By Nate Raymond
NEW YORK Jan 28 Steven A. Cohen tried to sell
stock as quietly as possible as SAC Capital Advisors unwound
positions at the center of an insider trading trial, the hedge
fund's head trader said on Thursday.
The testimony came as the government called its final
witnesses in the trial of former portfolio manager Mathew
Martoma, putting the case within days of its conclusion.
Martoma, 39, is accused of using inside information about a
drug trial to trade in the stock of Elan Corp Plc and
Wyeth that helped SAC Capital make profits and avoid losses of
Much of that trading took place in accounts controlled by
Cohen after prosecutors say Martoma received a tip about
negative results for a clinical trial for an Alzheimer's drug
being developed by Elan and Wyeth.
"Steve wanted to start selling Elan and he wanted to put in
accounts that didn't have as much visibility" inside SAC
Capital, Phillipp Villhauer, the hedge fund's top trader,
That included making trades through accounts that only about
15 of SAC's roughly 900 employees could view, he said, and using
computer algorithms and "dark pools" instead of public exchanges
to make the trades.
Under questioning by a lawyer for Martoma, Villhauer said
there was "absolutely nothing improper" about the methods SAC
used to minimize transparency of the trades, saying big
investors used the tactic to avoid causing a stock price to fall
during a sale.
Cohen, 57, has not been charged with a crime, although the
U.S. Securities and Exchange Commission is seeking to bar him
from the financial industry for failing to supervise Martoma and
another employee the agency says took part in insider trading.
Villhauer was among the final three witnesses in the
government's case against Martoma, shifting the case to
Martoma's defense team.
Lawyers for Martoma called their first two witnesses Tuesday
afternoon, including Peter Nussbaum, the general counsel for SAC
Capital, who testified to an arrangement the hedge fund had with
a former SAC portfolio manager to give advice on Wyeth.
The former portfolio manager, Wayne Holman, had left SAC
Capital in 2006 and started up his own hedge fund, Ridgeback
Capital Management. SAC Capital entered into a deal with Holman
to advise on investing in Wyeth in November 2007, Nussbaum said.
"He was expected to provide his advice on Wyeth to Steve,"
The testimony could help bolster an argument by Martoma's
lawyers that SAC's investments in Wyeth were not based solely on
any of the information focused on by prosecutors.
Cohen has said in a deposition with the SEC that he decided
to sell SAC Capital's position in Wyeth after speaking with
Holman. Martoma's lawyers had sought to introduce the deposition
at trial, but U.S. Judge Paul Gardephe denied the bid.
Over 12 days during the trial, prosecutors called 20
witnesses as they sought a conviction of an eighth current or
former employee of Cohen's hedge fund.
SAC Capital agreed last year to pay $1.8 billion in criminal
and civil settlements and plead guilty to fraud charges stemming
from insider trading by its employees.
Among the government witnesses was Sidney Gilman, a doctor
who chaired the safety monitoring committee for the drug trial
and testified to regularly speaking with Martoma through paid
consultations arranged through Gerson Lehrman Group, a firm that
connects experts with investors.
But Gilman's memory was repeatedly tested while on the
stand. The 81-year-old former University of Michigan professor
said he had "some holes in my memory" regarding a key meeting
with Martoma in July 2008 ahead of the negative results being
Other government witnesses included Joel Ross, a New Jersey
doctor who acted as a clinical investor on the trial for the
Alzheimer's drug, bapineuzumab, and said he also provided
confidential information to Martoma. Both he and Gilman are
testifying pursuant to non-prosecution agreements.
Richard Strassberg, Martoma's lawyer, said he expected to
finish the case for the defense by Thursday. Closing arguments
could come as early as Friday, Gardephe said.
The case is U.S. v. Martoma, U.S. District Court, Southern
District of New York, 12-cr-00973.