May 28, 2014 / 1:51 PM / 6 years ago

Long sentence for ex-SAC trader Martoma appropriate: court officials

NEW YORK (Reuters) - A prison sentence approaching 20 years would be an appropriate punishment for Mathew Martoma, a former SAC Capital Advisors LP fund manager convicted of insider trading, U.S. court officials said, prompting his lawyers to object strenuously.

Former SAC Capital Advisors portfolio manager Mathew Martoma walks out of the courthouse in downtown Manhattan, New York, February 6, 2014. REUTERS/Eduardo Munoz

In a court filing late Tuesday, lawyers for Martoma urged U.S. District Judge Paul Gardephe in Manhattan to show leniency, and impose a lesser sentence than the 11-year prison term given to Galleon Group hedge fund founder Raj Rajaratnam for his 2011 insider trading conviction. A term of nearly 20 years would be record for an insider trading conviction.

The filing also included more than 100 letters of support for Martoma, of Boca Raton, Florida, who is married and has three young children. SAC was founded and owned by billionaire investor Steven A. Cohen.

Martoma faces sentencing on June 10 following his Feb. 6 fraud conviction for seeking and trading on confidential tips about a clinical trial for an Alzheimer’s drug.

Prosecutors said this enabled SAC to make about $275 million in July 2008 from trades in Elan Corp and Wyeth, the nation’s largest insider trading scheme by dollar value.

According to Tuesday’s filing, the probation department for the Manhattan court deemed a prison term for Martoma of between 15 years, 8 months and 19 years, 7 months appropriate under federal guidelines.

Martoma’s lawyers, led by Richard Strassberg at Goodwin Procter, called such a long term “outrageous” and “irrational.”

They said Martoma’s fraud “does not even begin to approach” Rajaratnam’s, which spanned several years and dozens of stocks and co-conspirators - but totaled only $72 million.

Martoma’s lawyers said their client should be sentenced only for his $6.3 million of personal profit from his trades, for a recommended prison term as short as 5-1/4 years. They also cited similar cases in which sentences as short as two years were imposed.

The defendant’s unlawful trading was “far narrower in many important respects than the unlawful trading in nearly all other recent insider trading cases,” Strassberg wrote.

Judges may impose stiffer or lesser punishments than federal guidelines call for. Prosecutors also need not follow probation officials’ recommendations.

A spokeswoman for U.S. Attorney Preet Bharara in Manhattan declined to comment.

The longest U.S. insider trading sentence is a 12-year term given to lawyer Matthew Kluger for a $37 million scheme for which he pleaded guilty in 2011. Rajaratnam is appealing his conviction to the U.S. Supreme Court.

Martoma, who was born in 1974 to immigrant parents from India, graduated from Duke University and Stanford University’s business school, and attended Harvard Law School before being expelled after forging a transcript. His Stanford degree was voided following his conviction.

Eight SAC employees have been convicted of or pleaded guilty to insider trading charges. SAC pleaded guilty to fraud and agreed to pay $1.8 billion in criminal and civil settlements.

Cohen has not been criminally charged. He has renamed his Stamford, Connecticut-based firm Point72 Asset Management, and shifted its focus to managing his fortune.

The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, No. 12-cr-00973.

Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum, Sofina Mirza-Reid and

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