‘Inside trader’ Martoma lied to Harvard

Alleged inside trader Mathew Martoma is a cheater, prosecutors said Friday.

In 1999, he was expelled from Harvard Law School for forging his transcript, recently unsealed court documents show.

And nine years later, prosecutors told a Manhattan federal court jury, he was corrupting an esteemed Alzheimer’s expert to earn millions of dollars.

The government hopes to use both cases to show a pattern of Martoma skirting the rules.

The case against the former SAC Capital Advisors portfolio manager is “not about science or trading,” prosecutor Arlo Devlin-Brown told jurors Friday morning. “The case is about cheating.”

The government opened its 78th insider-trading case in Manhattan federal court with Devlin-Brown laying out for jurors the allegations that Martoma, 39, “corrupted” Dr. Sidney Gilman, an
Alzheimer’s expert, to get illegal tips on drug trials.

The doctor was paid $170,000 for inside information on drug trials undertaken by Elan and Wyeth, drug companies that helped Martoma and SAC ring up the most profitable trades ever based on inside information, it is alleged.

“The results [of the drug trials] had been kept secret, and everyone was waiting,” said Devlin-Brown, pausing for effect before adding “almost everyone.”

When the results of the trials became public, the stocks fell dramatically, with Elan losing 42 percent.

But Gilman had informed Martoma of the results two weeks earlier, it is charged.
Before the public announcement, SAC unloaded $700 million of stock in the two companies and began shorting them.

The government’s first witness, Tim Jandovitz — a former trader at SAC who handled Martoma’s stock trades — testified that those trades had been hidden from him by SAC owner Steve Cohen and Martoma.

Instead of Jandovitz handling the trades, Cohen’s trader put them through — a move that Jandowitz said “slightly offended” him. The government’s implication is that Martoma and Cohen had something to hide.

“What [Martoma] did is called insider trading,” Devlin-Brown said. “It’s illegal.” Martoma received a $9.2 million bonus at SAC the year of his alleged insider trading.

Much of the case will be based on the testimony of Gilman, 81, the government’s star witness, whom Devlin-Brown acknowledged “took a noble effort curing diseases” and turned it into a crime.

But Martoma’s lawyer, Richard Strassberg, attacked Gilman’s credibility, saying the doctor had changed his story after the FBI pressured him to cooperate.

Strassberg also noted that during June of 2008, when Gilman was talking to Martoma, the doctor was diagnosed with cancer and underwent aggressive chemotherapy treatment. One of the drugs he was taking was prednisone, the side effects of which include “confusion,” Strassberg said.

Martoma’s lawyer repeatedly called the government’s case a “rush to judgment” that falsely accused his client.

“There were many reasons to sell Elan and Wyeth in July of 2008. Insider trading is not one of them,” he said in his opening statement.