Jury Finds SAC's Martoma Guilty as Bharara Extends Streak
Despite the efforts of defense lawyer Richard Strassberg of Goodwin Procter, Manhattan U.S. Attorney Preet Bharara claimed yet another victory on Thursday in his campaign to clamp down on insider trading. Capping a four-week trial, a jury found former SAC Capital Advisors portfolio manager Matthew Martoma guilty of using insider tips to trade shares of two drug companies.
The unanimous jury sided with prosecutors on each of their conspiracy and securities charges after two-and-a-half days of deliberations.
Given the impressive evidence against Martoma—not to mention the publicity surrounding his trial—Thursday's verdict must have been a huge relief to the U.S. Department of Justice. Bharara's office, meanwhile, trumpeted the verdict as par for the course: Martoma is the 79th person convicted of insider trading by trial or guilty plea under Bharara's watch, with zero acquittals.
To obtain Thursday's verdict, the government persuaded jurors that Martoma gained nonpublic information from a doctor about disappointing clinical trials of an Alzheimer's drug. Prosecutors claimed that SAC used the tips to trade in shares of Wyeth and Elan Corp., netting the hedge fund $275 million in profits and avoided losses. The doctor who allegedly shared the clinical data with Martoma, Sidney Gilman, was the government's lead witness.
In a statement, Bharara said that Martoma "bought the answer sheet before the exam," securing himself a $9 million bonus at SAC. "In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty," Bharara said.
Martoma's lawyer, Goodwin Procter's Strassberg, didn't immediately return our call. He told a reporter for Time after the verdict that he was "very disappointed" and planned to appeal.
In the run-up to trial last month, U.S. District Judge Paul Gardephe unsealed eye-popping evidence that Harvard Law School expelled Martoma a decade and a half ago for falsifying transcripts in judicial clerkship applications and then covering up his misconduct. The government didn't ultimately introduce that evidence at trial.
Martoma is the eighth person who worked at Steven Cohen's SAC Capital to be charged in the government's long-running insider trading investigation. Cohen himself has yet to face criminal charges, although SAC was indicted in July and pleaded guilty in November, agreeing to pay $1.2 billion in penalties. The government's main witness in the Martoma case, Gilman, testified at trial that federal agents told him Cohen was the ultimate target of their investigation.