By Nate Raymond
NEW YORK, Feb 4 (Reuters) - A jury began deliberating on Tuesday on whether to convict Mathew Martoma of insider trading stemming from trades made while working at Steven A. Cohen’s SAC Capital Advisors hedge fund, in what prosecutors called the most lucrative such scheme in U.S. history.
U.S. District Judge Paul Gardephe in Manhattan spent the morning instructing the seven women and five men on the jury before they began their deliberations.
The jurors, who will resume deliberations Wednesday morning, include a bus driver, an employment lawyer and a film professor.
Jurors ended the day without a verdict after sending the judge a single note with a question about an element prosecutors must prove to establish insider trading. Deliberations will resume Wednesday morning.
Prosecutors charged that from 2006 to 2008, Martoma sought out confidential information from doctors involved in a clinical trial for an Alzheimer’s disease drug being developed by Elan Corp Plc and Wyeth, now owned by Pfizer Inc.
Prosecutors said SAC Capital began selling off its $700 million position in Elan and Wyeth in July 2008, based on a tip Martoma got from a doctor, Sidney Gilman, about negative trial results for the drug that were not made public until later that month.
Thanks to the trades, SAC Capital made profits and avoided losses of $275 million, prosecutors say.
Most of the trading took place in accounts controlled by Cohen, who prosecutors say Martoma had a 20-minute phone call with after receiving information about the negative results.
Martoma, 39, a former portfolio manager at SAC, denies wrongdoing. His lawyer Richard Strassberg told jurors Monday that prosecutors erred in charging his client “in their haste to make a case against someone who is not even in this courtroom: Mathew Martoma’s boss, Steven Cohen.”
Cohen, 57, has not been criminally charged. But the U.S. Securities and Exchange Commission is seeking to bar Cohen from the financial services industry for failing to supervise Martoma and Michael Steinberg, another portfolio manager convicted in December on insider trading charges. Cohen denies wrongdoing.
In total, prosecutors have charged eight current of former employees at Cohen’s hedge fund. SAC Capital last year agreed to pay $1.8 billion in criminal and civil settlements and plead guilty to fraud charges stemming from insider trading by its employees.
SAC Capital is scheduled to be sentenced March 14. It is meanwhile in process of converting into a so-called family office that will manage Cohen’s estimated $9 billion fortune.
Jurors sent Gardephe a note related to an element of what prosecutors must prove to establish Martoma engaged in insider trading, namely the “personal benefit” received by an insider in exchange for material non-public information.
Jurors asked if the benefit could include fees paid by Gerson Lehrman Group. Prosecutors say that Gilman, 81, received around $70,000 for his more than 40 paid consultations with Martoma arranged through Gerson Lerhman, a firm that pairs experts with investors.
Gilman, who chaired the safety monitoring committee for the clinical drug trial, testified that he provided confidential information to Martoma. The doctor testified pursuant to a non-prosecution agreement.
The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, No. 12-cr-00973.