Touring CEO Martin Shkreli courted attention and now he has it

A hooded Martin Shkreli is driven away after being arrested for securities fraud. Picture: Craig Ruttle

YOU might think being anointed “America’s most hated man” might be cause to step back from the spotlight and avoid any further controversy, but not Martin Shkreli.

When news spread that the 32-year-old pharmaceuticals CEO had been caught hiking up the cost of a lifesaving HIV drug by an inexplicable 5000 per cent back in September, Shkreli didn’t panic. Instead, he went on the offensive, taunting his critics, putting in smug TV appearances, live-streaming his work day and even buying a $US2 million, one-of-a-kind rap album.

Worse still, as the mayhem swirled and the headlines got progressively worse, he appeared to enjoy it.

But Shkreli’s familiar grin was nowhere to be seen this morning, as he was marched across a New York footpath and into a waiting police car, handcuffed and hooded and accused of a “securities fraud trifecta of lies, deceit and greed”.

Martin Shkreli being taken into custody outside his Manhattan apartment. Picture: Craig Ruttle/APSource:AP

It now appears the Turing Pharaceuticals CEO may be paying the price for all that attention.

Shkreli denies allegations he cheated investors out of $US11 million and used assets from a biotechnology firm he started in 2011 to pay debts from unrelated business dealings. He was freed on a $US5 million bond overnight, pocket change, you might think, for a man who says he made $100 million in a single stockmarket trade and as recently as this month was boasting about his wealth in a magazine interview.

But Shkreli says his story is more complicated than a lust for cash. He says he’s actually trying to help people — patients and investors.

“Our first and primary stakeholder is patients,” he told NBC News in the wake of the Daraprim drug hike scandal, insisting the higher price would be used to fund medical research into other medicines.

“There’s no doubt about that. I can see how it looks greedy, but I think there’s a lot of altruistic properties to it.”

Others say that’s rubbish, arguing Shkreli made a mistake in buying the Daraprim patent and has simply tried to recover his costs by squeezing patients through higher prices. A month after the Daraprim scandal broke, he agreed to lower the drug’s cost, then backflipped with a crafty move that would simply pass the cost on to hospitals and health insurers.

“Martin is the smartest guy in the room at all times,” an unnamed former associate from Shkreli’s days on Wall Street told The New York Times two weeks before his arrest.

“The guy’s intellect is unparalleled.”

The son of European immigrants, Shkreli was born and raised in Brooklyn. He was a gifted student who skipped ahead of his peers but never liked the “conformity...or expectations” of school.

He graduated with a business degree from Baruch College in New York in 2004 and within two years was the head of his own hedge fund, Elea Capital Management, aged in his 20s.

His position afforded him power but collapsed within a year under the weight of a multi-million lawsuit.

“I learned a lot about using leverage, the perils of leverage,” Shkreli told the newspaper of a $2.6 million gamble-gone-bad. “Back then, this was almost 10 years ago, I was rushing to succeed. I made a monster bet that the market would crash, and I was wrong.”

He soon bounced back, however, with MSMB Capital Management, his second hedge fund, before he began his first foray into pharmaceuticals.

In 2011, Shkreli acquired pharmaceutical company Retrophin along with the rights to sell Thiola, a drug used by 20,000 patients in the US to treat rare and incurable kidney diseases, including a chronic lifelong illness called cystinuria, developed in childhood.

Martin Shkreli is in a bit of trouble. Picture: Craig Ruttle/APSource:AP

He quickly bumped the price from $2 to $42. That was the beginning of a trend that soon turned the public against him. He was labelled “morally bankrupt” when, four years later, he raised the price of Daraprim from $US13.50 per tablet to $US750 per tablet.

“How does it feel knowing the entire world thinks you’re an a***hole?” one Reddit user asked him after Shkreli agreed to take part in an Ask Me Anything Q&A. Shkreli, against popular wisdom, is known to give as good as he gets.

“Haters, please tell me about the latest in apicomplexa genetic drift,” Shkreli taunted critics on Twitter. “You are all Protozoa experts equipped to judge and advise me, right?”

So is Shkreli just in over his head? Prosecutors allege over a five-year period he “perpetrated a series of frauds on investors in his hedge funds in order to cover up his poor trading decisions”, according to Andrew Ceresney, director of the Securities and Exchange Commission’s enforcement division.

