, which is indicated for the
treatment of toxoplasmosis in combination with a sulfonamide, and has been available
since 1953. At the time of the Daraprim acquisition Turing Pharmaceuticals indicated
that it intended to develop new toxoplasmosis drug candidates with better ADME than
Daraprim. In response to criticisms of the September 2015 price increases, Turing
Pharmaceuticals announced various patient affordability and access initiatives and in
November 2015 the company reduced the cost of Daraprim for hospitals by up to 50%
of the increased rate. Despite these partial rollbacks to the initial price increase,
according to February 2, 2016 memo from Representative Elijah Cummings to the
United States House Committee on Oversight and Government Reform, since Turing's
acquisition to the rights in Daraprim, the drug has gone from being affordable and
readily available to being prohibitively expensive. Turing Pharmaceuticals is working on
new indications for Vecamyl.
Turing Pharmaceuticals recently acquired the rights to Daraprim. Developed in the
1950s, the drug is the best treatment for a relatively rare parasitic infection called
toxoplasmosis. People with weakened immune systems, such as Aids patients, have
come to rely on the drug, which until recently cost about $13.50 (£8.80) a dose. But Mr.
Shkreli announced he was raising the price to $750 a pill. The more than 5,000%
increase and his brash defence of the decision has made him a pariah among patients-
rights groups, politicians and hundreds of Twitter users.
Turing was not Mr. Shkreli's first foray into the pharmaceutical industry. In 2011, he
founded biotech firm Retrophin, with the goal of focusing on medicines for rare
diseases. He was ousted as head of the company in 2014 amidst allegations he
improperly handled legal settlements. A year later the company filed a $65m lawsuit that
claimed Mr Shkreli created Retrophin and took it public simply to pay off investors in his
old hedge fund, MSMB when the fund went under. Mr Shkreli has denied the
accusations. "They are sort of concocting this wild and crazy and unlikely story to
swindle me out of the money," he told the New York Times.
On August 4, 2017, a jury found Mr. Shkreli guilty of three of eight counts, including
securities fraud, in a criminal case brought by US prosecutors. But they cleared him of
allegations that he had looted Retrophin to make payments for the hedge funds. The
civil suit brought by Retrophin remained pending as of 4 August.
Shkreli was sentenced last year after being found guilty of securities and wire fraud
related to the use of Retrophin, another drug company he founded, to pay investors he
had defrauded through two hedge funds he also ran. The charges were unrelated to the
incident for which Shkreli became infamous when, as CEO of Turing Pharmaceuticals,
he raised the price of the toxoplasmosis drug Daraprim from $13.50 per pill to $700.
Martin Shkreli says the judge and jury in his fraud case got it wrong. With Shkreli locked
up in a Pennsylvania federal prison, his lawyers will try to persuade an appeals court on
Friday to overturn his conviction and give him a new trial. Shkreli was convicted two
years ago of lying to investors in his hedge funds and manipulating shares of Retrophin
Inc., a biotech company he founded. He was sentenced to seven years and sent to a
low-security prison camp. Now Shkreli’s lawyers say the trial judge in Brooklyn, New
York, gave incorrect legal instructions, leading to an inconsistent verdict in which jurors
found him guilty of one count of conspiracy and two counts of securities fraud.
Although he’s barely into a seven-year prison sentence, the smell of money is still too
much for former pharmaceutical executive Martin Shkreli to resist.
Citing interviews with multiple unnamed sources, The Wall Street Journal reported
Thursday that Shkreli uses a contraband mobile phone to control his latest project,
Phoenixus, a Swiss drug company that operates out of Manhattan. Reportedly,
employees have already been interviewed by the FBI.
Review of Related Literature
Definition of terms
White-Collar Crime
White-collar crime is nonviolent crime committed for financial gain. According to the FBI,
a key agency that investigates these offenses, "these crimes are characterized by
deceit, concealment, or violation of trust." The motivation for these crimes is to obtain or
avoid losing money, property, or services, or to secure a personal or business
advantage.
