Former SAC Manager Martoma Pleads Not Guilty to Insider TradingPatricia Hurtado and Bob Van Voris
Former SAC Capital Advisors LP portfolio manager Mathew Martoma pleaded not guilty to criminal charges in what U.S. prosecutors called the biggest insider-trading scheme in history.
Martoma, 38, entered the pleas yesterday at his arraignment in Manhattan federal court to one count of conspiracy and two counts of securities fraud. Prosecutors say he used inside information about a clinical drug trial to help SAC make $276 million in profits and averted losses through trades in Elan Corp. and Wyeth LLC.
Assistant U.S. Attorney Arlo Devlin-Brown said in court that the government has collected “voluminous” evidence in the case which he expects will be produced in full to Martoma’s lawyers later this month.
“There is an ongoing investigation into this and related matters,” Devlin-Brown told U.S. District Judge Paul Gardephe, who is presiding over the case. “It is entirely likely the government will receive new and additional documents.”
Martoma isn’t discussing a plea deal with the government, his lawyer, Charles Stillman, said outside court.
Prosecutors said in a 12-page indictment filed Dec. 21 that Martoma illegally used tips from a physician who was in charge of monitoring the tests’ safety. Martoma advised a “hedge fund owner,” unidentified in the indictment, to trade in Elan and Wyeth, the government alleged.
A person familiar with the case said Steven A. Cohen, SAC’s founder, is the hedge fund owner referred to.
SAC bought shares of Elan and Wyeth, which were promoting bapineuzumab, or bapi, a drug intended to treat Alzheimer’s disease, based on positive safety data from the tests, the government said.
Later, when Martoma learned the companies would report negative data on the drug, Martoma had a 20-minute phone call with Cohen, according to the government.
SAC began liquidating its $700 million position in Elan and Wyeth the day after the call, the government said. SAC then profited by taking short positions in the stock, prosecutors said.
Jonathan Gasthalter, a spokesman for Stamford, Connecticut-based SAC, has said Cohen and SAC acted appropriately in making the trades. Gasthalter declined to comment on Martoma’s arraignment. Cohen hasn’t been charged criminally or sued by regulators in the case.
In court yesterday, Stillman asked if the government would include in its evidence any wiretapped conversations made by the U.S. under the Title III Wiretap Act, also known as “T-III.”
“We don’t plan to produce any T-III wiretaps and have no reason to believe any are relevant to the defense,” Devlin-Brown said.
To date, the Manhattan U.S. Attorney’s office has charged 75 people with insider trading since August 2009 and won 71 convictions.
Stillman said he and his defense team were “doing what is necessary for getting a happy ending for Mathew,” he said, adding, “Mathew Martoma is an innocent man.”
Martoma was arrested at his Boca Raton, Florida, home on Nov. 20 and charged in a criminal complaint. If convicted, he faces as many as 20 years in prison on the securities fraud charges and five years on the conspiracy charge.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).