NEW YORK (Reuters) - 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 that 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 said.
Gilman, 81, is one of two doctors from whom prosecutors contend that 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.
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.
They said that during this time, Gilman spoke with Martoma, a portfolio manager at SAC’s CR Intrinsic Investors, through a so-called expert networking firm, Gerson Lehrman Group, and had more than 40 paid consultations for which he earned more than $70,000.
Speaking slowly at times and wearing hearing aids, Gilman, an expert in Alzheimer’s disease, told jurors he chaired the safety monitoring committee for the Phase II clinical trial.
He had been chosen by Elan to present the results of the study at a Chicago conference on July 29, 2008.
But prosecutors said that 12 days earlier, on July 17, Gilman told Martoma the final results of the trial.
Prosecutors said that 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 on July 20 emailed Cohen, and then spoke with him for 20 minutes.
It is not known what was said, but prosecutors said SAC on July 21 began selling off its $700 million position in Elan and Wyeth. When the drug trial results were announced, SAC made profits and avoided losses of $276 million, prosecutors said.
Lawyers for Martoma are expected to question Gilman’s credibility and recollection during cross-examination.
Cohen 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.
The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.
Reporting by Nate Raymond in New York; Editing by David Gregorio