NEW YORK Days before Martin Shkreli's arrest for securities fraud, U.S. prosecutors obtained a secret court order ruling that communications between the former pharmaceutical executive and a corporate lawyer also under investigation were not protected by attorney-client privilege.
The order by U.S. District Judge Jack Weinstein in Brooklyn, New York, unsealed on Tuesday, provides a glimpse into how prosecutors built their case against Shkreli during his time as a hedge fund manager and CEO of drug company Retrophin Inc(RTRX.O).
Shkreli, who until recently was Turing Pharmaceuticals' chief executive, was arrested Dec. 17, along with Retrophin's outside counsel, Evan Greebel. Both men have pleaded not guilty.
Prosecutors said Shkreli engaged in a Ponzi-like scheme, defrauding investors in his hedge fund MSMB Capital Management and misappropriating $11 million in assets from Retrophin to repay them.
Before being indicted, Shkreli, 32, had gained notoriety when, as Turing's CEO, the company raised the price of a drug used to treat a dangerous parasitic infection to $750 from $13.50.
According to the unsealed records, Retrophin in May 2014 and January 2015 received grand jury subpoenas in connection with the investigation that sought communications between Shkreli and Greebel.
Retrophin agreed to waive attorney-client privilege for those communications. But Shkreli argued Greebel was also his personal lawyer and that the company could not waive that protection, the records said.
As a result, Retrophin produced some documents with redactions, prompting prosecutors on Nov. 17 to seek their full disclosure.
On Dec. 3, Weinstein ruled the documents were not covered by attorney-client privilege and were "probably" related to company business or criminal conduct.
Lawyers for Shkreli and Greebel did not respond to requests for comment Wednesday. A Retrophin spokeswoman had no immediate comment.
The unsealed records provided new insight on how long Shkreli was under investigation. Retrophin previously disclosed receiving a grand jury subpoena in January 2015, but had not previously referred to one in May 2014.
The U.S. Securities and Exchange Commission had separately launched a related civil investigation in 2012, Retrophin has said.
Prosecutors in court papers filed on Monday in the SEC's civil case said Shkreli provided testimony to the SEC in August 2013 and February 2014.
The SEC also sought testimony in 2015, prosecutors said, but Shkreli asserted his Fifth Amendment right against self-incrimination under the U.S. Constitution.
Shkreli has said he will again assert that right if he attends a Feb. 4 Congressional hearing on drug pricing.
(Reporting by Nate Raymond in New York; Editing by Noeleen Walder, Bernard Orr)
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Published Date: Jan 28, 2016 02:31 am | Updated Date: Jan 28, 2016 02:31 am