(Reuters) - Martin Shkreli was ousted as chief executive of drug company Retrophin Inc (RTRX.O) 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 federal court in Brooklyn 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. “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, because “he didn’t really have the experience or the leadership to run a complex, multi-product business.”
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. 29, 2014, though they asked him to stay on as a board member and senior adviser, Richardson said.
Richardson said Shkreli refused and boasted that he would found another company that would be worth a billion dollars before Retrophin was.
Shkreli did indeed go on to start another company, Turing Pharmaceuticals, which made headlines by acquiring a lifesaving 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, often through sham settlement agreements.
Richardson testified that the board was never given those agreements to approve and review.
Under cross-examination by Marc Agnifilo, one of Shkreli’s lawyers, Richardson conceded that he did know about the settlements by late 2013, and that they were eventually disclosed publicly.
He also acknowledged that the board did not cite the settlements as a reason for removing Shkreli as CEO.
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.
Reporting by Brendan Pierson in New York; Editing by Jonathan Oatis