Showing posts with label Commerce-Stealing. Show all posts
Showing posts with label Commerce-Stealing. Show all posts

August 5, 2017

Pharma Bro Martin Shkreli is Found Guilty of Fraud








Martin Shkreli, accused of defrauding his hedge fund investors and a pharmaceutical company, was convicted on three of eight counts on Friday, after a five-week trial in the Federal District Court in Brooklyn.

Mr. Shkreli was convicted of securities fraud in connection with his hedge fund MSMB Capital; of securities fraud in connection with another hedge fund he ran, MSMB Healthcare; and of conspiracy to commit securities fraud, related to a scheme in which he tried to secretly control a huge portion of shares of Retrophin, a drug company he started.

He faces up to 20 years on each of the first two counts, and up to five years on the final count.

The conviction, even as a mixed verdict, was a major defeat for the divisive Mr. Shkreli, who said before the trial that he was “so innocent” that the judge, jury and prosecutors would apologize to him afterward.

Mr. Shkreli, 34, was acquitted of the count that potentially carried the most weight for sentencing: count seven, which charged him with defrauding Retrophin by creating sham consulting agreements and unauthorized settlement agreements. That charge was associated with the biggest financial loss, which judges take into account when deciding on sentences in fraud cases.

Bridget Rohde, the acting United States attorney for the Eastern District of New York, the federal prosecutors’ office in Brooklyn, said she was “gratified” with the verdict. “Our work is not done: Mr. Shkreli remains to be sentenced, and there’s a co-defendant in the case,” she said, referring to Evan Greebel, Mr. Shkreli’s onetime lawyer, who is scheduled to be tried in the fall. 

The jury, which was outwardly quiet during its five-day deliberation — it sent only one substantive note — was never deadlocked, said one juror, who spoke after the verdict on condition of anonymity, because he did not want his name immediately associated with the case.

He described the deliberation method as methodical and logical and said the jurors had focused on whether Mr. Shkreli had intended to harm investors who gave him money.

“In some of the counts at least we couldn’t find that he intentionally stole from them and the reasoning was to hurt them,” the juror said.

As Judge Kiyo A. Matsumoto read the verdict, Mr. Shkreli, wearing a black polo shirt and khakis, sat with his arms crossed.

He showed outward relief when Judge Matsumoto said he was found not guilty on count seven, mouthing “Yes” and patting his lawyer Benjamin Brafman on the back. When she said he was guilty of count eight, the Retrophin securities-fraud conspiracy, he hung his head. After the verdict was read, he gathered in a circle with his lawyers, looking a little shaken, then pulled on a hoodie. By the time he got outside court, where he gave his statements, he was smiling and speaking smoothly.

A sentencing date was not set; Judge Matsumoto said she would wait for submissions from both sides on how much money was lost, as the sentencing depends on that. She set a fall date for those submissions.

Mr. Shkreli was accused of securities and wire fraud related to MSMB Capital and MSMB Healthcare. Prosecutors charged he then illegally used Retrophin to repay the defrauded MSMB investors. 
The prosecution brought forth an “avalanche” of evidence, as the prosecutor Jacquelyn Kasulis put it in her rebuttal argument, that included a threatening letter he sent to the wife of a former employee, statements he sent to MSMB investors showing great returns at the same time he had no money in fund accounts, three versions of a backdated agreement to make it look as if MSMB Capital had invested in Retrophin when it had not, as well as claims about assets under management that were wildly out of line with his actual fund size.

“It’s time for Martin Shkreli to be held accountable,” she said.

The government argued that Mr. Shkreli had lied to investors about issues like whether his hedge funds had an auditor or law firm working on it, and about their liquidity. He lost everything in MSMB Capital after a bad trade in February 2011, and hid that fact, sending investors statements for more than a year and a half showing strong returns — even though the fund did not trade after that month, and had no assets. 

A major factor was Mr. Shkreli’s state of mind, as a fraud conviction requires the defendant to knowingly commit fraud. The defense asked why Mr. Shkreli, if he wanted to commit fraud, did not commit fraud: He ultimately paid back his investors with shares of Retrophin, which became valuable, along with cash. His lawyers also asked how Mr. Shkreli profited, painting him as a hardworking oddball who, rather than throwing in the towel after his funds imploded, vowed to get his investors’ money back. He paid them back late, they argued, but he paid them back.

