Former SAC Capital Advisors LP portfolio manager Mathew Martoma, charged in what prosecutors called the biggest-ever insider trading case, had the terms of his bail modified and will be allowed to remain free after appearing in Manhattan federal court for the first time.
Martoma, 38, is accused of using illegal tips about a clinical trial of an Alzheimer’s disease drug to help SAC, the hedge-fund founded by Steven A. Cohen, make $276 million on shares of Elan Corp. and Wyeth LLC. He was arrested at his Boca Raton, Florida, home Nov. 20 and freed on $5 million bond after a hearing there. He faces the possibility of decades in prison if convicted of the charges against him.
Before and after yesterday’s court appearance, Martoma and his wife chatted with defense lawyers, smiling. Rosemary Martoma, a pediatrician, sat straight-backed as she listened to the judge and lawyers discuss bail. At the end of the hearing, picking up their coats and bags, she joked “I’m the bag lady.”
The defense and prosecution yesterday agreed to a modified bail package under which the $5 million bond must be secured by $2 million in cash or property, as well as signatures from three instead of two financially responsible people. Martoma, who surrendered his and his children’s travel documents, is limited to Florida, Massachusetts, New Jersey and parts of New York.
The defendant, wearing a gray jacket, dark pants, a sweater and tie, didn’t speak during the 13-minute court appearance except to tell U.S. Magistrate Judge James Cott he understood he could be re-arrested if he violates the bail terms. Martoma, holding hands with his wife, emerged from the courtroom after the proceeding into a crowd of reporters.
Martoma is charged with conspiracy and two counts of securities fraud, a crime that carries a maximum 20-year prison term. Defense lawyer Charles Stillman has said he expects his client to be exonerated.
Martoma was allowed to remain free yesterday on his signature and that of his wife. The judge set the next court appearance for Dec. 26. Stillman said the parties may agree to change the date.
“We took care of business today and we’ll be back another day,” Stillman said outside court yesterday.
The government says Martoma got tips about the drug, bapineuzumab, from Dr. Sidney Gilman, an 80-year-old University of Michigan neurologist who was overseeing part of the clinical trial. Prosecutors have reached a non-prosecution agreement with Gilman, who is cooperating with the investigation.
Prosecutors and the Securities and Exchange Commission, which has sued Martoma, have linked SAC founder Cohen to the case, although he isn’t identified by name in their complaints. A person familiar with the matter said Cohen is the person identified in the criminal complaint as “Hedge Fund Owner” and in the SEC’s suit as “Investment Advisor A.”
Martoma denies wrongdoing, and Cohen hasn’t been sued or charged. A spokesman for the SAC founder, Jonathan Gasthalter, has denied any wrongdoing and said Stamford, Connecticut-based SAC is cooperating with the government.
The criminal case is U.S. v. Martoma, 12-mj-02985; and the civil case is SEC v. CR Intrinsic Investors LLC, 12-08466, U.S. District Court, Southern District of New York (Manhattan).