Examples of white-collar crimes include securities fraud, embezzlement, corporate
fraud, and money laundering. In addition to the FBI, entities that investigate white-collar
crime include the Securities and Exchange Commission (SEC), the National Association
of Securities Dealers (NASD), and state authorities.
White-collar crime has been associated with the educated and affluent ever since the
term was first coined in 1949 by sociologist Edwin Sutherland, who defined it as "crime
committed by a person of respectability and high social status in the course of their
occupation."
In the decades since, the range of white-collar crimes has vastly expanded as new
technology and new financial products and arrangements have inspired a host of new
offenses. High-profile individuals convicted of white-collar crimes in recent decades
include Ivan Boesky, Bernard Ebbers, Michael Milken, and Bernie Madoff. And rampant
new white-collar crimes facilitated by the internet include so-called Nigerian scams, in
which fraudulent e-mails request help in sending a substantial amount of money.
Types of White-Collar Crimes
Securities Fraud
Securities fraud, also referred to as investment fraud, is a type of serious white-collar
crime that can be committed in a variety of forms but primarily involves misrepresenting
information investors use to make decisions.
The perpetrator of the fraud can be an individual, such as a stockbroker. Or it can be an
organization, such as a brokerage firm, corporation, or investment bank. Independent
individuals might also commit this type of fraud through schemes such as insider
trading.
The Federal Bureau of Investigation (FBI) describes securities fraud as criminal activity
that can include high yield investment fraud, Ponzi schemes, pyramid schemes,
advanced fee Schemes, foreign currency fraud, broker embezzlement, hedge fund
related fraud, and late-day trading. In many cases, the fraudster seeks to dupe investors
through misrepresentation and to manipulate financial markets in some way. This crime
includes providing false information, withholding key information, offering bad advice,
and offering or acting on inside information.
Other types of Securities Fraud
Insider Trading
Insider trading is another type of securities fraud. It occurs when someone with
confidential information about a company's financial state uses that information to make
decisions about whether to buy or sell the stock before that information is disclosed to
the public. For example, a corporate accountant could notice that the company is losing
money fast and heading towards bankruptcy. If the accountant places an order to sell
his stock before notifying the board, he’s arguably guilty of insider trading.
Third Party Misrepresentation
This type of securities fraud occurs when a third party gives out false information about
the stock market or a particular company or industry. “Pump and dump” schemes are a
prevalent type of third-party misrepresentations. In a pump and dump scheme, a person
will find a small, unknown company with cheap stock and buy large amounts of its
shares. The perpetrator will then send out false information about the company to
encourage others to buy the stock, driving up the price. Once the price of the stock is
high enough, the perpetrator sells his or her shares for a profit.
Common Signs of Securities Fraud
• Your broker does not return your phone calls.
• The transactions on your statements don't make sense to you.
• Your account statements include transactions you did not authorize.
• You find unidentifiable debits or credits on monthly account statements.
 • You see a dramatic drop in value of stock in a short period of time.
• It's an "up" market, but you're losing money.
• The majority of investments recommended by the broker are declining in value.
• Your broker tells you to view market news as entertainment.
• Your broker fails to disclose important information regarding an investment
purchase.
• Your broker begins trading in high risk and speculative investments.
• You are paying capital gains taxes, despite the fact that your account value is
decreasing.
• Financial results are markedly different from publicly announced expectations.
These warnings signs don't necessarily mean you are a victim of fraud. However, if you
experience any of these, it is in your best interest to immediately seek the advice of an
attorney with experience handling investment and securities fraud matters.
Proving Securities Fraud
To prove securities fraud, a customer must show that the broker or someone else in the
industry intentionally or recklessly made a misrepresentation or omission of material fact
that the customer justifiably relied upon and then suffered damages as a direct result of
his reliance on the misrepresentation or omission of material fact. In plain English that
means you lost money because you relied on factual information provided by your
broker or another securities industry member that they either knew or should have
known was not true.
For some fraud claims an investor must show some reliance or action related to the
misrepresentation. When a showing of reliance is required, it can be established by
direct or indirect evidence. Direct evidence is something like a statement in a
prospectus claiming the existence of a lucrative contract that the issuer does not have.
