Former SAC Capital Advisors analyst Mathew Martoma was convicted Thursday of using confidential information about an Alzheimer's drug to trade on pharmaceutical stocks in a $275 million insider-trading case, the most profitable ever prosecuted.
Martoma was the sixth employee of the powerful Connecticut hedge fund convicted of insider trading, and the firm itself agreed to a $1.2 billion fine in 2013. Martoma resisted pressure from prosecutors to cooperate against multibillionaire SAC founder Steven A. Cohen, but his gamble on a trial didn't pay off.
"In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon," Manhattan U.S. Attorney Preet Bharara said. The conviction marked the 79th insider-trading conviction in a four-year campaign against Wall Street fraud by Bharara's office and the FBI.
Martoma faces up to 45 years in prison after being accused of using nonpublic information from a doctor about poor results in a clinical trial of the Alzheimer's drug to guide trades and avoid losses in drug companies Elan and Wyeth. The 39-year-old married father of three is from Boca Raton, Fla.
He was impassive when the jury verdict was read, but his wife, Rosemary, a pediatrician, was crying as the couple left court holding hands. His lawyer, Richard Strassberg, said through a spokesman, "We're very disappointed and we're planning to appeal."
The government's star witness at the monthlong trial was Dr. Sidney Gilman, the University of Michigan professor accused of leaking the information about the tests to Martoma in July 2008.
According to evidence at trial, Martoma spoke to Cohen just after learning of the poor results, and just before SAC made massive trades in the two stocks, liquidating a $700 million position. Martoma, a portfolio manager, got a $9 million bonus.
At trial, the defense -- which SAC underwrote -- claimed Gilman's testimony was unreliable and argued that Martoma used other information to form his opinions about the investment in Elan and Wyeth.
U.S. District Judge Paul Gardephe kept out evidence that Martoma fainted at the time of his arrest in 2011, and that he was expelled from Harvard in 1999 after falsifying his law school grades on resumes and later trying to cover his tracks.
The jury deliberated over three days. Jurors declined to comment leaving court.
SAC, once a hedge-fund powerhouse, is exiting the business in the wake of its guilty plea. Cohen, who grew up in Great Neck, has been sued by the SEC but has never been charged. The 2008 trades are subject to a five-year statute of limitations on securities fraud.