Martoma Pleads Not Guilty To SAC Insider Charges

Jan 4 2013 | 1:22pm ET

Former SAC Capital Advisors portfolio manager Mathew Martoma pleaded not guilty to insider-trading charges yesterday, setting the stage for another high-profile trial of a hedge fund manager.

Martoma entered his plea nearly seven weeks after he was arrested and accused of running the "most lucrative" insider-trading scheme in history, earning SAC some $276 million. He was formally indicted four days before Christmas on three counts of securities fraud and conspiracy after he continued to refuse to cooperate with prosecutors, who are widely thought to want his help in building a case against SAC founder Steven Cohen.

The case against Martoma is the first to refer specifically, if obliquely, to Cohen—who is referred to as the "owner" of Martoma's hedge fund—and coincided with the Securities and Exchange Commission's warning to SAC that an enforcement action against it was likely. Prosecutors said yesterday that their case would not include the sort of wiretap evidence that has damned previous insider-trading defendants, and will be based instead on trading and telephone records and e-mails. Sidney Gilman, the former University of Michigan professor accused of passing Martoma tips about Alzheimer's drug trials, is expected to testify.

SAC, Cohen and Martoma have all previously proclaimed their innocence. Neither Cohen nor SAC has been formally accused of wrongdoing.

Martoma entered his plea yesterday in Manhattan federal court. U.S. District Judge Paul Gardephe set a March 5 hearing for pretrial discovery updates and pretrial motions.

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