Former SAC Capital Advisors LP fund manager Mathew Martoma was portrayed by his lawyer as the victim of a “rush to judgment” by prosecutors looking to use him to bring insider-trading charges against his former boss, Steven A. Cohen.
The jury could begin considering the case as soon as today.
“Mathew was just a grain of sand in their haste to make a case against someone who is not even in this courtroom: Mathew’s boss, Steven Cohen,” Richard Strassberg said in his closing argument yesterday in Manhattan federal court.
Martoma, 39, is accused of using secret information about clinical tests of bapineuzumab, an Alzheimer’s disease drug being developed by Elan Corp. and Wyeth. Prosecutors say he used tips provided by two doctors supervising the tests. The $275 million scheme is the most lucrative ever charged against an individual, the U.S. said.
Martoma is being tried on charges of securities fraud and conspiracy after the government failed to persuade him to cooperate in their investigation of SAC Capital and Cohen, founder of the Stamford, Connecticut-based hedge fund company. Lawyers for both sides yesterday made their closing arguments in the trial, now in its fifth week.
SAC Capital sold a $700 million position in the two drugmakers in July 2008 after Martoma learned the results, which hadn’t been released to the public, would be disappointing, the U.S. said. Martoma faces as long as 20 years in prison if convicted of the securities-fraud charges.
Strassberg delivered his argument after a prosecutor told jurors that Martoma used Sidney Gilman, one of the doctors involved in the drug test, to warn if the hedge fund’s huge investment in Elan and Wyeth was about to turn toxic.
“Martoma needed the equivalent of a canary in a coal mine,” Assistant U.S. Attorney Eugene Ingoglia said. “He needed some early-warning system.”
On July 15, 2008, Gilman flew to Elan’s offices in San Francisco, where he learned the results of the clinical trial, Ingoglia said. Two days later, in his office in Ann Arbor, Michigan, Gilman received a set of draft PowerPoint slides providing detailed information about the tests, the prosecutor said.
Gilman and Martoma discussed the slides in a phone conversation that lasted an hour and three-quarters, Ingoglia said. That day, July 17, Martoma booked flights for a July 19 trip to Detroit and back to New York, Ingoglia said.
Martoma spoke by phone for 20 minutes with Cohen on July 20, a Sunday, Ingoglia told jurors. When trading began the next day, SAC Capital started selling its investment, he said.
Cohen, who denies wrongdoing, hasn’t been charged with a crime. He faces an administrative proceeding filed by the U.S. Securities and Exchange Commission claiming he failed to properly supervise trading at his firm.
In November, SAC Capital agreed to plead guilty to securities fraud and end its investment advisory business as part of a record $1.8 billion settlement. The agreement must be approved by a judge before it can take effect.
U.S. District Judge Paul Gardephe, who’s overseeing the case, is instructing jurors today on the law.
In his closing argument, Strassberg attacked the credibility of both doctors, particularly Gilman, the 81-year-old former University of Michigan neurologist who was the government’s star witness. Gilman, who was forced to retire in connection with the Martoma charges, testified for five days.
Strassberg quoted Gilman’s testimony that when he was first confronted by FBI agents, one of them informed him that he was “only a grain of sand, as is Mr. Martoma” and that “they are really after a man named Steven A. Cohen.”
Gilman admitted during the trial that his memory of the July 19, 2008, meeting with Martoma had evolved and that he still has “holes” in his memory.
“About two weeks ago I recalled what I related today,” Gilman said, referring to his testimony about the meeting with Martoma in his Ann Arbor office to discuss the final results of the clinical trial of bapineuzumab. Gilman testified that he reviewed with Martoma a set of draft slides containing details of the test results.
Gilman, who served as chairman of the clinical trial’s safety monitoring committee, presented the final results at a medical conference in Chicago July 29, 2008.
Strassberg told jurors that Gilman said he couldn’t recall details of the meeting in six sessions with U.S. authorities starting in February 2012. According to Gilman’s testimony, the doctor only recalled specifics of the Michigan meeting 707 days later, as lawyers were selecting the jury, Strassberg told them as he projected the number on a large screen in the courtroom.
Strassberg told jurors they should also disregard Gilman’s testimony about a July 17, 2008, telephone conversation in which he said he and Martoma spent an hour and three-quarters discussing the bapineuzumab results.
“I don’t see how you can rely on his testimony to establish anything,” Strassberg said.
Gilman and Joel Ross, a New Jersey geriatrician prosecutors claim also passed illegal tips on the bapineuzumab tests to Martoma, testified in exchange for immunity from criminal charges.
As part of his non-prosecution agreement, Gilman agreed to forfeit $186,000, plus interest, that he was paid by Elan for his role in the testing and by Gerson Lehrman Group Inc., which arranged the meetings with Martoma.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).