Some who know him say he is driven by the desire to prove just the opposite — that he’s made it, that he’s capable.

“He’s driven by ambition,” a former investor, who spoke on the condition of anonymity, told the New York Times. “The affirmation is as important to him as the financial success.”

On social media, users aren’t singing his praises as he might’ve hoped, though. Instead, he’s becoming the subject of memes.

His palms are sweaty, knees weak, arms are heavy There's vomit on his sweater already, martin shkreli pic.twitter.com/10JfxNxngo

— Caro (@socarolinesays) December 17, 2015

Martin Shkreli Fan Fiction, Part Two: The Shkrelshank Redemption https://t.co/wxDqI9OHBZ pic.twitter.com/vhvpXddGqt

— Noisey (@NoiseyMusic) December 17, 2015

But at least he’s made a name for himself. He’s become a talking point not only in social circles but also in the US presidential campaign, where politicians are now debating how to best control the cost of prescription drugs.

On December 9, Shkreli tweeted: “I hate being in the news. Any way to turn it off?”

“Stop being douchey,” one user responded.

“Stop being an amoral, money-grubber. Just a thought,” wrote another.

And another: “Maybe don’t be a disgusting garbage human”. Ouch.

Let it go? Not Shkreli.

“You would have to stop being an anonymous cretin,” he fired back, adding “F*** boy”.

It’s not typical behaviour from a CEO. But Shkreli is clearly not your typical CEO.

Martin Shkreli doing Martin Shkreli. Twitter.Source:Supplied

Credit cards go back to the future as loyalty programs push out rewards by decades

London’s calling ... But will it still be on your bucket list in 2062? Picture: Britain Visit Source: Supplied

REWARDS card users could be on a road to nowhere, according to the latest analysis of credit card loyalty programs by comparison website mozo.com.au.

In a dramatic illustration of rewards cards’ limited mileage, it would take Hilton HHonors Macquarie Platinum Card customers a whopping 47 years to earn enough points for a return flight from Sydney to London.

This is based on an average yearly spend of $18,000 to reach the $853,333 required to unlock the reward.

It gives new meaning to the bucket list overseas trip, with plenty of consumers likely to count themselves lucky to be alive in 2062.

Customers would be better off sticking closer to home and opting for a trip to Melbourne, which could be earned in just under three years with a required $53,333 spend. We hope that’s not for an economy seat.

The average Heritage Bank Classic Card customer would take three-and-a-half years to earn a $100 gift card, with the required spend set at $64,000 and points accrued at the measly rate of 0.001 per dollar.

It’s not just hotel loyalty programs and building societies that offer limited rewards. Expect to rack up a $40,000 grocery bill on your Coles No Annual Fee MasterCard before getting your hands on a $100 cash reward — a two-year slog for the average shopper.

Consumer group Choice has seized on the data to savage credit card companies, with campaigns manager Erin Turner telling news.com.au: “It’s a perfect illustration of why reward programs aren't worth it. Credit card companies are trying to bamboozle people.

“Unless you’re spending big and paying off the card every month, there is no benefit. You’ve got to take into account what you may be paying in interest.”

She said rewards cards often attracted a higher rate of interest on purchases and had higher annual fees than ordinary credit cards.

“We don’t recommend using credit cards at all. There are much better methods of payment out there, like personal loans for big purchases or home loan redraw facilities.”

And the best option, she said, was to save up for that coveted holiday.

“You can get a return flight to Melbourne for a couple of hundred dollars; you don’t need to spend $50,000.”

Mozo director Kirsty Lamont said that loyalty card programs varied greatly, and there were still

“some great value cards out there which do reward you for your normal spending behaviour”.

“The vast difference in rewards value is reason to shop around,” Ms Lamont said, encouraging consumers to compare online.

COUNTING THE COST

* The average annual fee on a rewards credit card is $165, versus an average $115 for non-reward cards.

* The average interest rate for purchases on a rewards credit card is 19.73 per cent, against an average 17.61 per cent on a non-reward card.

* The average value customers get back from a rewards credit card is just $88 per year.

* Cash back rewards offer the lowest value, while flights from Sydney to Melbourne are the best value rewards.

* Mozo recommends choosing a card aligned to an airline points scheme to get the best bang for your buck.

* If you have companion cards, use the one that returns the most points — but watch out for surcharges.

* Check the value of the points earned, as these can vary greatly between providers.

