Trial begins on January 3rd; if convicted, maximum prison term of 25 years on combined charges
Bureau Report
NEW YORK: Mathew Martoma joined a long list of high profile Indian Americans in the corporate world who have been ensnared in the quagmire of insider trading and its consequences, this year, when the former SAC Capital Advisors portfolio manager was indicted by a federal grand jury in Manhattan on securities fraud and conspiracy charges which amounted to $276 million in benefits to his former company, the largest such scheme in history.
The indictment largely restates the accusations in the criminal and civil complaints, reported The Wall Street Journal, that Martoma participated in more than 40 paid consultations with a neurologist working on the clinical trial for an Alzheimer’s drug being developed jointly by Elan Corp. and Wyeth Pharmaceuticals, which is now part of Pfizer Inc.
The complaints say the doctor, Sidney Gilman, who is now cooperating with the government under a non-prosecution agreement, illegally gave Martoma confidential details about the trial. Dr. Gilman emailed Martoma a PowerPoint presentation in July 2008 that contained negative details about the trial which would soon become public, the complaints said, reported the Journal.
Shortly after that, Martoma allegedly had a telephone conversation about the stocks with the hedge-fund owner. On the next trading day, they began selling $700 million in stock in the two companies, and making negative bets on the shares, the complaints said.
Based on that trading, Martoma received a $9.3 million bonus for that year, the complaints said. When he was fired in 2010 after failing to repeat the successful performance, one hedge-fund official at the firm called him a “one-trick pony,” according to the complaints.
The New York Times reported that SAC, based in Stamford, Conn., has been touched by several insider trading cases in recent years, but there is heightened attention surrounding the Martoma prosecution. For the first time, the government has tied questionable trades to Steven A. Cohen, the billionaire owner of SAC.
“Though disappointing, today’s events come as no surprise,†Martoma’s lawyer, Charles A. Stillman, said in a statement. “The simple fact is that Mathew Martoma did not trade on inside information, is innocent of all these charges, and we look forward to his ultimate vindication.â€
Before Friday’s indictment, there had been speculation that the government, before formally presenting evidence to a grand jury, was trying to gain Martoma’s cooperation in building a case against Cohen. Martoma has rebuffed several earlier efforts by the authorities to enter into plea talks and implicate his boss, reported the Times.
Cohen has not been charged with any wrongdoing, and a spokesman for SAC has said that he thinks that he and SAC have acted appropriately at all times. The Securities and Exchange Commission, which brought a parallel civil action against Martoma, has warned SAC that it is likely to file a fraud lawsuit against the firm related to the Martoma case, said the report.
Martoma, 38, is set to appear in Federal District Court in Manhattan for his arraignment on January 3, when he will enter a plea. The case was assigned to Judge Paul G. Gardephe, a former federal prosecutor who assumed his seat on the bench in 2008 after an appointment by President George W. Bush.
Before coming to New York for his arraignment, Martoma will be spending the holidays with his wife and three young children at home, in Boca Raton, Fla., reported the Times.
According to Bloomberg News, Martoma rejected several bids by prosecutors for his cooperation, according to a person familiar with the case. When first confronted by an FBI agent in the front yard of his mansion last year, he fainted, another person said.
If convicted, Martoma faces as many as 20 years in prison on the securities fraud charges and five years on the conspiracy charge.
Two months ago, in October, Former Goldman Sachs director Rajat Gupta was sentenced to two years in prison for tipping insider information to Galleon Group co-founder Sri Lankan American billionaire Raj Rajaratnam, who was later convicted. Gupta is appealing the conviction.