The defense tried to undercut the testimony of the prosecution’s witnesses, portraying them as rich sophisticates who did not carefully read the documents Mr. Shkreli gave them.

And his lawyers asked why he would defraud Retrophin when he had started and worked extremely hard on Retrophin. He had done that, Mr. Brafman said, in part to get MSMB investors what they were due. “He did it and it worked and they got paid,” he said.

The case has featured a number of strange twists. Judge Matsumoto ordered Mr. Shkreli to stop talking in and around the courthouse after he dropped into a room full of reporters and began offering his thoughts on the trial. Victims, usually the most sympathetic witnesses in a trial, were undercut here by the defense as rich and out of touch; when the prosecution tried to limit the victims it would call to testify, the defense urged it to call more. The investors all made money — by the defense’s tally, more than triple what they invested.

And it was the defense bringing in personal claims about their client’s life, from his sexual orientation to how frequently he brushed his teeth to his anxiety and depression, often over government objection. And while defendants usually keep a low profile during a federal trial, Mr. Shkreli livestreamed after court many days.

Mr. Shkreli seemed to take pains to appear that he was not taking the trial very seriously. During the prosecution’s rebuttal argument, the last thing the jury would hear from either side, he read a book. He popped into a room full of reporters to denounce the prosecution as “junior varsity,” leading Judge Matsumoto to issue an order preventing Mr. Shkreli from talking in and around the courthouse.

He became widely known after raising the price of a drug called Daraprim to $750 a pill from $13.50 overnight. He courted controversy, defending the price increase, then bragging that he had bought the sole copy of a Wu-Tang Clan album for a reported $1 million. The case against him, however, has nothing to do with the Daraprim pricing, and the federal investigation into Mr. Shkreli’s hedge fund and Retrophin work began well before the other controversies.

His lawyer, Mr. Brafman, portrayed him, in closing arguments, as a brilliant man who could pioneer new cures for diseases, something that the government raised concerns about outside the presence of the jury.

“There’s been a suggestion that somehow the great visionary of his generation will be snuffed out,” Judge Matsumoto said on July 28 as lawyers debated whether Mr. Brafman had overstepped in his closing, adding that she would instruct jurors not to consider the effect of conviction “upon anybody’s life or on humanity.”

The verdict was a partial win for federal prosecutors in the Eastern District of New York, who had pursued the case for more than four years and have been trying to build up their business unit to compete with their colleagues in Manhattan. This was by far the most closely watched case in the office’s financial unit in years. 

“This trial was particularly challenging for both the prosecution and the defense,” said Mark C. Zauderer, a partner at Flemming Zulack Williamson Zauderer. “The quixotic behavior of the defendant made the outcome even more unpredictable than usual.”




December 21, 2013

What Would you do if KlearGear’s.com Fined You $3500. For a Negative Review? What Would You do?

  

Jen and John Palmer filed a lawsuit today against KlearGear.com in a Utah federal court, charging that the company violated the Fair Credit Reporting Act, defamation, intentional infliction of emotional distress and other actions.
"In sum, KlearGear attempted to punish a dissatisfied customer for his wife's criticism of KlearGear, then abused the credit reporting system in an attempt to extort money that the customer did not owe and could not possibly have owed," the Palmers' lawsuit states.
The story goes back to December 2008 when KlearGear.com didn't deliver Jen Palmer's online Christmas order of a desk ornament and keychain that cost less than $20. Jen Palmer, now 40, wrote a negative review on private business review site RipoffReport.com, saying KlearGear.com had "horrible customer service practices."

