Former SAC Capital Advisors LP fund manager Mathew Martoma was granted 90 days to review U.S. evidence in his insider-trading criminal case, including hundreds of thousands of e-mails from the fund.
Martoma was charged in November in what the office of Manhattan U.S. Attorney Preet Bharara called the biggest insider-trading scheme in history. The U.S. says Martoma helped SAC, the hedge fund founded by Steven A. Cohen, make $276 million on illegal tips about an Alzheimer’s drug by trading in shares of Elan Corp. (ALN:US) and Wyeth LLC.
Charles Stillman, Martoma’s defense lawyer, told U.S. District Judge Paul Gardephe today that he needed time to review the evidence, including about 4 million pages of documents that the U.S. already has turned over. Stillman estimated there were hundreds of thousands of e-mails left to review before he can assess how to defend his client.
“I’d like to propose you give us 90 days to finish our analysis,” Stillman told Gardephe at a court hearing in Manhattan. “I’m not looking to delay the case but I’m saying that there is a lot to be done here. The case was announced as the biggest insider trading case in history. If it is the biggest case, I want to be able to defend it.”
Stillman said he has received at least 17,000 pages of evidence from the government in recent days. He held up a folder he estimated to be about six inches thick, which he said represented the number of e-mails Martoma exchanged and received in a single day of work at SAC’s CR Intrinsic Investors in Stamford, Connecticut.
Gardephe granted Stillman’s request.
“If I thought we were talking about a mere two weeks of conduct I’d be very reluctant to put the case off,” the judge said. “But the facts in the indictment present a conspiracy between 2006 and 2008 and 42 consultations. We’re talking a significant time period. In light of that I’m going to give Mr. Stillman the 90 days he requested. I will likely set a trial date at that time.”
Gardephe set the next court date for June 5 and told Stillman that he will likely set a trial date at the hearing.
“This is your opportunity to get your hands around the discovery material,” the judge said.
Prosecutors said in a December indictment that Martoma illegally used tips from a physician who was in charge of monitoring the the safety of the Alzheimer’s drug tests. Sid Gilman, a University of Michigan neurologist who was head of the safety monitoring committee for the clinical trial, entered into a non-prosecution agreement and is cooperating with the U.S.
Stillman said today the government has a computer hard drive that belonged to Gilman and that prosecutors have told him it may contain privileged and encrypted material. Assistant U.S. Attorney Arlo Devlin-Brown said Federal Bureau of Investigation agents were trying to decrypt the hard drive of a laptop that the cooperating witness had used.
The witness granted the FBI permission to make a copy of the laptop’s hard drive, to preserve the evidence for the case, Devlin-Brown said. The original was still in the custody of the University of Michigan.
“If we determine there is anything conceivably relevant on that hard drive, we’ll turn it over,” Devlin-Brown said.
Prosecutors turned over the majority of their evidence against Martoma in January and estimated that a trial could take three to four weeks, Devlin-Brown said.
‘Best We Can’
“The e-mails and electronic communications retrieved from Mr. Martoma’s former employer, these have been produced,” Devlin-Brown said. “We’ve been doing the best we can to move this case along but ultimately, this case is about one defendant who allegedly corrupted a doctor.”
Stillman countered that there is a vast amount of complicated evidence that he and his legal team need to review so they can plot a strategy.
“The case the government tries to sell you today is not some simple walk in the park, it’s a three-year conspiracy with 42 consultations between my client and the cooperating witness and trading records,” Stillman said. “The schedule the government is presenting is not fair to our ability to defend Mathew.”
Both Martoma and his lawyers declined to comment on the case after today’s hearing.
Martoma bought shares of Elan and Wyeth for his portfolio, according to the December indictment. The hedge fund owner, identified as Cohen by a person familiar with the case, also bought Elan and Wyeth, based on Martoma’s recommendation, prosecutors said.
In July 2008, Gilman passed Martoma secret data showing that bapineuzumab, or bapi, a drug intended to treat Alzheimer’s, had failed to halt the condition’s progress in clinical tests, the SEC alleged. The hedge fund owner, at Martoma’s recommendation, sold off almost all of the fund’s $700 million position in Elan and Wyeth, then sold the stock short, prosecutors claimed.
When the clinical trial results became public, shares in both companies plunged, allowing the hedge fund to make $276 million in profits and losses avoided, according to the government. Martoma received a $9.3 million bonus as a result, according to the indictment.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).
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