Bloomberg
By Bob Van Voris and Patricia Hurtado
Feb 6, 2014 11:00 PM CT
Jurors in Manhattan federal court yesterday found Martoma, 39, used secret tips on clinical trials of an Alzheimer’s disease drug to trade Wyeth and Elan Corp. shares. In doing so, he reaped a $275 million benefit for the fund. Martoma chose to risk a trial after rejecting U.S. offers of a deal for cooperation. He faces as long as 20 years in prison on the most serious counts.
Martoma showed no reaction when the verdict was announced. As the jury forewoman read the verdict tears welled in the eyes of Martoma’s wife, Rosemary, who sat in the front row of the spectator benches behind her husband. The couple, flanked by defense lawyers, walked out of the courtroom arm-in-arm, with Rosemary Martoma crying visibly.
Martoma’s conviction “is a major win for the government,” said Anthony Sabino, a law professor at St. John’s University in New York, in an interview. “It may embolden them to go after Cohen.”
The jury reached the guilty verdict after less than three days of deliberations. The conviction follows a similar verdict against SAC Capital fund manager Michael Steinberg, who was convicted in December of a separate insider-trading scheme involving technology stocks from 2008 to 2009. He hasn’t been sentenced and may yet seek to strike a deal with the U.S.
Harvard Expulsion
Martoma’s conviction raises the possibility that he also may seek to cooperate against Cohen in exchange for leniency, said Sabino. The disclosure, at the start of the trial, of Martoma’s expulsion from Harvard Law School for creating a phony transcript may lead prosecutors to reject such a deal, given the possible damage to his credibility as a witness.U.S. District Judge Paul Gardephe didn’t set a sentencing date and allowed Martoma to remain free on $5 million bond.
“We are very disappointed,” Martoma’s lawyer, Richard Strassberg, said through his spokesman Lou Colasuonno, who added “we are planning our appeal.”
Longest Sentence
Martoma was convicted of two counts of securities fraud, a charge that carries a maximum 20 years in prison. He was also convicted of conspiracy, which has a maximum penalty of as long as five years in prison. The longest insider-trading sentence of 12 years was given to attorney Matthew Kluger in 2012 for a $37 million scheme. The second-longest of 11 years was imposed upon Galleon Group LLC co-founder Raj Rajaratnam for a $72 million scheme.In the Martoma case, prosecutors claimed SAC Capital reversed a bullish stance on Wyeth and Elan in July 2008, selling a $700 million position days after Martoma learned the disappointing trial results for the drug, bapineuzumab, and shared a 20-minute phone call with Cohen.
Cohen, 57, who denies wrongdoing, hasn’t been charged with a crime. He faces an administrative proceeding before the U.S. Securities and Exchange Commission claiming he failed to properly supervise trading at his firm.
In November, SAC Capital agreed to plead guilty to securities fraud in a landmark prosecution of the financial company. The hedge fund agreed to end its investment advisory business and pay $1.8 billion. The plea deal must be approved by a judge before it can take effect.
Rename Fund
Cohen plans to rename SAC Capital and add a layer of management to oversee traders as the hedge fund becomes a family office, a person familiar with the firm said.The Stamford, Connecticut-based company, which will manage about $9 billion for Cohen in addition to employee money, will have three trading units after the restructuring, said the person, who asked not to be identified because the firm is private. The changes are expected to take place by mid-March.
The office of Manhattan U.S. Attorney Preet Bharara has filed insider-trading charges against 83 people and four entities -- all of them units of SAC Capital -- in its investigation of fund managers, company insiders and expert-networking firms.
‘Market Cheaters’
In announcing his case against SAC Capital last year, Bharara called it a “veritable magnet for market cheaters,” citing the series of cases his office made against the hedge fund’s portfolio managers and analysts.Seven former SAC fund managers and analysts -- Noah Freeman, Donald Longueuil, Jon Horvath, Wesley Wang, Richard Lee, Steinberg and Martoma -- were convicted of insider-trading schemes.
An eighth man, Richard Choo-Beng Lee, an SAC Capital analyst from 1999 to 2004, pleaded guilty in 2009 to insider trading while at Spherix Capital LLC, the hedge fund he co-founded.
Prosecutors said in the indictment of SAC Capital that Lee, while he was at SAC Capital, obtained inside information about technology companies that he passed to the fund’s portfolio managers and others.
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Ex- SAC Capital manager found guilty in largest US insider trading case
Published time: February 07, 2014 13:14
Edited time: February 07, 2014 13:46
Edited time: February 07, 2014 13:46
According to prosecutors, Martoma got secret information from a former Professor of Neurology at University of Michigan Sidney Gilman, who was participating in testing of a new drug for Alzheimer's disease.
Martoma obtained the trial results for the drug in July 2008, and SAC Capital then started selling off a $700 million position in drug firms Elan and Wyeth before the negative results were made public, says Reuters.
“Martoma bought the answer sheet before the exam – more than once – netting a quarter-billion dollars in profits and losses avoided for SAC, as well as a $9m bonus for him,” Preet Bharara, the US Attorney said. “It made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty.”
Steven A. Cohen's SAC Capital Advisors, a $14 billion hedge fund that has long been in the cross-hairs of the FBI, profited to the tune of $275 million by selling shares in the pharmaceutical companies Wyeth and Elan Corp. now owned by Pfizer Inc, which developed the drug.
At trial prosecutors presented testimony that Dr Sidney Gilman and Dr Joel Ross both provided confidential clinical drug test results to Martoma in exchange for thousands of dollars.
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Bloomberg
SAC’s Martoma Faces Up to 20 Years at June 10 Sentencing
Feb 8, 2014 11:16 AM CT
Mathew Martoma, a former SAC Capital Advisors LP fund manager, center, exits federal... Read More
Martoma, 39, was convicted of two counts of securities fraud, which carries a maximum 20 year term, and one count of conspiracy, which has a maximum five year term. U.S. District Judge Paul Gardephe may make each term concurrent, and has latitude to impose a significantly shorter sentence.
The longest insider-trading term of 12 years was given to attorney Matthew Kluger in 2012 for a $37 million scheme. The second-longest of 11 years was imposed upon Galleon Group LLC co-founder Raj Rajaratnam for a $72 million scheme.
Martoma was found guilty of a $275 million scheme. His was the seventh conviction tied to SAC Capital-related insider trading in the six-year probe of the hedge fund and its billionaire founder, Steven A. Cohen.
Jurors in Manhattan federal court found Martoma used secret tips on clinical trials of an Alzheimer’s disease drug to trade Wyeth and Elan Corp. shares. In doing so, he reaped a $275 million benefit for the fund.
Prosecutors claimed SAC Capital reversed its bullish stance on Wyeth and Elan in July 2008, selling a $700 million position days after Martoma learned the disappointing trial results for the drug, bapineuzumab, and shared a 20-minute phone call with Cohen. Martoma, who earned a $9.3 million bonus connected to the trades, chose to risk a trial after rejecting U.S. offers of a deal for cooperation.
Read More Here
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