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SECURITIES & BUSINESS LAW SEMINAR

Fe brua ry 7 , 2 0 1 8

P r e s e n t e d B y

Ma r ia E . Windha m, Sha re holde r S e c u r i t i e s L i t i g a t i o n & R e c e i v e r s h i p

Case Study: The Conviction of

Shkreli Attorney Evan Greebel

The picture can't be displayed.

Image Source: baylorlariat.com

“Former BigLaw Partner Faces Up To 20 Years In Prison For

Fraudulent Scheme”

Above the Law 12/28/17

Evan Greebel

Image: John Taggart | Bloomberg | Getty Images

“How Did I Get Here”

Talking Heads

(1981)

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Evan Greebel

J.D., Georgetown UniversityB.A., Univ. of Michigan

Partner “focusing on mergers and acquisitions, corporate finance, and securities law

“[F]requently interviewed by national and international media outlets on bitcoin and virtual currency related matters.”

Partner, Kaye Scholer

Formerly Partner, Katten Muchin, Rosman, LLP

Evan Greebel

Image from DailyMail.com

Image from DailyMail.com

Martin Skhreli

Cash

Rules

Everything

Around

Me

Wu-Tang Clan

(1993)

Image: Nigel Parry for Vanity Fair

“Wall Street’s most visible villain” – Vanity Fair (2015)

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Martin Shkreli

� Ostentatious Wealth & Greed � “I am a modern day Robber Barron” – Martin Shkreli

� Unhinged Attention-Seeking� Banned from Twitter

� Release revoked for placing bounty on Clinton’s hair

Image Source: onthemarcmedia.com

Criminal Charges

� Conspiracy to Commit Wire Fraud� Conspired with Shkreli, then CEO of Retrophin, to pay off investors of

Shkreli’s failed hedge fund MSMB with $11M of Retrophin’s assets.

� Conspiracy to Commit Securities Fraud � Conspired with Shkreli to manipulate Retrophin share price – Shkreli

secretly controlled huge portion of Retrophin stock through associates

Image: Andrew Burton/Getty ImagesImage: Andrew Burton/Getty Images

“Every transaction I’ve ever made at Retrophin was done with

outside counsel’s blessing.” - Martin Shkreli

Image Source: onthemarcmedia.com

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Shkreli’s Hedge Funds

� Shkreli Opens Hedge Funds

� MSMB Capital

� Funds short biotech stocks

� Take huge losses

� Shkreli falsifies statements

� MSMB Wealth

� Shorts biotech stocks

� Take Huge Losses

� Misrepresent Losses to Investors

Retrophin Pharmaceuticals

Image: investors.com

• Shkreli founds his first startup biotech drug company in 2011

• Plan: • (1) Buy needed drugs &

raise prices • (2) Develop drugs for rare

diseases• Goes public through reverse

merger• Controls Retrophin stock to

affect market price• Pays off in a big way

Evan Greebel

� Represented Retrophin from 2011 Inception to 2014

� Becomes corporate Secretary of Retrophin

� Near-daily commun with Shkreli

� Retrophin propels Greebel’s Career

� 10 M in legal fees paid to Katten Muchin

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Ouster from Retrophin

� Shkreli ousted September 2014

� Greebel represents Shkreli in ouster

� Greebel ousted October 2014

� Shkreli & Greebel are hit by lawsuits re Retrophin

� Shkreli immediately creates Turing� Turing purchases Daraprim

Image: MSMBC/screen grabImage: CNBC.com

Transfer to MSMB Fund Investors

Chart provided by the Department of Justice illustrating Shkreli's alleged scheme.

Control of Stock by Shkreli

� Attempt to control price and trading volume of Retrophin stock

� Use of associates (employees loyal to Shkreli) to make moves on stock

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Secret Control of Stock In furtherance of the conspiracy and to effect its objects, within the Eastern District of New York and elsewhere, the defendant EVAN GREEBEL, together with others, committed and caused to be committed, among others, the following overt acts:

� a. On or about December 12, 2012, Evan Greebel sent an email to [Marek Biestek],

attaching six stock purchase agreements, and stated, in part, “attached are purchase agreements for the acquisition of the [unrestricted] stock.... Please ask each person to sign the last page and return it to me.”