When the investor can show that their investment decision was based on that
statement, they have provided direct evidence of reliance.
Penalties
A conviction for securities fraud can involve significant penalties for anyone involved.
Securities fraud can be punished both with civil penalties, such as fines or license
restriction, as well as criminal penalties, such as fines and prison.
Fines. Securities fraud can involve very high fines, though the amount of fine will
depend upon the circumstances of the case. In some situations, such as in cases of
insider trading, fines of up to $5 million are possible, while fines for other types of
securities fraud can be $10,000 or more.
Incarceration. A conviction for securities fraud can also result in a prison sentence. Any
conviction for a federal securities fraud crime can result in a 5-year federal prison
sentence per offense.
Probation. Probation is also a possible penalty for securities fraud, especially when
there is only a single instance of fraud or it involves offenses which didn't result in any
financial loss. Probation usually lasts several years, though terms of 5 years or more
are possible. While on probation, the probationer must regularly meet with a probation
monitor and comply with any conditions imposed by the court, such as not committing
more crimes, submitting to drug testing, and paying all fines and restitution.
Restitution. Because securities fraud often involves investors, employees, clients, or
others who suffer monetary loss as a result of the fraud, courts make restitution part of
the sentence. When ordered to pay restitution, a person convicted of securities fraud
must repay the money lost as a result of the fraudulent activity. The restitution must be
paid in addition to any fines.
The table below shows the biggest securities fraud:

Corporate Fraud
Some definitions of white-collar crime consider only offenses undertaken by an
individual to benefit themselves. But the FBI, for one, defines these crimes as including
large-scale fraud perpetrated by many throughout a corporate or government institution.
In fact, the agency names corporate crime as among its highest enforcement priorities.
That's because it not only brings "significant financial losses to investors," but "has the
potential to cause immeasurable damage to the U.S. economy and investor
confidence."
Falsification of financial information
The majority of corporate fraud cases involve accounting schemes that are conceived to
deceive investors, auditors, and analysts about the true financial condition of a
corporation or business entity. Such cases typically involve manipulating financial data,
the share price, or other valuation measurements to make the financial performance of
the business appear better than it actually is.
For instance, Credit Suisse pleaded guilty in 2014 to helping U.S. citizens avoid paying
taxes by hiding income from the Internal Revenue Service. The bank agreed to pay
penalties of $2.6 billion. Also in 2014, Bank of America acknowledged it sold billions in
mortgage-backed securities (MBS) tied to properties with inflated values. These loans,
which did not have proper collateral, were among the types of financial misdeeds that
led to the financial crash of 2008. Bank of America agreed to pay $16.65 billion in
damages and admit to its wrongdoing.
Self-dealing
Corporate fraud also encompasses cases in which one or more employees of a
company act to enrich themselves at the expense of investors or other parties. Most
notorious are insider trading cases, in which individuals act upon, or divulge to others,
information that isn't yet public and is likely to affect share price and other company
valuations once it is known. Other trading-related offenses included fraud in connection
with mutual hedge funds, including late-day trading and other market-timing schemes.
Detection and deterrence
With the range of crimes and corporate entities involved so wide, corporate fraud draws
in perhaps the widest group or partners for investigations. The FBI says it typically
coordinates with the U.S. Securities and Exchange Commission (SEC), Commodity
Futures Trading Commission (CFTC), Financial Industry Regulatory Authority, Internal
Revenue Service, Department of Labor, Federal Energy Regulatory Commission, and
the U.S. Postal Inspection Service, and other regulatory and/or law enforcement
agencies.
Money Laundering
Money laundering is the process of taking cash earned from illicit activities, such as
drug trafficking, and making the cash appear to be earnings from a legal business
activity. The money from the illicit activity is considered "dirty" and the process
“launders” the money to make it look "clean."
With such cases, of course, the investigation often encompasses not only the
laundering itself but the criminal activity from which the laundered money was derived.
Criminals who engage in money laundering derive their proceeds in many ways
including healthcare fraud, human and narcotics trafficking, public corruption, and
terrorism.
Criminals use a dizzying number and variety of methods to launder money. Among the
most common, though, use real estate, precious metals, international trade, and virtual
currency such as Bitcoin.
