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New SAC E-Mails Given Martoma as Steinberg Heads to Trial

SAC Capital Offices
Signage stands outside the offices of hedge fund SAC Capital Advisors LP in Stamford, Connecticut. Photographer: Rick Maiman/Bloomberg

SAC Capital Advisors LP e-mails and other documents found on “newly discovered” backup tapes from 2007 and 2008 were turned over to a former fund manager accused of insider trading, his lawyer said.

Mathew Martoma’s legal team received 114,757 pages of the documents this week at the goverment's instruction from SAC's lawyer, said Martoma's attorney, Richard Strassberg, in a letter yesterday to U.S. District Judge Paul Gardephe in Manhattan. Strassberg is seeking a two-week delay of Martoma’s Jan. 6 trial. He said he needs the additional time to analyze the new evidence and prepare witnesses.

“Certain of these materials appear directly relevant to specific allegations made against Mr. Martoma,” Strassberg said in the letter.

Michael Steinberg, another SAC money manager, is set to go on trial on insider-trading charges next week in Manhattan. Steinberg, who worked at SAC’s Sigma Capital Management unit, is charged with trading on inside tips he got from convicted SAC technology analyst Jon Horvath.

SAC offered a guilty plea to charges Nov. 8 as part of a record $1.8 billion settlement of the government’s investigation into insider trading at the firm. The Stamford, Connecticut-based hedge fund agreed to close its investment advisory business as part of the accord to end both its prosecution and a money-laundering lawsuit filed by the Justice Department. The judge in that case hasn’t decided whether to accept the plea.

Jonathan Gasthalter, a spokesman for SAC with Sard Verbinnen & Co., didn’t immediately respond to phone and e-mail messages after regular business hours yesterday seeking comment on Strassberg’s letter.

Martoma’s E-Mails

“The documents -- which were restored from newly discovered SAC backup tapes created in 2007 and 2008 -- consist primarily of e-mails sent to or received from Mr. Martoma’s analyst, Mr. Martoma’s trader, and SAC healthcare portfolio managers,” Strassberg said in the letter. In an e-mail, Strassberg declined to provide additional information about the new material.

Martoma is charged with using inside information on clinical trials of an Alzheimer’s disease drug to trade in shares of Elan Corp. and Wyeth. Prosecutors claim the illegal trading gave SAC a benefit of $276 million in profit and avoided losses.

If convicted, Martoma faces as long as 20 years in prison on each of two securities-fraud charges and five years for a single conspiracy charge. He has pleaded not guilty.

Prosecutors claim Martoma got improper information on trials of bapineuzumab, or “bapi,” from two doctors involved in the drug trials in 2008.

$700 Million Position

After Martoma learned that Elan and Wyeth would report negative data from the trials, he had a 20-minute telephone call with SAC founder Steven Cohen, according to the government. The hedge fund owner sold almost all of the fund’s $700 million position in the stocks and then sold them short.

Cohen hasn’t been charged. SAC’s settlement with the government doesn’t bar prosecutors from bringing charges against him or other individuals at SAC.

Before the fall of 2008, SAC deleted e-mails from employee mailboxes every 30 or 60 days, the firm’s general counsel, Peter Nussbaum, testified in a 2011 deposition in a civil suit. Prosecutors in Steinberg’s case said they were able to obtain some deleted e-mails from third parties who had retained them.

Martoma’s former lawyer, Charles Stillman, told Gardephe in a hearing in March that the government had turned over 4 million pages of documents at that time.

In a separate case, a federal judge yesterday ruled that a lawsuit filed by the U.S. Securities and Exchange Commission against Martoma will proceed while the criminal case is pending.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan). The Steinberg case is U.S. v. Steinberg, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

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