� b. On or about December 13, 2012, Evan Greebel sent an email to [Marek Biestek] and another one of the seven employees and contractors who received unrestricted or free trading shares, and stated, in part, “Please send me an email confirming the following: I represent that I am not an officer, a director, or holder of 10% or more of the outstanding equity securities of Desert Gateway and do not, alone or together with any other person, exercise control over Desert Gateway.”

� c. On or about December 17, 2012, Martin Shkreli sent an email to all employees, copying six of

the seven employees and contractors who received unrestricted and free trading shares, and stated

that Retrophin now had four employees and that everyone else, including the employees and

contractors who received the unrestricted or free trading shares, were no longer employees or

consultants to Retrophin or MSMB even though they could continue using Retrophin's office space

as a courtesy. Martin Shkreli then forwarded this email to Evan Greebel.

Secret Control of Stock (Cont.)d. On or about December 20, 2012, Evan Greebel sent an email to Martin Shkreli, attaching a

Schedule 13D, and stated, “Attached is a draft of the 13D. We should discuss.”

e. On or about December 20, Martin Shkreli filed a Schedule 13D with the SEC that failed to

disclose his control over any of the unrestricted or free trading shares.

f. On or about January 2, 2013, Martin Shkreli sent an email to Evan Greebel requesting Evan

Greebel's thoughts on a draft email that Martin Shkreli wanted to send to one of the seven

employees and consultants who received unrestricted or free trading shares and who was selling his

RTRX stock. In the draft email, Martin Shkreli stated, in part, “I have decided to commence

litigation against you for failing to honor the agreement we made in our office on December 10th.

You agreed to work for MSMB … Instead you have failed to come to the office and will not even

return my telephone calls.” Less than thirty minutes later, Evan Greebel replied to Martin

Shkreli, and stated, “Very risky given what you[r] agreement was – could be opening a much bigger

can of worms.”

Secret Control of Stock (Cont.)d. On or about January 18, 2013, GREEBEL sent an email to Martin Shkreli, and stated, in part,

“I just need the [$100,000] and can be patient again; ive [sic] gotten you out of paying a lot of

people, I cant [sic] be left stuck at this point on this.” Later that day, GREEBEL sent another

email, and stated, in part, “[I've] repeadtedy [sic] done all you ask and very rarely chase you

for money.”

h. On or about February 19, 2013, Martin Shkreli filed an amended Schedule 13D with the SEC that

failed to disclose his control over any of the unrestricted or free trading shares.

i. On or about March 8, 2013, Evan Greebel sent an email to Martin Shkreli, and stated,

“[Michael Fearnow] and the ‘purchasers' are signing an amendment to their purchase agreement and in the amendment the ‘purchaser’ is directing [Michael Fearnow] to have the stock delivered to the designated people.”

j. On or about April 10, 2013, Evan Greebel sent an email to [Michael Fearnow] and Martin Shkreli,

and stated, in part, “The 50k [unrestricted or free trading] shares that were owed to [Marek

Biestek] should be broken down as follows ....”

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Secret Control of Stock (Cont.)k. On or about May 9, 2013, in response to an email from Evan Greebel requesting the source of

unrestricted or free trading shares to settle a dispute with a defrauded MSMB Healthcare investor,

Martin Shkreli stated, “Take from anyone – I don't care – do the math?”

l. On or about January 15, 2014, GREEBEL sent an email to Martin Shkreli concerning a request by

Investor 1 for, inter alia, 100,000 unrestricted or free trading shares and stated, in part, “As

you may recall, we discussed that [Marek Biestek] could transfer 100k shares of stock to [Darren

Blanton] and we could have the board approve a 100k grant of new RTRX stock to [Marek Biestek].” In response, Martin Shkreli stated, in part, “Smarter thing to do is to give him 200K restricted stock and have him swap any and all he wants for free trading from our employees.”

Martin Skhreli Trial

• Convicted of 3 of 8 charges in August 2017

• Lying to hedge fund investors

• Scheme to secretly control shares of Retrophin.

• BUT, AQUITTED of stealing from Retrophin

The Trial of Evan Greebel

� 10 Weeks Long

� Judge Matsumoto E.D.N.Y. (Brooklyn)

� Prosecution’s motion to exclude evidence of Shkreli’sAquittal is granted

� Parties tweak their cases

� Jury deliberation ends Dec. 27, 2017

Kevin C. Downs for New York Daily News.

