| NEW YORK
NEW YORK Jan 10 Prosecutors "rushed to
judgment" in charging former SAC Capital Advisors portfolio
manager Mathew Martoma with insider trading, his lawyer told
jurors on Friday.
Richard Strassberg, Martoma's attorney, argued there were
"many, many independent reasons" for the hedge fund to have made
the trades at the heart of the case.
"The story just doesn't add up because in the haste to make
a case, the prosecution rushed to judgment," Strassberg said.
Arlo Devlin-Brown, an assistant U.S. attorney, acknowledged
that Martoma did research before trading in the stocks and
making investment recommendations to Steven A. Cohen, the
founder of SAC Capital.
"But the evidence is going to show Mathew Martoma also
sought out an illegal edge," Devlin-Brown said.
Martoma had "corrupted" two doctors involved in a clinical
trial being conducted by Elan Corp and Wyeth of an Alzheimer's
drug in order to gain inside information, the prosecutor said.
Strassberg and Devlin-Brown were making opening statements
on Friday in the criminal trial of Martoma, 39, before a
standing-room-only crowd in federal court in New York.
Prosecutors say Martoma engaged in the most lucrative insider
trading scheme in U.S. history, helping SAC make profits and
avoid losses of $276 million.
The case is one of a series of prosecutions by U.S.
authorities since 2009 with the aim of cracking down on insider
trading by hedge funds.
Much of the government's attention has centered on Cohen's
SAC Capital, a once $14 billion hedge fund that has agreed to
pay $1.8 billion in criminal and civil settlements and plead
guilty to fraud charges stemming from insider trading by its
Martoma is one of eight current or former SAC employees to
be charged with insider trading. A resident of Boca Raton,
Florida, Martoma worked at the hedge fund's CR Intrinsic
Investors division before being charged with three conspiracy
and securities fraud counts.
An indictment against Martoma accuses him of arranging
trades in Elan and Wyeth based on confidential information he
got from two doctors, Sidney Gilman and Joel Ross, who took part
in a clinical trial for an Alzheimer's drug. Wyeth is now a unit
of Pfizer Inc.
FOCUS ON DOCTORS' CREDIBILITY
During the opening statements Friday, Strassberg urged
jurors to question the credibility of the doctors, who he said
received "sweetheart" deals promising they would not be
prosecuted if they cooperated with the investigation.
He focused in particular on Gilman, a former neurology
professor at the University of Michigan, saying he first told
government investigators he had not provided Martoma with
"Dr. Gilman felt pressure to tell a story the prosecutors
wanted to hear," Strassberg said.
He also questioned the memory of Gilman, 81, who at the time
was undergoing chemotherapy and taking a drug whose side effects
Devlin-Brown, the prosecutor, acknowledged there was "no
question these doctors broke the law and disgraced themselves
and their professions."
He called them "valuable witnesses" who had agreed to
testify about their "corrupt" relationships with Martoma.
Martoma came to connect with the doctors through so-called
expert-networking firms, which connect sophisticated investors
with industry experts, Devlin-Brown said.
Ross, a New Jersey doctor who was a clinical investigator on
the Alzheimer's drug trial, earned $1,500 per hour to consult
with Martoma, he said.
Ross oversaw a couple of dozen patients participating in the
trial and "started telling Mathew Martoma virtually everything
he knew about the drug trial," Devlin-Brown said.
Gilman earned $70,000 through more than 40 paid
consultations with Martoma, Devlin-Brown said. The doctor also
began considering Martoma a friend, in what Devlin-Brown said
could be seen as an "odd coupling."
Gilman too began telling Martoma about "virtually everything
he was learning," about the drug, bapineuzumab, Devlin-Brown
said, including ultimately on July 17, 2008, about the final
trial results, which he was scheduled to present at a conference
in Chicago on July 29.
Martoma flew out to meet Gilman in Michigan on Saturday,
July 19, where he reviewed a presentation about the trial,
"The evidence will show that he knew these results would not
be good," he said.
After the meeting, SAC sold off its $700 million position in
Elan and Wyeth, and placed bets against the companies.
For his part, Strassberg said SAC had always planned to sell
off its stake. He said by the time the sale took place, Elan's
stock had become "overheated" and the global financial crisis
"You're going to see the evidence doesn't match the story,"
The case is U.S. v. Martoma, U.S. District Court, Southern
District of New York, 12-cr-00973.