Martoma Jury Takes Up ‘Most Lucrative’ Insider Case

A jury ended its first day of deliberations without reaching a verdict in the trial of former SAC Capital Advisors LP fund manager Mathew Martoma, accused by federal prosecutors of masterminding the most lucrative insider trading scheme in U.S. history.

Martoma’s trial began with jury selection Jan. 7 after federal investigators failed to persuade him to cooperate in their probe of SAC Capital and its owner Steven A. Cohen.

The jury of seven women and five men in Manhattan federal court was given the case shortly before noon today after U.S. District Judge Paul Gardephe instructed them on the law. They are set to continue deliberations tomorrow.

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 traded on 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’s charged with two counts of securities fraud and one count of conspiracy. The securities fraud charges each carry up to 20 years in prison. The maximum sentence for the conspiracy count is five years.

Phone Call

Prosecutors say Martoma and Cohen sold a $700 million position in Elan and Wyeth, then sold the stocks short, within days after Martoma received detailed confidential results of the testing. Martoma and Cohen shared a 20-minute phone call on July 20, 2008, a Sunday, the day before the sell-off began, according to the government.

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 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.

After instructing the jury, Gardephe dismissed three alternate jurors, telling them they may be recalled if one or more jurors is unable to remain on the case.

After about four hours of deliberations, jurors sent Gardephe a note asking whether payments from Gerson Lehrman Group Inc., the company that set up dozens of paid consultations between Martoma and the two doctors, satisfied the legal requirement that the physicians benefitted from providing the alleged illegal tips.

Gardephe referred the jury to his earlier instruction in which he said the benefit to the tippers could include money or maintaining professional contacts or a friendship.

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

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