The prosecution’s star witness against Mathew Martoma testified that he lied about passing inside information to the former SAC Capital Advisors LP fund manager when he was first questioned by agents of the Federal Bureau of Investigation in September 2011.
“I was so intensely ashamed,” Sidney Gilman, 81, a former University of Michigan neurologist, told jurors in Martoma’s insider trading trial yesterday in Manhattan federal court. “I was hoping the whole thing would go away.”
Later, Gilman said, he told the government the truth, that he had kept Martoma informed in “minute detail” about adverse effects of bapineuzumab, a drug intended to treat Alzheimer’s disease, while the drug was being tested on patients, and tipped him off about the final results of the testing in July 2008.
Gilman testified that Martoma typically set up telephone conferences with him within a day or two after the drug trial’s safety monitoring committee, of which Gilman was chairman, met to discuss confidential data. Martoma appeared to be taking careful notes, Gilman testified.
“He frequently asked me to pause or to go more slowly as I was telling him numbers,” Gilman told jurors.
Martoma, who’s charged with conspiracy and securities fraud in what the government claims was the biggest illegal trade in U.S. history, is on trial in the same courtroom where SAC manager Michael Steinberg was convicted on Dec. 18 of the same charges.
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. The agreement must be approved by a judge before it can take effect.
Gilman took the stand for a second day yesterday, after testifying last week that he gave Martoma detailed secret information including data that was kept from Wyeth and Elan Corp., the companies that were developing the drug. The so-called Phase 2 tests were designed to determine whether bapineuzumab was safe and effective for patients with mild and moderate Alzheimer’s disease.
Prosecutors claim Martoma, 39, used confidential data about the tests from Gilman and a second doctor, New Jersey geriatrician Joel Ross, to benefit SAC by $276 million in trades of Wyeth and Elan. Martoma, who denies wrongdoing, faces as long as 20 years in prison if convicted of securities fraud.
Both doctors were given immunity from criminal charges in exchange for their testimony.
Gilman testified yesterday that Martoma was particularly interested in vasogenic cerebral edema, a type of brain swelling that was seen in some bapineuzumab test subjects. Ross and Gilman both testified that the side effect, while a source of concern, was interpreted as a possible sign the drug was working.
Gilman, who was selected by Elan to present the full results of the drug trial July 29, 2008, at a Chicago conference of Alzheimer’s specialists, testified that he shared the confidential results with Martoma in an hour-and-a-half telephone conversation on July 17, the day after he learned them himself. Gilman said he’d set up a meeting with Martoma in his Ann Arbor office on July 19 after Martoma claimed he would be in the area that day on a family matter.
Prosecutors claim SAC sold a $700 million position in Elan and Wyeth the week before the bapineuzumab results caused shares of the companies to drop.
U.S. District Judge Paul Gardephe, who’s overseeing the trial, sent the jury home at 2 p.m., three hours early, because of a snowstorm in New York. Gilman will continue testifying when the trial resumes.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).