NEW YORK Feb 3 Mathew Martoma sought out a "canary in the coal mine" to give him inside information on drug companies, a federal prosecutor said on Monday, urging jurors to convict the former SAC Capital Advisors portfolio manager of insider trading.
Martoma, 39, built up contacts with doctors involved in a clinical trial of an Alzheimer's drug, which paid off in a "dramatic way" when one of them told him the final results, Assistant U.S. Attorney Eugene Ingoglia said.
"Martoma then used this information for his financial benefit," Ingoglia said.
Ingoglia was summarizing the government's case after four weeks of trial over what prosecutors call the most lucrative insider trading episode in U.S. history.
Martoma is accused of using confidential information to trade the stocks of the drug's developers, Elan Corp Plc and Wyeth, which is now owned by Pfizer Inc. Based on that information, SAC Capital made profits and avoided losses of about $275 million.
Martoma has denied wrongdoing. His lawyer, Richard Strassberg, told jurors the entire case came down to the testimony of a single doctor who cooperated with the government and whose "testimony cannot be believed."
"If beyond a reasonable doubt means anything, then it's that the prosecution has failed to prove its case against Mathew Martoma," Strassberg said.
With Martoma's wife, Rosemary, looking on, Ingoglia told a packed courtroom that Martoma had "corrupted" two doctors involved in the trial beginning in 2006.
After an earlier trial for an Alzheimer's drug developed by Elan had been halted due to safety issues, "Martoma needed the equivalent of a canary in the coal mine," Ingoglia said.
Martoma began speaking with Joel Ross, a clinical investigator on the trial who oversaw patients at his clinic in Eatontown, New Jersey.
Ross, 58, earned $1,500 an hour to speak with Martoma, Ingoglia said. Ross also "very badly" wanted Martoma to help use his contacts to bring business to his newest clinic, he said.
"He was going to return the favor or return the courtesy by giving insider information to Mr. Martoma," Ingoglia said.
Ingoglia said Martoma received "an illegal sneak preview" in July 2008 of negative results of the drug trial from Sidney Gilman, then a professor at University of Michigan who chaired the drug trial's safety monitoring committee.
SAC Capital then began selling off its $700 million position in Elan and Wyeth before the data was made public later that month, Ingoglia said.
Most of the trading took place in accounts controlled by Steven A. Cohen, the founder of SAC Capital Advisors, who was informed about the negative results by Martoma during a 20-minute telephone call, Ingoglia said.
Gilman, 81, testified under a non-prosecution agreement, as did Ross. But Strassberg said "there are so many inconsistencies and so many changes" in the testimony by Gilman, whose memory became an issue at trial.
"It is just Dr. Gilman's testimony, and that testimony cannot be believed," Strassberg said.
Cohen, 57, has not been criminally charged. The U.S. Securities and Exchange Commission is seeking to bar him from the financial services industry for failing to supervise Martoma and Steinberg. Cohen has denied wrongdoing.
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.
The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.