Last summer, her husband, a senior network engineer, received an email from KlearGear.com demanding $3,500 pursuant to a non-disparagement clause that it claimed was in its "Terms of Use" on its website.
The Palmers say they asked RipOffReport to take down the negative review, but the site has an arbitration process that requires the involvement of the business. The couple say they shared this information with KlearGear.com, but the company didn't respond.
The Palmers refused to pay the fine, prompting KlearGear.com to report their "debt" to one or more credit reporting agencies, the suit claims. When the Palmers disputed the debt with several credit reporting agencies, KlearGear.com continued to maintain that the debt be paid and then demanded a $50 "dispute fee" because they attempted to dispute the debt, the couple claims.
KlearGear.com did not respond to a request for comment.
 The Palmers said the mark on their credit history affects their ability to obtain loans, most recently for a financing plan for a new furnace. As a result, in October, the couple and their 3-year-old son were without heat for three weeks until they saved the $1,900 to buy a furnace, the told ABCNews.com.
"KlearGear's unscrupulous conduct has affected every aspect of our lives, from major financial transactions like financing a new home purchase and a car purchase, to basic needs like heat in our home," John Palmer said in a statement. "For weeks, we bundled our son in blankets every night just to keep him warm in his own bedroom. We are fighting not only to clear my credit record and obtain compensation for our ordeal but also to make sure that no one else has to go through what we did."
Besides the debt to KlearGear.com, Palmer said she and her husband have maintained a good credit history.
After the Palmers took their story to a local television station, the nonprofit advocacy group Public Citizen volunteered to represent the couple, sending a letter last month to KlearGear.com, threatening to file a lawsuit against the e-commerce site unless it fixed the situation with a deadline of Dec. 16.
In the letter by Scott Michelman, staff attorney with Public Citizen who is representing the Palmers, the Palmers demanded that KlearGear.com inform the three major credit reporting agencies that their debt was in error, to compensate the Palmers $75,000 and not to include its "non-disparagement clause" going forward.
Michelman also said that the “non-disparagement" clause was not even on the website when John Palmer placed his order in 2008.
Information obtained from  SUSANNA KIM | Good Morning America 

November 21, 2013

“Cash America” Lending to People in Need and More, Stealing too!

Cash America International, a major owner of U.S. pawn shops and payday loan shops, has agreed pay $19 million in consumer refunds and fines for robo-signing documents used in debt collection, issuing improperly high loans to military members and destroying records sought by a federal regulator.
The Consumer Financial Protection Bureau imposed the penalties Wednesday under a consent order with the Fort Worth-based company. The penalties marked the agency's first enforcement action against a payday lender, one of the industries the regulator has examined since its 2010 creation under the Dodd-Frank financial reform act.
"If the bureau had not gone on site at Cash America, these problems might never have been uncovered," said CFPB Director Richard Cordray, who said the case highlighted the watchdog agency's mandate to oversee non-bank firms that affect millions of Americans "and make sure they're following the law."
Cash America CEO Daniel Feehan said the firm cooperated with examiners. "Now that we have completed the initial CFPB review process and entered into this settlement, we will continue to focus on serving our customers while working to develop additional compliance programs," he said.
According to the consent order, workers in Cash America's Ohio-based collections department improperly stamped their manager's signature on loan collection affidavits for nearly five years "without the manager's prior review of the affidavits or supporting documentation." An unidentified in-house collection attorney also directed workers to stamp the lawyer's name on Ohio court pleadings that had not been reviewed, the order said.
More than 14,000 Ohio consumers targeted in debt-collection lawsuits from 2008 to Jan. 2013 were affected, said Cordray. Cash America has already started repaying $6 million to the consumers, and will pay an additional $8 million in refunds, he said. The company also worked with the consumer watchdog to cancel improper Ohio debt-collection judgments.
Separately, investigators found that Cash America's online payday loan subsidiary in Chicago for nearly a year gave active-duty service members loans above the 36% annual interest rate maximum allowed by the Military Lending Act. More than 300 military members or their dependents received the loans.
Cash America has refunded $33,550 in loans and related fees to those customers, according to the order.
When notified in July 2012 that the regulator planned to examine its records, Cash America failed to preserve recorded phone calls and halt shredding of documents requested for the review. According to the order, company managers also told call-center workers "to de-emphasize the marketing and sales aspect" of their duties. They also instructed some to avoid using the word "sales" during interviews with examiners, and removed sales-focused material from office walls and cubicles.
The company has agreed to pay a $5 million fine for failing to preserve the requested records. During a conference call with reporters Wednesday, Steve Antonakes, the consumer watchdog's deputy director, said it was unclear whether the record destruction was part of a deliberate effort to impede the exam.
The consent order also requires Cash America to strengthen its legal compliance procedures.

Kevin McCoy, USA TODAY

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