Money-Laundering Steps
There are three steps in the money laundering process, according to the FBI:
placement, layering, and integration. Placement represents the initial entry of the
criminal’s proceeds into the financial system. Layering is the most complex step, as it
often entails the international movement of funds. Layering separates the criminal’s
proceeds from their original source and creates a deliberately complex audit trail
through a series of financial transactions. Integration occurs when the criminal’s
proceeds are returned to the criminal from what appear to be legitimate sources.
Not all such schemes are necessarily sophisticated. One of the most common
laundering schemes, for example, is through a legitimate cash-based business owned
by the criminal organization. If the organization owns a restaurant, it might inflate the
daily cash receipts to funnel its illegal cash through the restaurant and into the bank.
Then they can distribute the funds to the owners out of the restaurant’s bank account.
Detection and Deterrence
The number of steps involved in money laundering, along with the often-global scope of
its many financial transactions, makes investigations unusually complex. The FBI says it
regularly coordinates on money laundering with federal, state, and local law
enforcement agencies, along with a host of international partners.
Embezzlement
Embezzlement refers to a form of white-collar crime where a person or entity
misappropriates the assets entrusted to him or her. In this type of fraud, the embezzler
attains the assets lawfully and has the right to possess them, but the assets are then
used for unintended purposes. Embezzlement is a breach of the fiduciary
responsibilities placed upon a person.
The nature of embezzlement can be both small and large. Embezzling funds can be as
minor as a store clerk pocketing a few bucks from a cash register. However, on a
grander scale, embezzlement also occurs when the executives of large companies
falsely expense millions of dollars, transferring the funds into personal accounts.
Depending on the scale of the crime, embezzlement may be punishable by large fines
and time in jail.
Individuals who are entrusted with access to an organization’s funds are expected to
safeguard those assets for their intended use. It is illegal to intentionally access that
money and convert it to personal use. Such activities can include diverting funds to
accounts that appear to be authorized to receive payments or transfers. However, the
account is a front that allows the individual, or a third-party they are collaborating with,
to take the funding. For instance, an embezzler might create bills and receipts for
business activities that never took place or services that were never rendered to
disguise the transfer of funds as a legitimate transaction.
An embezzler might collaborate with a partner who is listed as a consultant or contractor
who issues invoices and receives payment, yet never actually performs the duties they
are charging for.
Code of Ethics 5 Fundamental Principles
1. Integrity
being clear, fair and honest in all professional and business connections. Try not to
be related with any data that you accept contains a tangibly false or deluding
explanation, or which is misdirecting by oversight.
2. Objectivity
Not allowing conflict of interest or any influence from other people affect your
professional judgement
3. Professional Competence and Due Care
An ongoing commitment to your level of professional knowledge and skill. Base this on
current developments in practice, legislation and techniques. Those working under your
authority must also have the appropriate training and supervision.
4. Confidentiality
You should not disclose professional information unless you have specific permission or
a legal or professional duty to do so.
5. Professional Behavior
To comply with relevant laws and regulations. You must also avoid any action that could
negatively affect the reputation of the profession.
Threats to the fundamental principles
1. Self interest threat.
Commonly called a 'conflict of interest' which may inappropriately influence judgement
or behaviour.
2. Self review threat.
When you are required to evaluate the results of a previous judgement or service.
3. Advocacy threat.
Arising if promoting a position or opinion to the point that your subsequent objectivity is
compromised.
4. Familiarity threat.
When you become so sympathetic to the interests of others as a result of a close
relationship that your professional judgement becomes compromised.
5. Intimidation threat.
When you are deterred from acting objectively by actual or perceived pressure or
influence.
Fraud
Fraud is an intentionally deceptive action designed to provide the perpetrator with an
unlawful gain or to deny a right to a victim. Fraud can occur in finance, real estate,
investment, and insurance. It can be found in the sale of real property, such as land,
personal property, such as art and collectibles, as well as intangible property, such as
stocks and bonds. Types of fraud include tax fraud, credit card fraud, wire fraud,
securities fraud, and bankruptcy fraud.
