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Controversial Drug CEO Was Accused of Serious 'Harassment'

The drug company boss under fire for raising the price of a drug 5,500 percent overnight was accused of harassing an ex-employee and his family.
Image: Martin Shkreli
Martin Shkreli, sits behind a chess board in New York, U.S., on Aug. 10, 2011Bloomberg via Getty Images File

The pharmaceutical company boss under fire from Hillary Clinton and many others for jacking up the price of the drug Daraprim 5,500 percent overnight allegedly engaged previously in a bizarre campaign of "harassment" of a former employee and his immediate family, according to court documents.

Drug boss Martin Shkreli, 32, also allegedly gained access to social media accounts belonging to that ex-employee, and contacted him and his relatives directly, including his teenage son and wife, as he accused the worker of defrauding Shkreli's then-pharma company, Retrophin.

"Your husband had stolen $1.6 million from me and I will get it back. I will go to any length necessary to get it back," Shkreli allegedly wrote the wife of former Retrophin employee Timothy Pierotti in a January 2013 letter, according to court documents.

MSMB Capital Management CIO Martin Shkreli
Martin Shkreli, then chief investment officer of MSMB Capital Management, sits for a photograph in his office in New York City on Aug. 10, 2011.Paul Taggart / Bloomberg via Getty Images file

"Your pathetic excuse of a husband needs to get a real job that does not depend on fraud to succeed. ... I hope to see you and your four children homeless and will do whatever I can to assure this," Shkreli allegedly wrote.

Read the affidavit claiming harassment by Martin Shkreli and see the related documents here.

Police in New Jersey were contacted about the alleged harassment as it escalated around Christmas, Retrophin settled a lawsuit against the ex-worker out of court, confidentially, in early 2014, after the employee's lawyer asked a New York judge to order Shkreli's computers to be analyzed on the heels of the allegations.

Retrophin's board later move to replace Shkreli as CEO, and he resigned his positions. Retrophin is now suing him for $65 million in a case where he is accused of acting against the interests of the company.

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Shkreli, through a spokesman, declined to comment for this story. Pierotti's lawyer declined to comment, citing a confidentiality agreement.

A Retrophin spokesman, when asked for comment, said, "Retrophin's claims regarding Mr. Shkreli are detailed in the company's lawsuit against him. The company's leadership is focused on running and growing the business and will make its arguments on this matter in court or in arbitration, as appropriate. The Pierotti litigation was brought and settled under Mr. Shkreli's tenure, and we have no further comment on the matter."

Shkreli made headlines this week when it was revealed that his current company, Turing Pharmaceuticals, hiked the price of Daraprim from $13.50 to $750 per pill after buying the drug, which is used to treat a parasitic infection, in August.

The move, which Shkreli has defended as necessary for Turing to be profitable and to fund research for a replacement drug, drew widespread criticism, with Clinton calling the move "outrageous." Clinton's comment, and her vow to introduce a plan to control drug prices overall, sent biotech stocks plummeting Monday.

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Shkreli, a former hedge fund manager, had been fired from Retrophin, which he founded, last year. In August, the company sued him in Manhattan federal court, for "repeatedly breaching his duty of loyalty to Retrophin," by allegedly using his control of Retrophin to "enrich himself and to pay off claims of (his prior hedge fund's) investors (who he had defrauded)," Retrophin claimed in its suit.

"Shkreli was the paradigm faithless servant," Retrophin charged in its suit, which is seeking $65 million in damages from its founder.

Shkreli has denied Retrophin's claims, and has asked that the dispute be settled in arbitration. He told the New York Times that Retrophin owes him at least $25 million in severance, and that "they are sort of concocting this wild and crazy and unlikely story to swindle me out of the money."

But before that suit, Retrophin, with Shkreli at the helm in 2013, sued Pierotti in New York state court seeking the recovery of 350,000 shares of Retrophin stock "that was taken by the defendant," the company said in court papers.

Retrophin claimed it had facilitated a purchase of its stock at a deep discount by Pierotti with promise by him that he work for the company to develop revenue-generating acquisitions. Retrophin accused Pierotti of abruptly reneging on that promise, and then "absconding with the stock," which then was worth at least $3 million, or 7,000 times the $400 that he paid for the shares.