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Argument & Evidence

Prosecution -� Greebel pleased Shkreli to make

millions of fees

� Greebel was making $900,000/yr at his law firm by April 2014 up from 335,000 in 2013

� Greebel deferred to a berrating Shkreli

� Greebel drafted sham agreements to pay Retrophin assets to Shkreli hedge fund investors

� Greebel advised Shkreli regarding employment when Retrophin board ousted him in 2014 – (Steve Aselage Testimony)

Defense –� Different as two people can be.

Greebel lived a “quiet life”

� Deceived by Shkreli the con man.

� Shkreli fed Greebel some facts and concealed others from him. Such as hedge fund losses and investigation by regulators.

� Greebel had a promising practice –early virtual currency practice, that he would not sacrifice for one client

� Greebel would not have thrown everything away for Shkreli, “a guy he just met.”

� Greebel did not testify.

Greebel’s Conviction

� Conviction on both charges � (1) conspiracy to commit wire fraud (stealing from Retrophin)

� (2) conspiracy to commit securities fraud (stock manipulation)

� Reactions:

� We are shocked by the verdict. ” – Reed Brodsky, Greebel Attorney (report by NY Times)

� Lawyers will be held accountable when they “use their legal expertise to facilitate the commission of crime.” - Bridget Rohde, U.S. Attorney (report by NY Times)

Greebel’s Conviction

COUNT ONE: Conspiracy to Commit Wire Fraud

In or about and between February 2011 and September 2014, both dates being approximate and inclusive, within the Eastern District of New York and elsewhere, the defendant EVAN GREEBEL, together with others, did knowingly and intentionally conspire to devise a scheme and artifice to defraud Retrophin, and to obtain money and property from Retrophin by means of materially false and fraudulent pretenses, representations and promises, and for the purpose of executing such scheme and artifice, to transmit and cause to be transmitted by means of wire communication in interstate and foreign commerce writings, signs, signals, pictures and sounds, contrary to Title 18, United States Code, Section 1343.

Jury Instruction on elements of Conspiracy:

� First, that Mr. Greebel and at least one other person entered into an agreement to commit wire fraud, a crime I will define for you; and

� Second, that Mr. Greebel knowingly and intentionally became a member of the conspiracy.

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Greebel’s ConvictionCOUNT TWO: Conspiracy to Commit Securities Fraud

In or about and between November 2012 and September 2014, both dates being approximate and inclusive, within the Eastern District of New York and elsewhere, the defendant EVAN GREEBEL, together with others, did knowingly and willfully conspire to use and employ manipulative and deceptive devices and contrivances, contrary to Rule 10b-5 of the Rules and Regulations of the United States Securities and Exchange Commission, Title 17, Code of Federal Regulations, Section 240.10b-5, by: (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material fact and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which would and did operate as a fraud and deceit upon investors and potential investors in Retrophin, in connection with the purchase and sale of securities of Retrophin, directly and indirectly, by use of means and instrumentalities of interstate commerce

and the mails, contrary to Title 15, United States Code, Sections 78j(b) and 78ff.

Jury Instruction on Overt Acts:

Two additional elements for this Count. :

� Third, that one of the members of the conspiracy committed at least one of the overt acts charged in the Superseding Indictment.

� And Fourth, the government must prove beyond a reasonable doubt that at least one overt act was in furtherance of some object or purpose of the conspiracy as charged in the Superseding Indictment.

Where Did Greebel Go Wrong?

Post-Mortem

Who Speaks for the Client?

Post-Mortem

“Greebel’s conviction shows the dangers of an attorney misunderstanding who it is they actually represent. ‘That can often happen when you have a particularly powerful or overbearing individual as your client contact.’” Assistant Professor of Business Law and Ethics at Indiana University’s Kelley School of Business (as quoted by Law360 on Jan. 2, 2018)).

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Duty to Know Client’s Transactions?

“Government investigators believe that outside counsel should understand historical reasons for the transaction, act as a facilitator and investigator, and probe alternate sources for information that may render the transaction improper.” (Blanche T. & K DeYoung, Traversing the Minefields: Outside Counsel May Face Criminal Liability in Complex Business Cases, The New York Law Journal(Jan. 26, 2018)).

Post-Mortem

Is Greebel Unlucky Target Of Increased Scrutiny?

