January 9, 2014 / 8:50 PM / 4 years ago

SAC's Martoma faced discipline at Harvard, documents show

NEW YORK, Jan 9 (Reuters) - Years before he went on trial for insider trading, former SAC Capital Advisors portfolio manager Mathew Martoma faced disciplinary action while at Harvard Law School, according to court records unsealed on Thursday.

The court records do not reveal how Martoma was disciplined. But a person familiar with the matter said he was expelled from Harvard in 1999 for creating a false grades transcript.

A spokesman for Harvard, Robb London, said the school does not comment on disciplinary proceedings, although he said it had no record of Martoma graduating.

The revelations, which date back to 1999, came as government and defense lawyers prepared to make their opening statements in Martoma’s high-profile insider trading trial on Friday.

Lou Colasuonno, a spokesman for Martoma, declined to describe the event at Harvard, but said it occurred 15 years ago and has no bearing on the case.

“Raising it now is a transparent effort by the government to unduly influence the ongoing court proceedings,” Colasuonno said.

Martoma, 39, is one of eight current or former SAC Capital employees to face criminal insider trading charges.

He chose to go to trial rather than plead guilty and cooperate with prosecutors, an option six others took. Another, Michael Steinberg, was convicted on insider trading charges in December.

Prosecutors accuse Martoma of arranging trades in Elan Corp and Wyeth based on nonpublic information he got from two doctors involved in a clinical trial for an Alzheimer’s drug. Wyeth was later acquired by Pfizer Inc.

The trades enabled SAC Capital to make profits and avoid losses of $276 million, a sum prosecutors say is a record in a U.S. insider trading case.

SAC Capital pleaded guilty to fraud charges in November stemming from employees’ insider trading. The hedge fund has agreed to pay $1.8 billion in criminal and civil settlements.

Steven A. Cohen, the founder of SAC Capital, has not been criminally charged but faces an administrative action by the U.S. Securities and Exchange Commission seeking to bar him from the financial industry for failing to supervise Martoma and Steinberg. He denies wrongdoing.

In court on Thursday, U.S. District Judge Paul Gardephe and lawyers for both sides agreed on the seven women and five men who will hear the case against Martoma. The jurors range in age from 24 to 66 and include a film professor, a lawyer and a bus driver.

The judge said opening statements would start Friday.

News of Martoma’s Harvard troubles came to light in two orders issued by Gardephe in which he said documents related to a disciplinary proceeding against Martoma in 1999, while he was a student at Harvard, should be unsealed.

Martoma’s lawyers had fought all the way to the 2nd U.S. Circuit Court of Appeals to keep the papers secret, arguing he would suffer embarrassment and his right to a fair trial would be violated. The 2nd Circuit denied his appeal Wednesday.

The documents were not immediately available. The 2nd Circuit was expected to make them available Friday.

After leaving Harvard, Martoma went to Stanford University where he earned an MBA.

The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.

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