Sep 1 • 11M

Chapter 6, Part 7: Merry Christmas, I’m suing you

This is Chapter 6, Part 7 of SMIRK, a serialized memoir of my relationship with “Pharma Bro” Martin Shkreli.

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My experiences uncovering the story of, and falling in love with, Martin Shkreli.
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an illustration of a lump of coal as a Christmas gift.
An illustration of a lump of coal as a Christmas gift.

A startup can be as precious to its founders as a newborn child. Threaten that tiny, vulnerable company and you may very well see some teeth and claws come out, and the protective founder saying and doing things that are regrettable at best, and incriminating at worst.

Obviously, Martin Shkreli leaned toward the “incriminating” end of the spectrum.

The problems began around Christmas of 2012. He had just pulled off a near-miracle of taking a pharmaceutical startup, Retrophin, which had only a year earlier been barely more than an idea in his head, public through a reverse merger. But the business was still desperately short of cash, and Martin had urgent needs for whatever assets it could amass — including for building up the company’s research capacity and paying back burned investors in his hedge funds who were increasingly clamoring for redemptions.

And then a former hedge fund employee of Martin’s, Tim Pierotti, walked off with what turned out to be around $1.5 million worth of Retrophin stock, potentially pulling the rug out from all of the young founder’s intricate plans. To put it mildly, Martin went apesh*t.

To name just a handful of his disturbing behaviors: He angrily berated Pieroitti over the phone, hired a private investigator to snoop around him, bothered his teenage children on Facebook, sent a nasty letter to Pierotti’s wife threatening to make the family “homeless,” and hacked into Pierotti’s own social media accounts. And he had Retrophin sue Pierotti.

A screenshot of the complaint Martin Shkreli filed against Pierotti.
A screenshot of the complaint Martin Shkreli filed against Pierotti.

When the harassment escalated again the following year, again around Christmas, with Martin sending more unwelcome messages to Pierotti’s children and a text to his wife simply saying, “hey, sweetheart,” Pierotti called the police. Police then contacted Martin, and he sounded more or less like a juvenile delinquent, according to the report. 

“I advised Mr. Shkreli of the accusations being made and Mr. Shkreli advised me that he hasn’t talked to Mr. Pierotti in over a year so how could he be harassing him,” the officer wrote. “I suggested to Mr. Shkreli that he listen to what I was advising him of and not try to make denials based on word semantics….I told him that should any of the behaviors continue: contacting any of the family members via phone, text, email, or in person, contacting Mr. Pierotti’s employers, or accessing Mr. Pierotti’s email accounts, it would be considered harassment …Mr. Shkreli then hung up the phone on myself.”

The whole episode looked, even from a standpoint of being generous to Martin, completely deranged — especially his harassment of Pierotti’s family. Even a longtime friend of his, his former broker Roger* (not his real name), told me he was “troubled” by Martin’s rampage. He suspected Martin was not “properly medicated” when the incidents happened. “The wife and kids are off-limits,” Roger said. “That’s the human social skills that don’t come to him instinctively like they would to you and me.” 

I agreed with Roger, and in later conversations with Martin told him I thought the same: that he went completely over the line — actually maybe several lines — with the Pierottis. But as the norm with virtually every drama involving Martin, there was more complexity lurking below the surface. 

Tim Pierotti testified during Martin’s securities fraud trial in mid-July 2017. When he took the stand, his face appeared painfully tightened into an expression of contempt that he wore almost the entire time he spoke. For his part, Martin scowled when he looked in Pierotti’s direction. It was obvious there was no love, or even neutral feelings, between the two men.

Passing by the witness room earlier, when Pierotti was inside, I had seen him gesticulating and talking to himself. He did the same again in the courtroom whenever there was a sidebar and prosecutors took a break from asking him questions. From what I could tell, he was rehearsing. It seemed clear to me that Pierotti was eager to testify against Martin, and had probably been imagining doing so for quite some time.

Pierotti was a pleasant-enough looking man in his mid-40s whose features and mannerisms reminded me of my ex-husband. (Their feelings about Martin also appeared to be roughly the same.) He had worked in hedge funds and elsewhere in the financial industry for a number of years before ending up with Martin, including at Galleon Group, a multi-billion-dollar hedge fund that was at the center of a massive insider trading probe. (Pierotti cooperated with the government in the investigation and received a non-prosecution agreement.)

In the Brooklyn federal courtroom in 2017, he told his story: A mutual acquaintance introduced Pierotti to Martin, who was looking for a portfolio manager, in the late summer of 2011. Pierotti met with Martin in the MSMB fund’s walk-in closet-sized office space near Grand Central Station, and Martin apparently told him he was managing “about $80 million or $100 million.” In fact, Martin’s entire operation managed just several million dollars…and it was struggling. 

About a week later, they met again with some of Martin’s associates at an Italian restaurant on Manhattan’s Upper East Side. Martin was “enthusiastic” about hiring Pierotti and expressed hopes that the fund could attract more investment based on Pierotti’s experience. “He even said, ‘I knew you were from Galleon and I thought we could raise money off of that, but now that I see your performance, you know, I’m sure that we can raise money,’” Pierotti testified in 2017.

Martin’s fund, MSMB, hired Pierotti at a starting yearly salary of $120,000, with a signing bonus of $30,000. Pierotti was given a fund of about $4.5 million to manage (which unbeknownst to him, was probably most of MSMB’s assets). It lacked the “critical mass” needed to grow, Pierotti testified. “No investor wants to come in and be right away the largest investor.” 

Odd things started to happen….

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