Martoma Leniency, Glaxo Probe, Tourre Appeal: Compliance

Former SAC Capital Advisors LP fund manager Mathew Martoma is seeking a lenient prison term for his insider-trading conviction, saying the narrow scope of his unlawful trades warrants a lighter penalty when he is sentenced next month.

Martoma was convicted of trading that took place over at most two weeks based on one piece of information from one tipper about one event, making him “less culpable than other recent insider trading defendants,” Richard Strassberg, an attorney for Martoma, said in a May 27 filing in federal court in Manhattan. He described the recommended 15 to 20 year prison sentence as “outrageous.”

While Strassberg didn’t cite a specific sentence, he cited cases similar to Martoma’s that resulted in prison terms as short as two years.

Martoma was convicted in February after prosecutors alleged he helped SAC Capital make $276 million on illegal tips about an Alzheimer’s drug by trading in Elan Corp. and Wyeth LLC. More than a 100 people wrote letters in support of Martoma and his “tight-knit, fragile family,” according to the filing.

Separately, an administrative proceeding filed against SAC Capital founder Steven A. Cohen by the Securities and Exchange Commission should be put on hold because prosecutions of his former employees aren’t fully resolved, the government told an agency judge.

The SEC filed its case against Cohen last year, alleging he failed to supervise former hedge fund managers Martoma and Michael Steinberg. Both men were convicted after separate federal trials in Manhattan.

The federal judge who presided over Steinberg’s case “acknowledged the possibility” that Steinberg’s conviction could be overturned after two other portfolio managers found guilty in a related case appealed their convictions in April. Assistant U.S. Attorney Arlo Devlin-Brown has asked Brenda P. Murray, the SEC’s chief administrative law judge, to delay the agency’s case while the criminal cases are pending.

SAC Capital last year reached a $1.8 billion settlement with the U.S., pleading guilty to making hundreds of millions of dollars in illegal profits and fostering a criminal culture at the firm. The hedge fund has since shut its doors to outside investors and changed its name to Point72 Asset Management LP. Cohen, who has denied wrongdoing, hasn’t been charged with a crime.

Steinberg, convicted after a federal trial in New York in December, was sentenced this month to 3 1/2 years in prison.

The criminal cases are U.S. v. Martoma, 12-cr-00973, and U.S. v. Steinberg, 12-cr- 00121, U.S. District Court, Southern District of New York (Manhattan). The SEC administrative proceeding is In the Matter of Steven A. Cohen, Administrative Proceeding No. 3-15382.

Compliance Action

Glaxo Faces Criminal Probe After China Bribery Allegations

GlaxoSmithKline Plc faces a criminal probe in the U.K. after allegations in China that the drugmaker’s employees bribed doctors, hospitals and medical associations to boost sales.

The Serious Fraud Office “has opened a formal criminal investigation into the group’s commercial practices,” London-based Glaxo said in a statement May 27. “GSK is committed to operating its business to the highest ethical standards and will continue to cooperate fully with the SFO.”

Since China began its investigation in June, allegations have surfaced of wrongdoing by company employees in Iraq, Poland, Jordan and Lebanon. The U.S. Justice Department began looking in 2010 into whether Glaxo and several other drugmakers violated a law against bribing officials in foreign countries.

Glaxo won’t comment beyond the statement, David Mawdsley, a spokesman, said by e-mail. He declined to say whether the U.K. probe involves China. The fraud office confirmed in a statement that a criminal investigation is under way, without providing any details.


Ex-Goldman VP Tourre Says He Won’t Appeal in Civil SEC Case

Ex-Goldman Sachs Group Inc. vice president Fabrice Tourre, found liable Aug. 1 for his part in a failed $1 billion subprime-mortgage investment known as Abacus in a case brought by the Securities and Exchange Commission, said he won’t appeal the verdict.

“I look forward to finishing my PhD in Economics and to making meaningful contributions to my field,” Tourre said in statement. He is a graduate student at the University of Chicago.

U.S. District Judge Katherine Forrest in Manhattan ruled March 12 that Tourre must pay $650,000 in civil penalties and give up $175,463 of his 2007 bonus, plus interest. He can’t seek reimbursement of the penalties from Goldman Sachs, the judge ruled.

Goldman Sachs, which paid Tourre’s legal fees, settled SEC claims over the Abacus transaction in July 2010 for $550 million, a record at the time.

Comings and Goings

Standard Chartered Names Cusack to Head Financial Compliance

Standard Chartered Plc, the international banking group, named John Cusack to be global head, financial crime compliance and group money laundering reporting officer, the company said in statement on its website.

Cusack will join Standard Chartered from UBS AG, where he was group managing director and deputy global head of compliance.

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