Martin Shkreli was ousted as chief executive of drug company Retrophin (rtrx) after disobeying directions from the board of directors and lying about it, the board’s former chairman testified at Shkreli’s securities fraud trial on Wednesday.
The former chairman, Steven Richardson, told jurors in Brooklyn federal court that he met with Shkreli in September 2014 to tell him he was losing the board’s support.
Richardson said he had recently learned that Shkreli, himself a board member, had set up a system to pay Retrophin employees commissions to encourage them to trade stocks, against the board’s instructions. When Richardson asked Shkreli about that at the meeting, Shkreli denied it.
“I was stunned,” Richardson said. “As a board member – I’m chairman at the time – he’s lying to my face.”
Richardson said he and other board members had already discussed moving Shkreli to another role at the company, which Shkreli founded in 2011.
“He was excellent at the setup stages, but he didn’t really have the experience or the leadership to run a complex, multi-product business,” he said.
Richardson also said the board had concerns about Shkreli’s use of Twitter.
Shkreli’s fellow board members told him he was being removed as CEO on Sept. 14, 2014, though they asked him to stay on as a board member and senior advisor, Richardson said.
Richardson said Shkreli refused and boasted he would found another company that would be worth a billion dollars before Retrophin was. In the following days, he returned to the Retrophin office and went through computer servers and documents until the company took his access away, Richardson said.
Shkreli did indeed go on to start another company, Turing Pharmaceuticals, which made headlines by acquiring a life-saving anti-infection drug and jacking up its price by 5,000 percent in 2015.
While the move made Shkreli famous as the “pharma bro,” it has nothing to do with the charges against him.
Prosecutors, instead, claim that beginning in 2009, Shkreli hid losses from investors in two hedge funds he ran, MSMB Capital and MSMB Healthcare, and paid them back with money stolen from Retrophin.
Richardson testified he invested $400,000 in MSMB, later rolled over into Retrophin. Like other investors, he said he came out ahead, with his investment now worth about $1.9 million.