Martin Shkreli: The Downward Spiral of Fraud and Greed

Martin Shkreli, former CEO of a pharmaceutical company is known for buying up old drugs and immediately raising the price to consumers by as much as 5,000% overnight. He recently raised the price of one drug that treats a devastating infection in babies and people with AIDS from $13.50/pill to $750/pill. Mr. Shkreli has often spoken out against critics, and has become known as the “bad boy of pharmaceuticals,” portrayed by his excessive greed. On December 17^th, Mr. Shkreli was arrested for securities fraud and wire fraud charges, not because he raised prices so quickly in his current company, Turing Pharmaceuticals, but because of fraud he committed in two prior hedge funds and a previous biopharmaceutical company, Retrophin.

Mr. Shkreli lied to investors for both of his hedge funds while losing millions of dollars. He then paid them off by using funds from Retrophin without consent from the board of directors. Throughout the process, he and a partner fabricated consulting agreements so that external auditors would not be suspicious of the transactions taking place between Retrophin and the investors of the two hedge funds. This article from The New York Times and the video below (posted by the Associated Press) give more information about what Mr. Shkreli did and what he has been charged for.

Swisher Executives Charged with Fraud

In 2012, Swisher, a janitorial and cleaning-supply services company, was charged with allegations of financial wrongdoings.  Now, three years later, Michael Kipp (former CFO) and Joanne Viard (former director of external reporting) face charges of conspiracy to defraud the United States, wire fraud, securities fraud, and obstruction of justice.

The fraud was carried out largely so that executives could meet earnings targets. While it may not have initially seemed like a big deal to Kipp and Viard to commit the fraud, the investing public was put at risk, and fraud is a crime that is punished. Jill Rose, the U.S. Attorney for the Western District of North Carolina, made it clear that whenever there is fraud it will be punished, and in this case the two executives may face up to 30 years in prison.

See this article from The Charlotte Observer for more information.

Individuals Causing the 2008 Housing Crisis Receive No More Than a Slap on the Wrist

Following the 2008 housing crisis, several of the banks involved paid large settlement fines. JPMorgan Chase was one of those banks. The Justice Department used evidence from an anonymous whistleblower in the prosecution, but until recently the whistleblower remained anonymous. Matt Taibbi recently released an article in Rolling Stone describing why the whistleblower, Alayne Fleischmann, has gone public with what she knows. Ironically, the Justice Department wasn’t committed to bringing “justice” to those individuals who contributed to the fall of the economy through fraudulent activities. In fact, Attorney General Eric Holder said the following:

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy, and I think that is a function of the fact that some of these institutions have become too large.”

What is the Justice Department doing if they aren’t bringing justice to those responsible for major crimes? When Fleischmann realized that much of what she reported to the SEC and the Justice Department was not being fully pursued, she decided she had to go public with what she knew.

City Governments Committing Financial Statement Fraud

The Wall Street Journal reported recently that city governments in Pennsylvania, Florida, California, New Jersey and Illinois are increasingly being charged with financial statement fraud in their bond offerings. In the case of Harrisburg, Pennsylvania, the SEC stated that:

...this is the first time the (SEC) has "charged a municipality for misleading statements made outside of its securities disclosure documents."

According to "Anthony Figliola, a vice president at Empire Government Strategies, a Long Island-based consulting firm to local governments. 'Harrisburg is the tip of the iceberg.'"

Fraud and the Mortgage Meltdown

Charles Ferguson, the person who created the documentary on the mortgage meltdown "Inside Job," has written a book on the topic titled "Inside Job: The Financiers Who Pulled Off the Heist of the Century." I can only seem to find it on Amazon's UK website so I don't know if it will be available in the US. In any case, this article in the Guardian, written by Ferguson, has some interesting comments about the fact that the Obama administration and the US Justice Department is not prosecuting anyone. Ferguson also names several banks that he claims were complicit in the meltdown and committed various forms of fraud. He says that It's pretty disheartening to think this much corruption exists in the financial industry and the government isn't doing much to hold anyone accountable for it. Here are a few excerpts: