Sept. 6 (Bloomberg) -- Former SAC Capital Advisors LP manager Mathew Martoma, who faces trial in November on insider trading charges tied to illicit tips on an Alzheimer’s drug, got some of his information from New Jersey physician Joel Ross, two people familiar with the matter said.
Ross is the unidentified physician in a revised indictment filed against Martoma Aug. 22, said the people, who requested anonymity because they aren’t authorized to speak publicly. Referred to as Doctor-2, Ross provided confidential information to Martoma about a drug trial in July 2008, the U.S. said.
A geriatrician and clinical associate professor of medicine at Mt. Sinai School of Medicine, he is the founder and chief executive officer of Memory Enhancement Centers in Eatontown, New Jersey, according to his website. He hasn’t been charged.
Martoma, 39, pleaded not guilty to charges of two counts of securities fraud and one count of conspiracy. He faces as long as 20 years in prison if convicted at trial, which is scheduled to begin Nov. 4 in Manhattan federal court.
The U.S. Securities and Exchange Commission has alleged that the other doctor who tipped off Martoma about the drug trials was Sid Gilman, a neurologist who was head of the safety monitoring committee for the drug trial. Gilman, who worked at the University of Michigan, has entered into a non-prosecution agreement and agreed to cooperate with the government.
Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara’s said Ross conducted paid consultations with Martoma, which were arranged through an unidentified “financial services firm” that provided expert networking services to SAC, the hedge fund company founded by Steven A. Cohen.
“Doctor-2 provided confidential information about the drug trial and other Alzheimer’s disease drug trials to Martoma with the expectation that Martoma would assist Doctor-2 in obtaining additional clinical trial business,” according to court papers.
Ross received his medical degree from the State University of New York Downstate Medical Center in Brooklyn, according to his website. It describes continuing clinical trials of Alzheimer’s medications and states Ross was named Alzheimer’s Caregiver Humanitarian of the Year in 2011.
The U.S. alleged Martoma used information from two doctors, who were involved in the trial of the Alzheimer drug bapineuzumab, or “bapi,” to help the hedge fund make $276 million by trading in shares of Elan Corp. and Wyeth LLC. The government has called it the biggest insider-trading prosecution of an individual in U.S. history.
Ross didn’t respond to a call seeking comment on the allegations. Richard Strassberg, Martoma’s lawyer, didn’t respond to a voice-mail message left at his office yesterday after regular business hours seeking comment on the allegations. Jerika Richardson, a spokeswoman for Bharara’s office, declined to comment.
SAC, based in Stamford, Connecticut, was indicted in July on insider trading charges. Bharara said the hedge fund reaped hundreds of millions of dollars in illicit profits through separate insider-trading schemes by at least eight former SAC fund managers and analysts, including Martoma.
In the SAC indictment, prosecutors claimed that two unidentified SAC health-care analysts exchanged e-mails with Cohen on April 11, 2008, and the next day about information they’d gotten through a paid consultation with an unidentified clinical investigator on the trial of the Alzheimer’s drug.
Working for Elan in the clinical trial for bapi, Doctor-2 treated Alzheimer’s patients with the drug, then reported to Elan data about their mental and physical condition, according to the government.
On May 29, 2008, Martoma set up a meeting with Doctor-2 for the evening of July 28, shortly after a briefing in which Doctor-2 was to be told the final results of the bapi trial and a day before they were scheduled to be announced publicly, the U.S. said.
In mid-July 2008, Gilman passed Martoma secret data showing that bapi failed to halt progression of Alzheimer’s in patients in the clinical test, the U.S. said.
When Martoma learned that Wyeth and Elan would report negative data on the drug, he had a 20-minute phone call with Cohen, according to the government. The hedge fund owner, at Martoma’s recommendation, sold almost all of the fund’s $700 million position in Elan and Wyeth, then sold the stock short, prosecutors said.
Ross’s identity was reported earlier by the Wall Street Journal. Cohen hasn’t been charged and has denied any wrongdoing.
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: Patricia Hurtado in Manhattan federal court at firstname.lastname@example.org
To contact the editor responsible for this story: Michael Hytha at email@example.com