A former SAC Capital Advisors portfolio manager got inside information about an Alzheimer's drug trial and made a pivotal phone call to his billionaire boss a day before the hedge fund began dumping more than $700 million in pharmaceutical stocks, a prosecutor told a jury Friday in opening statements at the trader's criminal trial.
Mathew Martoma seemed eager to speak with SAC Capital founder Steven A. Cohen on July 20, 2008, after returning from a round-trip flight to Michigan a day earlier, when he learned secrets about the results of a drug trial designed to test the safety and effectiveness of an Alzheimer's drug being touted as a breakthrough, Assistant U.S. Attorney Arlo Devlin-Brown said in Manhattan federal court.
He said Martoma, of Boca Raton, Fla., sent Cohen an email at 8:52 a.m., asking: "Is there a good time to catch up with you this morning? It's important."
Devlin-Brown said prosecutors will show jurors the email and phone records to prove that Martoma and Cohen spoke by phone for 20 minutes that day.
Over the next eight days, the Stamford, Conn.-based SAC Capital sold all of its more than $700-million investment in drugmakers Elan Corp. and Wyeth, which were jointly developing the drug undergoing the three-year drug trial. The announcement of the results of the drug trial caused the stock of Elan to plummet more than 40 percent while Wyeth's fell 11 percent.
Devlin-Brown said Martoma, 39, pocketed $9.3 million in bonuses for the successful trades at SAC Capital, which pleaded guilty in November to fraud charges and agreed to pay $1.8 billion to settle charges that it allowed, if not encouraged, insider trading.
In Martoma's defense, attorney Richard Strassberg attacked the case and the key witness, a physician accused of telling Martoma the drug was faring badly, and said prosecutors had "charged an innocent man."
Earlier this week, the judge in the case ruled that jurors cannot be told that Martoma fainted when federal agents first confronted him over insider trading allegations.