Life insurance policies are important

Dollar value ... How much is your family’s life worth? Source: Supplied

HOW much is your life worth in dollar terms?

It’s a tricky question that most of us never ask ourselves, but one we should if we’re serious about protecting our families if we get sick or die.

Every day, life insurance policies put a price on people, but in most cases it’s well below their true value. Research by Rice Warner has found that a typical middle-income family requires $680,000 of life insurance cover, but only has $258,000.

Working out your true dollar value might only require a few quick calculations on paper but it’s well worth the effort.

If you’re dead or disabled, your family is going to struggle unless all your debts are repaid, children’s education is covered and at least part of a replacement income is provided. For many this level of cover is going to head towards $1 million, but the good news is that insuring it usually won’t cost you an arm and a leg.

Superannuation can be a great structure to hold insurance that covers death, disability and loss of income. You won’t have to spend a cent of your own money because the premiums are paid by your employer’s 9.5 per cent compulsory contributions, although that will eat into your retirement nest egg.

How money saavy are you?

A new report by the Financial Planning Association and Zurich Financial Services says almost two-thirds of workers hold their life insurance through their super but a majority have never been advised about how much insurance they need.

It found that many people have misplaced trust that their super fund or their employer is going to know how much insurance they should have.

Misplaced trust .. don’t rely on your employers to worry about your insurance. Picture: iStock Source: Supplied

Well, that’s not their job, and the typical default super cover provided by a super fund is way below what most people should have, especially if they have dependants.

Life insurance is an umbrella term that includes death cover, which is pretty self-explanatory, total and permanent disability cover, income protection, and trauma cover that pays out if you suffer a critical illness such as cancer or heart attack.

Zurich’s Philip Kewin says young people without kids and a big mortgage may feel they don’t need to worry about any kind of life insurance, but this is a false sense of security. “For a young single person, not being able to work and being alive is the worst possible thing if you can’t fund it,” he says

Financial Planning Association CEO Mark Rantall says when death or disability strikes, any additional financial stress can be crushing. He recommends asking yourself four simple questions:

1. What are you looking to protect?

2. Why are you looking to protect it?

3. How much is adequate?

4. What structure is most effective for your life insurance?

While a comprehensive life insurance package outside super might cost more than $2000 a year — a big turn-off for many people — it’s worth having at least some extra financial protection. Type in “life insurance calculator” into your internet engine and have a look.

So back to the opening question: How much are you worth?

Of course, you’re priceless. But that won’t protect your family financially if you’re not able to

Accused former Jeep boss Clyde Campbell imports Ferrari from New Zealand

On its way ... the 2008 Ferrari 599 owned by former Jeep Australia boss Clyde Campbell. Picture: Supplied Source:Supplied

THE former Jeep executive at the centre of a $30 million scandal into the alleged misuse of corporate funds, Clyde Campbell, has imported a Ferrari sports car into Australia.

As the deadline passed for his former employers Fiat Chrysler Australia — the distributors of Jeep and other vehicles including Alfa Romeo — to lodge a response to his defence filed late last month, the silver Ferrari was on its way to a shipping dock in Melbourne.

This exclusive photo taken before Mr Campbell’s car left Auckland, New Zealand, shows the rare Ferrari 599 strapped down ready for its four-day boat ride across the Tasman Sea.

Shipping lane ... the Ferrari strapped down and ready for transit to Australia. Picture: Supplied Source: Supplied

The same type of Ferrari cost $650,000 when new in Australia in 2008, but Mr Campbell is believed to have bought the car more cheaply as a used car in New Zealand.

The lawyer for Mr Campbell declined to comment on the importation of the Ferrari.

However, News Corp Australia understands the Ferrari bought by Mr Campbell was originally imported into New Zealand by his former business partner Neville Crichton, who was the Ferrari distributor for Australia and New Zealand at the time.

Former Jeep boss Clyde Campbell. Picture: SuppliedSource: Supplied

Mr Campbell’s former business partner Neville Crichton.Source: Supplied

Mr Campbell and Mr Crichton ended their business relationship after FCA Australia started legal proceedings against Mr Campbell in the Federal Court in Victoria in May this year.

The US car giant alleges Mr Campbell made “uncommercial” deals — including lavishing free loan cars to sport stars and celebrities such as Harry Kewell, Shane Warne, Liz Hurley and Jesinta Campbell — during his time as the head of the company from October 2010 to April 2013.

