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BigLaw Partner Who Aided Shkreli Arrested for Fraud

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By Jonathan R. Tung, Esq. on December 18, 2015 10:57 AM

Martin Shkreli's recent arrest happened to nab at least one other body its wake, Kaye Scholer partner Evan Greebel. According to allegations contained in the formal indictment against both men, Greebel was instrumental in helping Shkreli carry out at least one major fraudulent transfer, including funneling stock out of his dubious biotech company Retrophin to clear off a number of unrelated debts.

The Financial Times was perhaps more accurate that it knew when it recognized Greebel as a "U.S. Innovative Lawyer."

Sticker Shock: $13.50 to $750?

Things were already going well for Martin Shkreli. He was making a nice living as a investment professional and lobbyist. He picked up heat against himself when he used his influence as a lobbyist to gain earn massive profits by persuading the FDA not to approve certain drugs, and then shorting those companies who made those drugs.

Then things started getting a little nutty. He started the company Retrophin which essentially gathered together a number of neglected drugs and sought to profit from some dubious pricing schemes. For example, he drew considerable wrath after jacking the price of anti-parasite drug Daraprim from $13.50 per pill to $750 .

Wire Fraud Charges

Greebel was charged with a single count of wire fraud. If the charge ends up sticking, Greebel could end up in prison for up to 20-years. Of course, he pleaded not guilty to that charge ... both men did.

Prosecutors laid out a detailed timeline that painted Greebel as Shkreli's go-to outside counsel to counsel Retrophin. The two first met in 2011 after an introduction between another third-party lawyer. Once a relationship had been firmly established, prosecutors say that Greebel encouraged Shkreli to disguise payments back to his creditors as consulting fees. But behind the curtain, Shkreli was actually transferring stock from Retrophin to repay investors whom had invested in him even before the company was founded.

Fraud + Email = Foolish

For a lawyer who seemed quite aware that he was up to no good, Greebel made a fatal error. Prosecutors described a 2013 email exchange between the two men in which Greebel explained to the befuddled Shkreli that fraudulently disguising something as a consulting fee instead of a settlement of debts would be more likely to dodge disclosure and scrutiny.

Differences of Opinion

However, there are those who would disagree that such advice amounts to fraud. "If a lawyer gives advice that he believes to be correct but is later proven wrong, that might qualify as malpractice, but that's not fraud," says Stephen Gillers, a professional ethics professor and NYU. But even he agreed that a lawyer helping a client to commit a crime "crosses the line."

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