Ex-hedge fund manager Martoma charged

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U.S. prosecutors Tuesday charged a former SAC Capital employee with insider trading in a series of transactions that hedge fund titan Steven A. Cohen had personally signed off on.

Calling it "the most lucrative" insider-trading scheme ever, prosecutors said that Mathew Martoma helped Cohen's firm avoid losses and reap profits totaling $276 million in the summer of 2008 by using insider tips he got from a doctor about Elan Corp. and Wyeth Llc.

According to court papers filed Tuesday, Martoma spoke in July 2008 to the "hedge fund owner" and recommended selling shares of Elan and Wyeth before a negative announcement on clinical trial results for an Alzheimer's drug jointly developed by the two companies.

Martoma is the fifth person associated with SAC Capital -- one of the most widely followed and influential hedge funds -- to be charged with insider trading in either a criminal or civil proceeding. He had worked for a unit of SAC Capital called CR Intrinsic Investors in Stamford, Conn., until 2010.

The criminal complaint against Martoma, while not mentioning Cohen by name, refers to him as the "owner" of the hedge fund and makes clear that Cohen and Martoma talked often about the fund's trading in shares of Elan and Wyeth. The court papers do not indicate that Cohen had knowledge of how Martoma obtained his information.

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Martoma's lawyer, Charles Stillman, said his client was an "exceptional portfolio manager" and he is confident Martoma will be exonerated.

A spokesman for SAC Capital said, "Mr. Cohen and SAC are confident that they have acted appropriately and will continue to cooperate with the government's inquiry."

The charges against Martoma stem from the U.S. government's long-running investigation into improper trading in the $2-trillion hedge fund industry, which the FBI has called "Operation Perfect Hedge." To date, the investigation has led to more than 50 convictions.

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