In the defence lodged in the Federal Court, Mr Campbell’s lawyer says he had the permission of his superiors, including the Asia-Pacific boss John Kett and global boss Mike Manley, who either approved or were aware of the deals entered into by Mr Campbell.

Former boss ... Asia-Pacific Jeep executive John Kett being interviewed at a motor show. Picture: Supplied. Source:Supplied

Mr Kett declined to comment on the claims in Mr Campbell’s defence and FCA Australia has not responded to requests for comment from Mr Manley, who is based overseas.

Luxury car experts say the Ferrari 599, powered by a 600 horsepower V12, is today worth less than half its Australian sales price, at about $250,000 to $300,000.

According to the Ferrari website, the 599 is capable of reaching more than 330km/h and can blast from rest to the speed limit in just 3.7 seconds.

This reporter is on Twitter: @JoshuaDowling

Why house prices don’t need to be a consistent multiple of income

House price to income ratios should be rising. Just do the maths. Source: Supplied

This graph keeps going up and it has everybody worried. But should we be?

Household disposable income, excluding income of unincorporated enterprises and before the deduction of interest payments. Sources: ABS; APM; CBA/HIA; RBA; REIA: RP Data-Rismark. Source: Supplied

It makes sense house prices should be linked to income. But if the graph creeps up, does that mean there’s going to be a housing crash?

To answer the question, let’s go back 15 years. It’s the year 2000. John Howard is Prime Minister, Steve Waugh is captain of the cricket team, James Hird is a hero, and the median price for a house in Sydney is just $287,000.

At that time, the average annual fulltime wage was $43,000.

Let’s look at an imaginary household budget.

How an average wage could be spent in the year 2000. Source: Supplied

The person earning $43,000 paid $9,300 in tax, leaving $33,700. Let’s imagine two-thirds of that (~$22,600) gets spent on expenses and a third ($~11,100) goes to the mortgage.

The standard variable rate in 2000 was 7.8 per cent so that budget is enough to pay the interest on a loan of around $143,000.

Let’s go forward in time again. It’s 2015. Nobody pays attention to cricket anymore, John Howard is retired and James Hird is a duffer. The median house price in Sydney is now just over $1 million.

Let’s check the budget of our average income earner again. Wage inflation has been pretty good in the last 15 years. Our average fulltime earner is now on $79,500. Wages have nearly doubled.

But what’s happened to the price of those living expenses? They’ve risen 53 per cent, according to the consumer price index.

If the mortgage-holder decides they will consume the same things they did back in the year 2000 that’s now going to cost $34,600.

That decision lets them commit a much bigger slice of their budget to their mortgage than before.

Instead of a quarter of their earnings, it’s now over a third. The fact wage inflation has been higher than goods inflation means they can pay a higher mortgage without changing their standard of living.

How an average wage could be spent in 2015. Source: Supplied

The standard variable rate is now 5.45 per cent. That $27,500 a year is now enough to pay the interest on a loan of $505,000.

Australia’s standard of living has risen a lot in the last 15 years. So buying only the same things in 2015 as you bought in 2000 is not an easy option and not realistic. There are lots of ways in which society has shifted and constraining your purchases in this way would mean missing out.

But in some ways it is useful to consider. Mortgage holders — especially those in the early years of their mortgages — do scrimp and save. They do get by with less.

And it is in some of the most essential categories — like clothing — that price inflation has been weakest. The price of clothing rose just 1 per cent in the last 15 years, while the price of alcohol and tobacco rose 108 per cent.

Wage growth has been higher than consumer price growth across Australia’s history. That’s why we’ve had rising standards of living. It also means that some frugal people can scrape together large amounts to pay off big mortgages and that could be part of the reason house prices have blown up.

There are other reasons why people might be willing to borrow more money to spend on housing now.

• Macroeconomic stability — Australia is into its 25th year without a recession.

• More predictable and stable interest rates (the RBA controlling monetary policy);

• Longer lives;

• More flexible labour markets mean they are confident of finding another job if they lose theirs.

When you add in the fact female workforce participation has increased in the last 15 years and a lot more people are buying houses using two incomes, that means we can probably expect to see the ratio of house prices to incomes slope upward.

That’s not to say the housing market won’t crash. It easily could, especially in Sydney. I’m not saying it won’t. But the graph of dwelling prices to income is not proof on its own.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.