Fraud in the News

‘Pharma Bro’ gets 7 years for fraud

Martin Shkreli, 34, a former pharmaceutical executive who became famous by inflating life-saving drug prices, has been sentenced to seven years in prison. His fraud convictions were related to his involvement with Retrophin, the pharmaceutical company he founded in 2011, and two hedge funds he ran. (See Martin Skrekli Sentenced to 7 Years in Prison for Fraud, by Stephanie Clifford, The New York Times, March 9.)

Known by the moniker, “Pharma Bro,” Shkreli is best known for raising the price of a drug, Daraprim, by 5,000 percent. He founded Retrophin in 2011 and prosecutors say he lied to his investors about how well their hedge funds were doing. According to the article, Shkreli’s scheme cost investors more than $10 million. But that’s nothing compared to his overall worth — $27.2 million. Shkreli also must forfeit $7.36 million. 

Is that beer fraudulent?

According to the March 8 article in The Economist, Nuclear physics and the fight against beer fraud, the beer you’re drinking might be mislabeled. Slovenian scientists are testing the quality of hops (a type of plant) used to make certain types of beer.

According to the article, brewers depend on particular breeds of plants purchased from specific regions because of the higher-quality hops. However, growers might doctor their crop with cheaper versions and sell these to the brewers. This can affect the beer’s taste and ultimately deceive consumers.

Scientists from the Institute of Hop Research and Brewing in Slovenia are using a method previously used to test other doctored crops, such as olive oil and honey. They’re testing the chemical makeup of the soil from which the hops plants are grown to find evidence of product tampering. Final results aren’t yet available.

Theranos CEO charged with ‘massive fraud’

According to a March 14 Forbes article, Elizabeth Holmes and Theranos Charged With ‘Massive Fraud’ By SEC, by Michela Tindera, it’s all smoke and mirrors for the Silicon Valley blood-testing device company.

According to the article, in 2014, Holmes, 34, once listed on the 2014 Forbes 400 list of America’s richest talent, falsely told investors her company, Theranos, was worth $100 million and would reach $1 billion by the following year. However, according to the SEC, the company only made $100,000 in revenue that year. Not only did Holmes exaggerate the company’s earnings, she also lied about the company’s endorsements to attract new investors. Promotional materials to prospective investors contained logos of companies not associated with Theranos and included a claim that the Department of Defense used its product.

Holmes has agreed to resolve the charges filed against her and Theranos, and will pay a fine of $500,000. She’s also prohibited from serving as an officer or director of a publicly traded company for 10 years.