Elan Investors Get Access to SAC Insider Case Evidence

Elan Corp. shareholders who sued SAC Capital Advisors LP for insider trading can see evidence the Securities and Exchange Commission and U.S. prosecutors were required by law to provide to former SAC manager Mathew Martoma.

Martoma was indicted for insider trading and sued by the SEC. He has denied any wrongdoing. Investors sued him, SAC and its founder Steven Cohen, claiming Cohen created a “permissive culture” that encouraged insider trading of the pharmaceutical company’s stock and misappropriated material nonpublic information about an Alzheimer’s drug.

The plaintiffs may “obtain all document discovery now or hereafter produced to the defendants,” according to a July 19 order by U.S. Magistrate Judge Kevin Fox in Manhattan.

The investors who sued bought American depositary receipts of Dublin-based Elan or traded in options between July 1, 2006 and July 18, 2008, and between July 21, 2008 and July 29, 2008. Martoma’s alleged insider trading took place during that last week of July in 2008. Also sued was Sidney Gilman, a doctor who allegedly passed drug-trial information to Martoma.

Martoma, 39, is set to face trial on Nov. 4 in New York. Prosecutors told U.S. District Judge Paul Gardephe, who’s presiding over his case, that they’ve turned over to his lawyers at least 4 million pages of documents and hundreds of thousands of e-mails from the Stamford, Connecticut-based SAC.

Investor Suit

The investor suit seeks $549.2 million in profits gained and losses avoided plus $396 million in prejudgment interest. The amount in damages is offset by $259.7 million SAC agreed to disgorge as part of a record $602 million March settlement with the SEC, according to the complaint. Under the settlement, SAC didn’t admit fault.

Since 2009, 11 current or former SAC employees have been charged criminally with insider trading, sued by the government or named as uncharged co-conspirators, according to the plaintiffs.

On July 19, the SEC filed an administrative proceeding against Cohen, seeking to ban him from the financial industry, alleging he failed to supervise Martoma and SAC fund manager Michael Steinberg, who’s been charged with insider trading in a separate case.

The SEC today scheduled an Aug. 26 hearing in the Cohen matter in Washington, and appointed Chief Administrative Law Judge Brenda Murray to preside.

Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., said the regulator’s action “has no merit.” Elan shareholder lawyer Ethan Wohl declined to comment on Fox’s ruling.

The case is Kaplan v. SAC Capital, 12-cv-09350, U.S. District Court, Southern District of New York (Manhattan).

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