Bloomberg News

Former SAC Manager Martoma Begins Insider-Trading Defense (1)

January 28, 2014

Former SAC Capital Advisors LP fund manager Mathew Martoma began his defense in his trial on charges he was behind the most lucrative insider-trading scheme in history.

While the government claims Martoma used illegal tips to benefit the firm with $276 million in profits and losses avoided, he contends the trades were based on public information.

Martoma’s attorneys this afternoon called two witnesses including SAC Capital’s top in-house lawyer. Prosecutors rested their case today after presenting 12 days of testimony against Martoma in federal court in Manhattan.

Lawyers for Martoma called Peter Nussbaum, general counsel to the Stamford, Connecticut hedge fund, to testify about a contract the firm had with Ridgeback Capital Management LLC founder Wayne Holman.

Nussbaum told jurors that SAC Capital agreed to pay a percentage of money it made on an investment in Wyeth to Holman in exchange for his advice on the company. Martoma’s lawyers claim it was Holman, a former SAC Capital fund manager who left to start Ridgeback Capital, and not Martoma, who advised SAC Capital founder Steven Cohen to sell the firm’s position in Wyeth stock in July 2008.

$700 Million

Prosecutors claim SAC Capital sold off $700 million in shares of Elan Corp. and Wyeth in one week after Martoma got inside information about the results of clinical drug trial of bapineuzumab, a drug they were developing to treat Alzheimer’s disease.

Nussbaum’s testimony will continue tomorrow. Richard Strassberg, a lawyer for Martoma, told U.S. District Judge Paul Gardephe today that the defense case may finish Jan. 30. Gardephe said closing arguments in the case may come as soon as the next day.

Before calling Nussbaum, Martoma’s lawyers presented testimony from Anthony Cecchini, a former Piper Jaffray Cos. (PJC:US) employee who set up expert consultations between investors and Joel Ross, a New Jersey geriatrician. Prosecutors claim Ross and former University of Michigan neurologist Sidney Gilman passed inside information about the bapineuzumab trial to Martoma.

Martoma, who denies wrongdoing, is charged with conspiracy and two counts of securities fraud. He faces a maximum of 20 years in prison if convicted of the securities fraud charges.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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  • PJC
    (Piper Jaffray Cos)
    • $57.61 USD
    • 1.39
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