Pierotti's lawyers moved to dismiss the claims on a number of grounds, but the case was continuing through 2013.

According to court documents filed by Pierotti and his lawyer, Shkreli's harassment of the former Retrophin employee escalated in late 2013.

"I submit this affidavit to provide first-hand evidence of the repetitive harassment that Shkreli has inflicted on not only me, but on my wife, teenage children, elderly father, as well as other family members," Pierotti wrote in a Manhattan Supreme Court affidavit. "Shkreli has harassed me and my family for nearly a year, and his harassment intensified on and around this past Christmas."

"Indeed, Shkreli sent multiple unwelcome texts and social media messages to my family and me on Christmas Day."

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Pierotti said that Shkreli sent Facebook friend requests to his father and brother in March 2013.

On the same day, Pierotti wrote, Shkreli allegedly sent Pierotti's wife a Facebook message saying, "Hi Kristen, I hope you're well. Today we are filing a summons demanding $3 million in damages and penalties from you and your family, specifically your husband. ... I'm going to be sending copies of the summons with notice to everyone you and your husband know."

Shkreli also allegedly sent Pierotti's wife an October 2013 message on Facebook, saying, "How do you sleep at night? Your husband stole millions from me," according to the affidavit.

Around Dec. 20, 2013, Pierotti said in an affidavit, Shkreli sent a Facebook friend request to Pierotti's 16-year-old son, and then later sent a message saying, "hey, I'm a friend of your father."

"When my son asked why Shkreli sent him a Facebook friend request, Shkreli responded, 'because I want you to know about your dad ... he betrayed me. he stole $3 million from me,' " Pierotti wrote in his affidavit.

Shkreli, on or around Christmas Day that same year, "also sent a Facebook friend request to my 14-year-old son, who never responded," Pierrotti wrote.

Then, on Christmas Day, "Shkreli sent me a message via LinkedIn, stating simply, 'Scumbag. - Martin Shkreli,' " Pierotti wrote.

Pierotti also said in his affidavit that in the next several days, he became aware of the fact that a copy of Retrophin's lawsuit against him had been posted, by someone else, on his own Facebook page, and that his Facebook password had been changed, without his knowledge.

He soon afterward discovered that the passwords to his AOL email account, as well as his LinkedIn and Gmail accounts, had also been changed.

And on Dec. 26, 2013, Shkreli allegedly sent Pierotti's wife a text message that read, "Hey sweetheart," according to documents attached to Pierotti's affidavit.

Pierotti then complained to police in Summit, New Jersey, where he lived, according to the affidavit.

A police report attached to his affidavit said that an officer from the Summit Police was told by Pierotti about the contacts by Shkreli and the fact that Pierotti suspected Shkreli of hacking his social media accounts.

When the cop called Shkreli on his cell phone, "Mr. Shkreli initially denied even knowing Mr. Pierotti." the report said.

Then, when the officer told Shkreli she was aware of the Facebook friend requests, Shkreli told the cop he hadn't talked to Pierotti in more than a year "so how could he be harassing him," the report said.

The officer, Kathleen Maggiulli, wrote, "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 as he has been verbally advised by myself this behavior needs to stop."

"Mr. Shkreli then hung up the phone on myself," Maggiulli wrote.

In a Jan. 6, 2014, letter to the law clerk for the judge handling Retrophin's lawsuit against Pierotti, the lawyer for Pierotti outlined the alleged harassment by Shkreli, calling it "serious misconduct" and a "concerted cyber attack on Mr. Pierotti's and his family's email."

The lawyer, Jeff Kern, wrote that this created "a sense of imminent harm to the well-being of Mr. Pierotti and his family," and raised concerns that Shkreli had, by "breaching Mr. Pierotti's email accounts," gave him access to "privileged emails between Mr. Pierotti and his counsel."

"At this very moment, Mr. Shkreli continues to have unfettered access to Mr. Pierotti's personal accounts," Kern wrote.

Kern requested that Shkreli's computers be examined for evidence of the alleged hacking and harassment.

Court documents indicate that within months of Kern pushing for this inspection of Shkreli's hardware, Retrophin and Pierotti agreed to drop the court case.

Kern declined to comment to CNBC on Monday, saying the case was resolved out of court, and "there's a confidentiality order."