Fraudulent activity can be carried out by one individual, multiple individuals or a
business firm as a whole.
Fraud involves the false representation of facts, whether by intentionally withholding
important information or providing false statements to another party for the specific
purpose of gaining something that may not have been provided without the deception.
Often, the perpetrator of fraud is aware of information that the intended victim is not,
allowing the perpetrator to deceive the victim. At heart, the individual or company
committing fraud is taking advantage of information asymmetry; specifically, that the
resource cost of reviewing and verifying that information can be significant enough as to
create a disincentive to fully invest in fraud prevention.
Both states and the federal government have laws that criminalize fraud, though
fraudulent actions may not always result in a criminal trial. Government prosecutors
often have substantial discretion in determining whether a case should go to trial and
may pursue a settlement instead if this will result in a speedier and less costly
resolution. If a fraud case goes to trial, the perpetrator may be convicted and sent to jail.
While the government may decide that a case of fraud can be settled outside of criminal
proceedings, non-governmental parties that claim injury may pursue a civil case. The
victims of fraud may sue the perpetrator to have funds recovered, or, in a case where
no monetary loss occurred, may sue to reestablish the victim’s rights.
Related Cases
Enron scandal
series of events that resulted in the bankruptcy of the U.S. energy, commodities, and
services company Enron Corporation and the dissolution of Arthur Andersen LLP, which
had been one of the largest auditing and accounting companies in the world. The
collapse of Enron, which held more than $60 billion in assets, involved one of the
biggest bankruptcy filings in the history of the United States, and it generated much
debate as well as legislation designed to improve accounting standards and practices,
with long-lasting repercussions in the financial world.
The scandal resulted in a wave of new regulations and legislation designed to increase
the accuracy of financial reporting for publicly traded companies. The most important of
those measures, the Sarbanes-Oxley Act (2002), imposed harsh penalties for
destroying, altering, or fabricating financial records. The act also prohibited auditing
firms from doing any concurrent consulting business for the same clients.
Worldcom Scandal
In 1999, revenue growth slowed and the stock price began falling. WorldCom's
expenses as a percentage of its total revenue increased because the growth rate of its
earnings dropped. This also meant WorldCom's earnings might not meet Wall Street
analysts' expectations. In an effort to increase revenue, WorldCom reduced the amount
of money it held in reserve (to cover liabilities for the companies it had acquired) by $2.8
billion and moved this money into the revenue line of its financial statements.
That wasn't enough to boost the earnings that Ebbers wanted. In 2000, WorldCom
began classifying operating expenses as long-term capital investments. Hiding these
expenses in this way gave them another $3.85 billion. These newly classified assets
were expenses that WorldCom paid to lease phone network lines from other companies
to access their networks. They also added a journal entry for $500 million in computer
expenses, but supporting documents for the expenses were never found.
These changes turned WorldCom's losses into profits to the tune of $1.38 billion in
2001. It also made WorldCom's assets appear more valuable.
Tyco International Scandal
According to the Tyco Fraud Information Center, an internal investigation concluded that
there were accounting errors, but that there was no systematic fraud problem at Tyco.
So, what did happen? Tyco's former CEO Dennis Koslowski, former CFO Mark Swartz,
and former General Counsel Mark Belnick were accused of giving themselves interest-
free or very low interest loans (sometimes disguised as bonuses) that were never
approved by the Tyco board or repaid. Some of these "loans" were part of a "Key
Employee Loan" program the company offered. They were also accused of selling their
company stock without telling investors, which is a requirement under SEC rules.
Koslowski, Swartz, and Belnick stole $600 million dollars from Tyco International
through their unapproved bonuses, loans, and extravagant "company" spending.
Rumors of a $6,000 shower curtain, $2,000 trash can, and a $2 million dollar birthday
party for Koslowski's wife in Italy are just a few examples of the misuse of company
funds. As many as 40 Tyco executives took loans that were later "forgiven" as part of
Tyco's loan-forgiveness program, although it was said that many did not know they were
doing anything wrong. Hush money was also paid to those the company feared would
"rat out" Kozlowski.