By Nate Raymond
NEW YORK Jan 17 A former University of Michigan
neurology professor took the stand on Friday as the government's
star witness in the insider trading trial of Mathew Martoma,
saying he divulged confidential information about a drug trial
to the former SAC Capital Advisors trader.
Sidney Gilman, a retired doctor who is cooperating with
prosecutors, told jurors in New York federal court he leaked
confidential information to Martoma about safety and efficacy of
a drug under development by Elan Corp Plc and Wyeth.
"I revealed information that was confidential about a
clinical drug trial to Mathew Martoma inappropriately," Gilman
He said Martoma told him he wanted to be his friend. And
while Gilman said he at first only accidentally gave Martoma
confidential information during paid consultations, over time
the doctor was freely volunteering it.
Gilman, 81, is one of two doctors from whom prosecutors
contend Martoma obtained information to advance a
record-breaking insider trading scheme.
His testimony is seen as key in securing the conviction of
Martoma, 39, one of eight current or former employees of SAC
Capital to be charged with insider trading.
SAC Capital, a once $14 billion hedge fund owned by Steven
A. Cohen, has agreed to pay $1.8 billion in criminal and civil
settlements and plead guilty to fraud charges stemming from
insider trading by its employees.
Cohen, 57, has not been criminally charged and has denied
wrongdoing. The U.S. Securities and Exchange Commission is
seeking to bar Cohen from the financial industry for failing to
supervise Martoma and SAC portfolio manager Michael Steinberg,
who was convicted of insider trading in December.
Gilman is expected to resume testimony on Tuesday. On
cross-examination, lawyers for Martoma are expected to question
Gilman's recollection and credibility.
In opening statements, Richard Strassberg, a lawyer for
Martoma, told jurors that non-prosecution agreement Gilman
received in exchange for his cooperation gave him a "great
motivation to remember things" the way the prosecution wants.
Prosecutors said that from 2006 to 2008, Martoma obtained
confidential information from Gilman and another doctor, Joel
Ross, about a clinical trial underway for an Alzheimer's drug
called bapineuzumab being developed by Elan and Wyeth, now a
unit of Pfizer Inc.
Speaking slowly at times and wearing hearing aids, Gilman
told jurors how he had chaired the safety monitoring committee
for the Phase II clinical trial.
During this time, Gilman said he also spoke with Martoma, a
portfolio manager at SAC's CR Intrinsic Investors, through
consultations arranged by Gerson Lehrman Group, a so-called
expert networking firm that by 2008 was paying him around
Gilman said that, in these consultations, he would regularly
discuss data about the safety of the drug with Martoma. They
would set up calls usually around the quarterly teleconferences
or meetings of the safety committee, he said.
Martoma in particular showed an interest in a side-effect
that could cause swelling in the brain, Gilman said. Over time,
Gilman said he saw the swelling, "as a positive sign even though
it was a side-effect."
"I thought it was cool," he added.
FLIGHT TO MICHIGAN
Martoma ultimately had more than 40 paid consultations for
which he earned more than $70,000, Arlo Devlin-Brown, the lead
prosecutor, said during opening statements last week.
While Gilman said he consulted with hundreds of other people
through Gerson Lehrman, he considered Martoma "among the top 10
people in terms of inquisitiveness," saying he asked probing
questions and seemed "very bright."
"I wished I had students like that," he said.
Gilman said when it came time to present the results, the
drug companies chose him to present them at a Chicago conference
on July 29, 2008. He was sent the results in advance, which he
then shared with Martoma.
"I knew I was not allowed to do so," he added.
Prosecutors said Gilman shared the results on July 17, 12
days before they would be made public. On July 19, a Saturday,
Martoma flew to Michigan to meet with Gilman in his office in
Ann Arbor and review PowerPoint slides about the results,
They said that after returning home, Martoma emailed Cohen
on July 20 and then spoke with him for 20 minutes.
It is not known what was said, but prosecutors said SAC
began selling off its $700 million position in Elan and Wyeth on
July 21. When the drug trial results were announced, SAC made
profits and avoided losses of $276 million, prosecutors said.
The case is U.S. v. Martoma, U.S. District Court, Southern
District of New York, 12-cr-00973.