Martoma Called Victim of US Rush to Charge Cohen (Correct)
Bloomberg News
Former SAC Capital Advisors LP fund manager Mathew Martoma used a Michigan neurologist, the government's star witness, as a 'canary in a coal mine' to warn if the hedge fund's huge investment in Elan Corp. and Wyeth was about to turn toxic in 2008, a prosecutor said.
Martoma, 39, is accused of using secret information about a clinical drug trial that he received from the witness, Dr. Sidney Gilman, and another doctor supervising the testing. Prosecutors say the $275 million scheme is the most lucrative ever charged against an individual.
'Martoma needed the equivalent of a canary in a coal mine,' Assistant U.S. Attorney Eugene Ingoglia told jurors in his closing argument today in Manhattan federal court. 'He needed some early-warning system.'
SAC Capital sold a $700 million position in the two drugmakers in July 2008 after Martoma learned the results, which hadn't been released to the public, would be disappointing, the U.S. said. Gilman and the second doctor, Joel Ross, a New Jersey geriatrician, testified against Martoma in exchange for immunity from prosecution.
Martoma learned detailed testing results for bapineuzumab, an Alzheimer's disease drug under development by Elan and Wyeth, and traded on the information, prosecutors claim. The trial is in its fifth week.
Detailed Information
Richard Strassberg, Martoma's lawyer, is presenting his closing argument and the jury could begin considering the case as early as today. Martoma, charged with conspiracy and two counts of securities fraud, faces as long as 20 years in prison if convicted of the securities-fraud charges.
On July 15, 2008, Gilman flew to Elan's offices in San Francisco, where he learned the results of the clinical trial, Ingoglia said. Two days later, in his office in Ann Arbor, Michigan, Gilman received a set of draft PowerPoint slides providing detailed information about the tests, the prosecutor said.
Gilman and Martoma discussed the slides in a phone conversation that lasted an hour and three-quarters, Ingoglia said. That day, July 17, Martoma booked flights for a July 19 trip to Detroit and back to New York, Ingoglia said.
Phone Call
Martoma spoke by phone for 20 minutes with SAC Capital founder Steven Cohen on July 20, a Sunday, Ingoglia told jurors. When trading began the next day, SAC Capital started selling its investment, he said.
Cohen, who denies wrongdoing, hasn't been charged with a crime. He faces an administrative proceeding filed by the U.S. Securities and Exchange Commission claiming he failed to properly supervise trading at his firm.
In November, SAC agreed to plead guilty to securities fraud and end its investment advisory business as part of a record $1.8 billion settlement. The agreement must be approved by a judge before it can take effect.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net
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