NEW YORK, Jan 14 (Reuters) - A doctor who was involved in a clinical drug trial testified Tuesday to providing confidential information to Mathew Martoma, the former SAC Capital Advisors portfolio manager on trial on insider trading charges.
Joel Ross, one of two doctors who prosecutors say spoke with Martoma about the trial of an Alzheimer’s drug, said that he spoke frequently with Martoma during paid consultations.
“There was confidential information I shared with him on more than one occasion,” Ross said.
Martoma even made plans to discuss the results of the clinical trial on the day the doctor learned them, a day before they were to be presented publicly July 29, 2008, Ross said.
Martoma even made plans to discuss the results of the clinical trial a day before they were to be made public on July 29, 2008, Ross said, after he himself would have learned the results.
The testimony gave jurors their first opportunity to hear from one of the two doctors that prosecutors say Martoma used for what became a record-setting insider trading scheme.
Martoma used the information from Ross and the other doctor, Sidney Gilman, to support building up a $700 million position in Elan Corp Plc and Wyeth and then pushing his hedge fund to sell it off in 2008 in advance of negative results, prosecutors have said.
Thanks to those trades, SAC made profits and avoided losses of $276 million, according to an indictment against him.
Martoma, who left SAC in 2010, is one of eight current or former employees of billionaire Steven A. Cohen’s hedge fund to be charged with insider trading.
SAC Capital, which once managed $14 billion, 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 has denied wrongdoing.
Ross, 58, acted as a clinical investigator on the Phase II drug trial, which he said had a total of 270 patients.
Ross said he was overseeing 25 of the patients at his Memory Enhancement Center of America Inc, based in Eatontown, New Jersey. It was a so-called double-blind study, in which Ross said he didn’t know if his patients were receiving the drug or a placebo.
The doctor said he met Martoma in 2006 through a firm called HCRC, one of at least four outfits he said reached out to him about speaking to investors interested in his expertise.
For his consultations, Ross said he was paid $1,500 per hour. He also said he pushed Martoma to connect him with people to help bring research to a new center that he was working at, also in New Jersey. Jurors were shown a photo of Martoma and Ross together at the center’s grand opening in December 2007.
Ross said he spoke with other investors at times, also through third-party firms that arranged for such consultations. But he said Martoma “stood apart,” describing him as “one of the most well-informed Alzheimer’s individuals I ever met.”
The doctor will resume his direct testimony Wednesday. On cross-examination, the defense is expected to question his credibility and the importance of the information he had available to share with Martoma.
Last week, Richard Strassberg, a lawyer for Martoma, said Ross received a “sweetheart deal” from prosecutors through a non-prosecution agreement in exchange for his testimony.
Gilman, a former neurology professor at the University of Michigan who chaired the drug’s safety monitoring committee and presented the final results, is expected to testify later in the trial also pursuant to a non-prosecution agreement.
The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.