The 39-year-old Mathew Martoma is embroiled in what prosecutors have called the most lucrative insider trading episode in U.S. history. Martoma, who worked in SAC Capital Advisors' CR Intrinsic Investors division, is accused of using confidential information to trade stocks of the drug's developers, Elan Corp Plc and Wyeth, which is owned by Pfizer Inc.
Martoma reportedly built up contacts with doctors who were involved in a clinical trial of an Alzheimer's drug, which would wind up as a major payoff in a "dramatic way" after one told him of the final medical results, Assistant U.S. Attorney Eugene Ingoglia said.
Last November, SAC Capital Advisors' hedge fund manager and founder Stephen Cohen struck a massive plea dea to resolve all insider trading claims. At the time, the hedge fund manager agreed to plead guilty "to criminal fraud charges, stop investing money for others and pay 1.8 billion... to resolve criminal and civil clams," as reported by The Associated Press.
Cohen has not been criminally charged.
The $1.8 billion figure marked the largest financial penalty in the history of insider trading deals.
"We take responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC's liability. The tiny fraction of wrongdoers does not represent the 3,000 honest men and women who have worked at the firm during the past 21 years. SAC has never encouraged, promoted or tolerated insider trading," a spokesman for SAC Capital read in a statement last November 4.
"No institution should rest easy in the belief that it is too big to jail. Today, SAC Capital, one of the world's largest and most powerful hedge funds, agreed to plead guilty, shut down its investment business and pay the largest fine in history for insider trading offenses. That is the just and appropriate price for the pervasive and unprecedented institutional misconduct that occurred here," argued U.S. Attorney Preet Bharara.
Martoma is one of at least eight former SAC employees who has been been criminally charged with committing insider trading.
The jury is comprised of seven women and five men. U.S. District Court Judge Paul Gardephe is presiding over the trial, as Martoma faces conspiracy and two counts of securities fraud. Jurors have deliberated since Monday, and a verdict is expected within days or hours.
Richard Strassberg, Martoma's defense lawyer, argued that there was unreliable testimony by just one doctor who cooperated with the government in hopes of avoiding prison. Martoma became a victim of "rush to judgment" by investigators, according to Strassberg.
Martoma's trial lasted for four weeks. .
Michael Steinberg, Cohen's principal manager, was convicted of insider trading on December 18, as reported in The Wall Street Journal. He was accused of using inside information about technology companies Dell Inc. and Nvidia Corp. to make lucrative trades. Steinberg crossed a legal line in his pursuit of a "trading edge," according to The Wall Street Journal.
Martoma is the eighth current or former SAC Capital employee charged with insider trading The other seven defendants pleaded guilty or have since been convicted. Based on that information, SAC Capital made profit and avoided losses of about $275 million, prosecutors have said. Martoma had "corrupted" two doctors involved in the trial, beginning in 2006, according to news reports.
A verdict is expected on Wednesday or Thursday.
