Mathew Martoma, a former top portfolio manager at SAC Capital Advisors, pursued a “canary in a coal mine” to give him an “illegal sneak preview” of the results of a clinical Alzheimer’s drug trial, a prosecutor said on Monday in closing remarks for the government’s closely watched insider trading case.
The prosecutor, Eugene Ingoglia, an assistant United States attorney, told the jury that to find his canary, Mr. Martoma built up relationships with two doctors involved in the drug trial, which was run by Elan and Wyeth.
These relationships “paid off in the most dramatic way” when Mr. Martoma used the information to trade before Elan announced its negative trial results, a move that eventually led SAC to avoid losses and make profits totaling $275 million, Mr. Ingoglia said.
But the defense asserted that the government’s case against Mr. Martoma was “fatally flawed” because it hinged on testimony from a doctor and his “totally unbelievable” memory.
Documents
Graphic
VideoMr. Martoma’s case follows the conviction of another top SAC portfolio manager, Michael S. Steinberg, and is at the heart of the government’s decade-long investigation into SAC, which has resulted in six former employees pleading guilty to insider trading charges. In November, SAC itself pleaded guilty to insider trading charges and agreed to pay a $1.2 billion fine.
The courtroom on Monday was so packed with spectators wanting to hear the closing arguments that nearly two dozen people had to stand against the wall. Two prosecutors who won the Steinberg case were among those in the audience. The jury is expected to start deliberating on Tuesday.
During the four-week trial, the two doctors, Joel S. Ross and Sidney Gilman, testified that they had given Mr. Martoma inside information about the drug trial, breaching their confidentiality agreements with Elan and Wyeth. Both doctors have signed nonprosecution agreements with the government that give them immunity as long as they testify truthfully.
Dr. Gilman, 81, a former University of Michigan professor who was chairman of the safety committee during the drug trial, at times showed signs of a faltering memory during the five days he took the witness stand. Prosecutors used emails, electronic calendar entries and phone logs to help bolster his testimony.
“He’s not remembering, he’s creating,” Richard Strassberg, the defense counsel, told the jury on Monday.
Dr. Gilman testified that he gave Mr. Martoma the final results of the trial on July 17, 2008, hours after he received it himself and weeks before it was made public. Two days later, Mr. Martoma flew to Ann Arbor, Mich., to visit him and take a look at the data himself, Dr. Gilman testified.
The morning after his trip, Mr. Martoma made a 20-minute call to Steven A. Cohen, the founder of SAC. The next day SAC began to liquidate its $700 million positions in Elan and Wyeth shares, a full week before Elan announced the results of the trial.
Those results surprised investors, sending shares in both Elan and Wyeth plummeting on the news.
But Dr. Gilman told the jury that it was only days before the trial that he remembered the details of the meeting with Mr. Martoma.
Mr. Strassberg told the jury that he did not dispute the facts of Mr. Martoma’s trip, or the emails, calendar entries and phone calls showing the two spoke frequently. But, he told the jury, he was concerned that Dr. Gilman’s recollection of the details of what actually happened was faulty.
Dr. Gilman also worked as a paid consultant for Gerson Lehrman, a network that connected industry experts with hedge funds like SAC.
At one particularly interesting moment during the four-week trial, a star witness testified that F.B.I. agents had told him that he was “just a grain of sand, as is Mr. Martoma. They are really after a man named Steven A. Cohen.”
On Monday, Mr. Strassberg told the jury that Mr. Martoma “is not a grain of sand; he is not a means to make a case against Steve Cohen.”
Mr. Cohen has not been criminally charged, but he faces civil administrative charges for failing to supervise.
“Mathew’s life is on the line,” Mr. Strassberg told the jury, wrapping up his three-hour summation. As he paused to look at the jurors, Mr. Martoma’s wife, Rosemary, seated in the gallery just behind him, began to cry.
During the government’s rebuttal, a federal prosecutor, Arlo Devlin-Brown, addressed Mr. Strassberg’s contention that Dr. Gilman had lied about passing on inside information to Mr. Martoma. He asked the jurors to consider why Dr. Gilman would lie about giving secret information to Mr. Martoma.
As he finished, Mr. Devlin-Brown told the jurors that Dr. Gilman lying about his involvement in Mr. Martoma’s case “would be one of the craziest things for someone to do.”