By Nate Raymond and Joseph Ax and Emily Flitter
NEW YORK Jan 9 Years before he was accused of
insider trading, former SAC Capital Advisors portfolio manager
Mathew Martoma forged a Harvard transcript, falsified an email,
and created a dummy forensic computing company to try to cover
his tracks, according to a court document unsealed on Thursday.
Martoma was eventually expelled from Harvard Law School over
the incident, according to the document, which began with his
forging a Harvard transcript to submit an application for a
The revelations, which date back to 1999, came as government
and defense lawyers prepared to make their opening statements in
Martoma's high-profile insider trading trial on Friday.
Martoma's lawyers on Thursday lost a battle to keep the
facts surrounding Martoma's expulsion from Harvard Law out of
his insider trading trial.
News of Martoma's Harvard troubles came to light in two
orders issued by U.S. District Judge Paul Gardephe in which he
said documents related to a disciplinary proceeding against
Martoma in 1999, while he was a student at Harvard, should be
Martoma's lawyers had fought all the way to the 2nd U.S.
Circuit Court of Appeals to keep the papers secret, arguing he
would suffer embarrassment and his right to a fair trial would
be violated. The 2nd Circuit denied his appeal Wednesday.
Lou Colasuonno, a spokesman for Martoma, declined to
describe the event at Harvard, but said it occurred 15 years ago
and has no bearing on the case.
"Raising it now is a transparent effort by the government to
unduly influence the ongoing court proceedings," Colasuonno
According to one of the orders, which was unsealed Thursday,
Martoma, then a Harvard Law student, used computer software to
create a fake transcript which he then sent to federal judges in
an attempt to secure a clerkship. Based on his beefed up
transcript, he landed interviews with several judges.
But the lie caught up with him and Harvard initiated
disciplinary proceedings. During the proceedings, Martoma
changed the date of an email before submitting it as evidence of
his innocence. He also submitted a computer forensic report
about the email with the falsified date, but did not tell the
disciplinary committee that the company that produced the
forensic report was his creation.
A spokesman for Harvard, Robb London, said the school does
not comment on disciplinary proceedings, although he said it had
no record of Martoma graduating.
In his ruling, Judge Gardephe noted the government "does not
seek to introduce the law school evidence during its
case-in-chief," but would instead use it "to rebut particular
arguments made by the defendant."
Specifically, according to the judge's order, prosecutors
were planning to use the evidence to counter any point Martoma's
defense team tried to make about the lack of forensic evidence
in the government's case by proving Martoma understood the
"importance of minimizing electronic evidence that could
establish his guilt and his capacity to alter such evidence to
fit his version of events."
"It is undisputed that Martoma falsified the grades," Judge
Gardephe wrote, as were the rest of the facts Martoma's team was
looking to suppress.
"The embarrassment Martoma will suffer if the law school
evidence is disclosed does not trump the presumptive right to
public access that attaches to substantive pretrial motions."
CHOSE TO GO TO TRIAL
Martoma, 39, is one of eight current or former SAC Capital
employees to face criminal insider trading charges.
He chose to go to trial rather than plead guilty and
cooperate with prosecutors, an option six others took. Another,
Michael Steinberg, was convicted on insider trading charges in
Prosecutors accuse Martoma of arranging trades in Elan Corp
and Wyeth based on nonpublic information he got from
two doctors involved in a clinical trial for an Alzheimer's
drug. Wyeth was later acquired by Pfizer Inc.
The trades enabled SAC Capital to make profits and avoid
losses of $276 million, a sum prosecutors say is a record in a
U.S. insider trading case.
SAC Capital pleaded guilty to fraud charges in November
stemming from employees' insider trading. The hedge fund has
agreed to pay $1.8 billion in criminal and civil settlements.
Steven A. Cohen, the founder of SAC Capital, has not been
criminally charged but faces an administrative action by the
U.S. Securities and Exchange Commission seeking to bar him from
the financial industry for failing to supervise Martoma and
Steinberg. He denies wrongdoing.
In court on Thursday, Judge Gardephe and lawyers for both
sides agreed on the seven women and five men who will hear the
case against Martoma. The jurors range in age from 24 to 66 and
include an employment lawyer, a city bus driver and a film
professor who spent much of his time in court with an unlit
cigar in his mouth. Four alternate jurors were also expected to
be selected on Thursday afternoon.
The judge said opening statements would start Friday.
After leaving Harvard, Martoma went to Stanford University
where he earned an MBA.
The case is U.S. v. Martoma, U.S. District Court, Southern
District of New York, 12-cr-00973.