Securities Regulation Daily Investors to settle Retrophin suit; Founder Shkreli briefly appears on Capitol Hill
Thursday, February 4, 2016

Investors to settle Retrophin suit; Founder Shkreli briefly appears on Capitol Hill

By Mark S. Nelson, J.D.

Shareholders who alleged they were defrauded by Retrophin, Inc. asked a judge to preliminarily approve the settlement of their securities class action suit against the company and its top brass. The settlement comes as Retrophin founder and ex-CEO Martin Shkreli faces Congressional scrutiny over the pricing of drugs sold by another company at which he was once CEO, and law enforcement scrutiny in the form of civil and criminal securities fraud charges rooted in Shkreli’s hedge fund activities (In re Retrophin, Inc. Securities Litigation, February 2, 2016, Castel, P.).

Retrophin settlement. According to the amended complaint and the shareholder’s argument for approval of the settlement, Retrophin and its current and former officers and directors misled investors about undisclosed related-party transactions and violations of NASDAQ listing rules for stock grants to employees.

The proposed settlement would net shareholders $3 million. Court papers defined the settlement class as those investors who bought Retrophin’s securities between June 13, 2013 and September 30, 2014. The deal still must garner final court approval at a hearing set for June 2016.

Shkreli testimony. Shkreli gained notoriety when one of his companies dramatically raised the price of a critical infection-fighting drug. His testimony before the House Committee on Oversight and Government Reform was to focus on pricing practices in the pharmaceutical industry. But due to the SEC’s and the Department of Justice’s pending civil and criminal cases against him, Shkreli frequently invoked his Fifth Amendment rights.

Shkreli, the former CEO of Turing Pharmaceuticals LLC, briefly appeared before the House committee along with Turing’s current chief commercial officer and representatives of Valeant Pharmaceuticals International, Inc., the Pharmaceutical Care Management Association, and the U.S. Food and Drug Administration.

Shkreli declined to answer questions about the specter of a single, pregnant woman with AIDS in need of Turing’s drug and whether the thought he had done anything wrong regarding the pricing of that drug. Some members reminded him that not all questions justified his use of the Fifth Amendment, and one member suggested he could be held in contempt, but Chairman Jason Chaffetz (R-Utah) said that was not his intention. Ranking member Elijah Cummings (D-Md) implored Shkreli to ditch his “bad boy of pharma” reputation and advocate for lower drug prices.

Shkreli did answer “Yes” when asked by a member about the pronunciation of his last name. He also answered “Yes” when asked if he planned to invoke the Fifth Amendment to additional questions. Chairman Chaffetz later excused Shkreli from the hearing. On the advice of his lawyer, Shkreli never made an opening statement, nor did he submit any prepared remarks to the committee.

The case is No. 14-cv-08376.

Attorneys: Francis Paul McConville (Pomerantz LLP) for Grachya Kazanchyan. John Aubrey Wait (Fox Rothschild LLP) for Martin Shkreli.

Companies: Retrophin, Inc.; Turing Pharmaceuticals LLC

MainStory: TopStory DirectorsOfficers FraudManipulation NewYorkNews

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