“Are we treating lawyers differently from other gatekeepers such as accountants? I think we should carefully review the role lawyers play in our markets, with a view towards how they can better help deter misconduct and detect fraud.” – S.E.C. Commissioner Kara M. Stein (2014 comments cited by New York Times)

Post-Mortem

� “[A] harsh reminder to lawyers of the importance of knowing when to walk away from a dangerous client.” “You have to wake up every day and say to yourself, ‘I’m willing to be fired before I do something unethical.’” (Id.) -Patrick Cotter, Greensfelder Hemker & Gale PC (Law360 interview)

� “If you have any inkling that your client may be making misrepresentations to third parties or omitting material facts, that should sound an alarm and put you in a position of potentially having to remove yourself from the representation” Its “something that lawyers hate to do for obvious reasons, but the alternative is sometimes the situation - Robert A. Mintz, McCarter & English, LLP (Law360 interview).

� Avoid the Culture of Cognitive Dissonance- a lawyer’s natural inclination to alter one’s personal beliefs to alight with her arguments. Ask Hard questions of your clients. - Todd Blanche & Kyle De Young (Traversing the Minefields: Outside Counsel May Face Criminal Liability in Complex Business Cases, New York Law Journal (January 26, 2018)

� Seek the counsel of your partners. - Sarah M. Hall of Thompson Hine LLP (Law360 interview)

Post-Mortem – Walk Away from the Client

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Who Is Evan Greebel

� Greedy?

Cash

Rules

Everything

Around

Me

Wu-Tang Clan (1993)

Who Is Evan Greebel

� Or Hapless?

Discuss?

Contact Information:

Maria E. Windhammwindham@rqn.com(801) 323-3377

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REFERENCE LIST� Bishop, S. (2017, December 7). Ex-Katten Atty Was Corporate Ace At Firm, Jury Hears. Law360. Retrieved from

https://www.law360.com

� Bishop, S. (2017, December 11). Ex-Katten Atty’s Expert Defends No-Work Consulting Deals. Law360. Retrieved from https://www.law360.com

� Boyle, L. (2015, Dec. 22). Exclusive: ‘Pharma Bro’ Martin Shkreli’s Co-Accused Is Award-Winning Socialite Lawyer Who Once Advised the Winklevoss Twins and Lives In a $2 Million Home--But Could Lose It All If Found Guilty. Daily Mail.com. Retrieved from https://www.dailymail.com

� Business Wire (2012 , Dec. 18). Retrophin Completes Reverse Merger With Desert Gateway, Inc: Creates Publicly Traded Biotechnology Company. BusinessWire.com. Retrieved from https://www.burinesswire.com

� Byrne, D., Eno, D., Frantz, C., Harrison, J. & Weymouth, T. (1981). Once in a Lifetime. On Remain in Light [MP3}. Brian Eno. (1980, Aug.)

� Clifford, S. (2017, Aug. 1). Jury in Martin Shkreli Fraud Trial Has Questions for the Judge. New York Times. Retrieved from http://nytimes.com

� Digs, R. Hunter, J. Smith, C., & Woods, C. (1993) .C.R.E.A.M. (Radio edit). On Enter the Wu-Tang (36 Chambers) [MP#]. Firehouse Studio: RZA. (1993, July).

� Guardian Staff. (2016, Nov. 9). Martin Shkreli leaks Wu-Tang Clan Album in Celebration of Trump Victory. The Guardian. Retrieved from https://www.theguardian.com/us

� Henning, P.J. (2015, Dec. 21). In Shkreli Case, a Company Lawyer May Have Crossed the Line. New York Times. Retrieved from http://nytimes.com.

� Mclean, B. (2015, Dec. 18). Everything You Know

� Raymond, N. (2016, Feb. 3). Retrophin To Pay $3M in U.S. Lawsuit Over Shkreli’s Tenure. Reuters.com. Retrieved from https://reuters.com.

� Reuters (2017, Dec. 28). Martin Shkreli’s Ex-lawyer is Convicted of Fraud. New York Times. Retrieved from https://nytimes.com

� Rogers, C. & Pick, R. (2015, Dec. 17). Long before he started drawing public rage for his drug price hike. Vice.com Retrieved from https://motherboard.vice.com

� Securities & Exchange Commission v. Shkreli et al., No. 1:15-cr-000637-KAM-2 (E.D.N.Y (Brooklyn)) (Docket). Retrieved from Pacer.

� Stein, K.M. (2014, May 19) Speech: Keynote Address At Compliance Week 2014. Retrieved from https://www.sec.gov

� Strickler, A. (2017, December 20). Greebel ‘Greased Wheels’ For Shkreli, Feds Say At Closing. Law360. Retrieved from https://www.law360.com.