Shkreli's Lawyer Accused of Templating Sham Retrophin Share Deal

Will Martin Shkreli Opt for a Trial?
  • Greebel kept fraud secret from accountants, prosecutors say
  • Law firm partner described in charges as partner in crime

A handcuffed Evan Greebel walked out of the FBI’s New York headquarters a few steps ahead of ex-Retrophin Inc. CEO Martin Shkreli, but prosecutors say the men were side-by-side when it came to a multimillion-dollar fraud at the company’s expense.

A New York mergers and acquisitions lawyer with the law firm Kaye Scholer LLP, Greebel was indicted for actions while representing Shkreli and his biopharmaceutical firm from 2012 to 2014. Greebel, then with Katten Muchin & Rosenman LLP, allegedly helped the young CEO misappropriate assets to pay off his personal debts, according to the indictment unsealed Thursday in federal court in Brooklyn, New York.

Greebel, 42, was present with Shkreli, 32, at all “relevant” Retrophin board meetings and helped conceal sham agreements from the board and investors, prosecutors contend. Greebel made sure Retrophin’s outside accountants were unaware of Shkreli’s financial maneuvers, and helped him concoct consulting deals used to repay investors at a hedge fund run by Shkreli, according to the government.

Shkreli, who spurred an outcry in September by sharply raising costs for drugs owned by his current firm, Turing Pharmaceuticals LLC, has said all of his transactions at Retrophin were done with board and attorney approval. He was later ousted from the company, which isn’t charged with any wrongdoing.

Both men pleaded not guilty in an initial court appearance Thursday and were released on bail. They face decades in prison if convicted on fraud and conspiracy charges.

Transactions

Kaye Scholer said in a statement that Greebel, of Scarsdale, New York, joined the law firm this summer and that “the transactions in question predate his arrival.”

The law firm said later in a statement that it is “deeply concerned” by the charges and is conducting its own internal investigation.

“Based on our findings we will take appropriate action,” according to the statement. “In the meantime, we cannot comment on an active federal investigation or on our internal investigation.”

In 2011, Shkreli founded Retrophin, focusing on drugs for “debilitating and life-threatening diseases.” He took it public in December 2012.

Shkreli, Greebel and others were accused of orchestrating three interrelated schemes, including one where Greebel figured prominently, according to prosecutors. Shkreli, assisted by Greebel, defrauded Retrophin by transferring some of its shares to a separate partnership entity, MSMB Capital, founded by Shkreli, according to the indictment.

The men caused Retrophin to enter into settlements and “sham consulting agreements” with MSMB and another Shkreli entity, MSMB Healthcare Funds, to settle debts and liabilities Shkreli owed.

They “engineered a series of fraudulent transactions that were backdated to the summer of 2012 to create the appearance” that MSMB Capital had invested in Retrophin, according to the indictment. Greebel is accused of providing a “template share transfer agreement” of Retrophin shares to MSMB Capital.

He is also charged with removing company accountants from an e-mail chain on which Shkreli backdated an agreement to transfer the shares.

In total, Shkreli, Greebel and others are accused of causing Retrophin to pay $3.4 million in cash and stock to settle debt claims it wasn’t responsible for, and to pay $7.6 million in cash and stock as a result of the fake deals.

Bitcoin Expert

According to Greebel’s Kaye Scholer bio page, he was an expert in virtual currency, “specifically advising on the creation of the first bitcoin ETF and one of the first U.S. regulated bitcoin exchanges.”

He was involved in a long list of high-profile transactions, including representing ImClone Systems Inc. in its $6.5 billion sale to Eli Lilly and Co., the Rodgers & Hammerstein Organization in its sale to Imagem Music Group, and Atlantic Coast Entertainment in its sale of the The Sands Hotel Casino in Atlantic City to Pinnacle Entertainment Inc.

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