FBI Called Martoma ‘Grain of Sand’ Next to Cohen: Gilman

Former University of Michigan neurologist Sidney Gilman said an FBI agent told him that he and accused inside-trader Mathew Martoma were only a “grain of sand” compared with the government’s real target, SAC Capital Advisors LP founder Steven A. Cohen.

Martoma is on trial in Manhattan federal court, charged with using confidential information about a clinical drug trial that he got from Gilman and another doctor to make SAC $276 million in illegal profit and losses avoided. He faces as long as 20 years in prison if convicted of securities fraud.

The government claims SAC reversed a bullish stance on Wyeth and Elan Corp., the companies that were developing the drug, liquidating a $700 million position within days after a 20-minute phone call between Martoma and Cohen in July 2008. Shares of both companies dropped after disappointing results were announced for trials of the drug, bapineuzumab, which was intended to treat Alzheimer’s disease.

Under cross-examination by Martoma’s lawyer, Richard Strassberg, Gilman today told jurors about his first contact with agents from the Federal Bureau of Investigation.

One agent told him that “I am only a grain of sand, as is Mr. Martoma,” Gilman said. “They are really after a man named Steven A. Cohen.” Gilman said he only later learned that Cohen owned SAC, Martoma’s firm.

Denies Wrongdoing

Martoma, who denies wrongdoing, has declined to cooperate with the government’s insider-trading investigation.

SAC portfolio manager Michael Steinberg was convicted on Dec. 18 of insider trading. In November, Stamford, Connecticut-based SAC agreed to plead guilty to securities fraud and end its investment advisory business as part of a record $1.8 billion settlement of the government’s investigation of insider trading at the firm. Cohen hasn’t been charged with a crime.

Gilman said two agents of the Federal Bureau of Investigation spoke with him in a clinic office at the University of Michigan on Sept. 1, 2011. FBI Agent B.J. Kang said Gilman had given Martoma illegal inside information about the bapineuzumab testing, falsely claiming they had been recorded, Gilman recalled. Gilman testified that he denied the accusation at the time.

“I remember saying that I did not give Mr. Martoma nonpublic information, which was not true, actually,” said Gilman, in his fourth day of testimony. “At the time I knew it was not true because I lied to them.”

Paid Consultations

Strassberg spent much of the day questioning Gilman about his paid consultations with at least a dozen people from hedge funds about bapineuzumab before the results of phase 2 clinical testing on the drug were released to the public. Gilman frequently said he couldn’t remember the names of people he consulted with or the subject of their conversations.

Several times Strassberg suggested to Gilman that his testimony about conversations with Martoma was based on his preparation by prosecutors, rather than actual memories.

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.