The billionaire investor Steven A. Cohen kept one of his closest associates at SAC Capital Advisors in the dark about the hedge fund’s rapid selling of a substantial stock position in two drug companies, just days before the companies reported disappointing results of a clinical trial for an Alzheimer’s drug.
Chandler Bocklage, who for nearly a decade sat next to Mr. Cohen and helped the SAC founder make trades in his own multibillion-dollar account at the firm, said he learned about the big trade only after it had happened.
Mr. Bocklage, testifying on Wednesday at the insider trading trial of Mathew Martoma, a former SAC portfolio manager, said that when the results of the clinical trial were made public in July 2008, he thought the hedge fund had incurred big losses in shares of Elan and Wyeth.
“I was told after the fact that we weren’t involved anymore,” said Mr. Bocklage, who was called as a defense witness for Mr. Martoma. When asked how he learned of the trade, Mr. Bocklage said he believed he was told by Mr. Cohen. “I think Steve did, but I’m not sure.”
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VideoFederal prosecutors have charged Mr. Martoma with using inside information about the clinical trial to help Mr. Cohen’s firm avoid losses and generate profits totaling $276 million in shares of Elan and Wyeth. Prosecutors have said that Mr. Martoma was involved in the most lucrative insider trading scheme on record and that the scheme was indicative of a pattern of insider trading at the hedge fund.
Mr. Cohen has not been charged with any criminal wrongdoing. But prosecutors contend SAC began unloading its once-substantial share position in Elan and Wyeth after Mr. Martoma called Mr. Cohen at his home in Greenwich, Conn., and spoke with him for 20 minutes.
On Tuesday, Phillipp Villhauer, SAC’s head of trading execution, testified that Mr. Cohen instructed him on July 21, a day after Mr. Martoma’s phone call, to begin selling shares of Elan from the accounts that did not have “as many eyes” watching them.
Before Mr. Villhauer began selling the Elan shares, the hedge fund had a stake of roughly $700 million in shares of both companies. The stocks plummeted after Elan disclosed at a July 29, 2008, conference some potentially harmful side effects with the Alzheimer drug.
Mr. Bocklage, who testified that he worked “very closely with Steve,” said he normally would be aware of any trades made in Mr. Cohen’s account, referred to as the “COHE” account. But Mr. Bocklage said he could understand why the hedge fund might use less visible accounts to sell shares to avoid alerting other firms and hedge funds to what SAC was doing.
“I personally think Steve is the greatest trader of all time,” Mr. Bocklage said at one point. He noted that he mainly advised Mr. Cohen on industrial stocks.
The jury of seven women and five men also heard testimony on Wednesday from a former analyst with another hedge fund, Tokum Capital, who said he, too, had conversations with Dr. Sidney Gilman, an adviser to Elan on the drug trial who has testified that he provided Mr. Martoma with inside information about the troubled clinical drug trial.
Mr. Martoma’s lawyers questioned the former analyst, Rene Shen, about detailed notes he had taken of several meetings and phone calls with Dr. Gilman. The notes revealed that Dr. Gilman talked quite freely about the experimental drug to Mr. Shen.