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VideoProsecutors may not have any recorded conversations showing how a former SAC Capital Advisors trader, Mathew Martoma, engineered what they have called the biggest insider trading scheme in history. But testimony from one doctor indicates that Mr. Martoma knew the specific results of a clinical drug trial before they were known publicly.
On the witness stand for a second day, Dr. Joel S. Ross told the jury on Wednesday that he was “flabbergasted” that Mr. Martoma knew so much detail about a confidential presentation in Chicago that Dr. Ross and other medical experts had just heard. “It was like he was in the room with me and the slides I had just seen, ” he testified. The presentation was given by Dr. Michael Grundman, vice president of clinical development at Elan Pharmceuticals, on July 28, 2008. It was the first time that investigators in a clinical trial for an Alzheimer’s drug being developed by Elan and Wyeth Pharmaceuticals were told the results of the trial.
“The drug did not work at all,” Dr. Ross told the jury. This disappointing outcome would not be publicly announced until the next day, sending the share prices of Elan and Wyeth down sharply.
Knowing this information ahead of the public announcement, the government contends, gave Mr. Martoma an “illegal edge” that helped SAC avoid losses and make gains of $276 million. Mr. Martoma faces two counts of securities fraud and one count of conspiracy. His case turns on testimony from Dr. Ross and a second doctor who participated in the drug trial.
Dr. Sidney Gilman, the second doctor and the government’s star witness, is an 81-year-old retired University of Michigan professor. He has not yet testified, but Mr. Martoma’s lawyers have already sought to discredit him, raising questions about his memory. Dr. Gilman was undergoing cancer treatment in the years that Mr. Martoma cultivated a relationship with him, and one of the drugs he was taking at the time is known to cause confusion, Richard Strassberg, one of Mr. Martoma’s lawyers, said in his opening statement last week.
Both Dr. Gilman and Dr. Ross have been given immunity from prosecution by the federal government.
Dr. Ross testified on Tuesday that he was introduced to Mr. Martoma through H.C.R.C., a firm that arranged for paid consultations among investors and experts in specific fields. Mr. Martoma paid as much as $1,500 an hour to meet formally with Dr. Ross. But the two met on several occasions outside of those meetings, too, the jury was told.
A year into their relationship, which Dr. Ross described as “professional,” the doctor asked Mr. Martoma to help introduce him to biotechnology companies that might be interested in using his newly opened research center to conduct their clinical trials. Mr. Martoma promised to help, Dr. Ross testified.
Jurors were shown emails between the two arranging to meet the night before Elan publicly announced the results of its second phase clinical trial. Dr. Ross testified that he left his meeting about the final trial results early to meet with Mr. Martoma in the lobby of the Hyatt Regency McCormick Place in Chicago.
Dr. Ross described his surprise at hearing Mr. Martoma refer to statistics from the trial results.
He told Mr. Martoma that he was still optimistic despite the negative results. But, Dr. Ross recalled, “He said, ‘I don’t understand how you can say that with the statistical evidence showing otherwise.’ ”
At one point on Wednesday, Dr. Ross admitted lying about leaking inside information to Mr. Martoma when he was first approached by a F.B.I. agent in 2012. “I panicked,” Dr. Ross said.
Tension in the courtroom began to build as Roberto Braceras, one of Mr. Martoma’s lawyers, asked Dr. Ross a series of questions about whether he had suffered financially because of Mr. Martoma’s indictment.
Dr. Ross replied he had lost significant revenue and business after his name was first reported in the news media. Mr. Braceras shot back, “Do you think this is about money?” Pointing to Mr. Martoma, he reminded Dr. Ross that his client’s life was on the line. If found guilty of all charges, Mr. Martoma faces up to 45 years in prison.
Asked when he last saw Mr. Martoma, Dr. Ross replied that it was nearly six years ago in that Hyatt lobby.