Ex-SAC Trader Cites Cohen As Trial Approaches

Dec 9 2013 | 12:46pm ET

Lawyers for former SAC Capital Advisors portfolio manager Mathew Martoma on Friday asked the judge presiding over his insider-trading case to exclude a great volume of potential evidence against him—while also allowing them to quote from firm founder Steven Cohen's deposition before the Securities and Exchange Commission.

Cohen is not likely to testify at Martoma's trial next month, citing his Constitutional right against self-incrimination. But Martoma's lawyers would like his testimony from last year to speak for him—and to show that Martoma had nothing to do with the trades that led to his indictment.

In a pre-trial motion, Martoma's lawyers cited Cohen's statements that he elected to sell the firm's stake in pharmaceutical company Wyeth LLC not because Martoma suggested he do so—but because former SAC trader Wayne Holman did. Holman, who ran the defunct Ridgeback Capital Management, had a $20 million consulting deal, and Cohen said that the week SAC sold Wyeth, Holman "was telling me he was selling his Wyeth."

Cohen said he judged Holman to be "one of the great healthcare investors I have ever met" whose "recommendations are very important to me." He also called him a "good friend."

"I don't recall much other than that he was telling me he is selling his—he is selling some Wyeth," Cohen said. "I know he was nervous about the world" in 2008, "the macro picture, but he didn't give me any specifics."

Martoma's lawyers also wish to use Cohen's words to keep out testimony about SAC's trading strategy for Wyeth and another drug company, Elan Corp.

"Generally, what I remember was selling Wyeth and then deciding to hedge out my exposure in Wyeth by shorting Elan," Cohen said. "It was sort of imperfect. I was estimating the ratio that I would need to sell one against the other, but that's what I did."

Prosecutors allege that Martoma urged Cohen to sell the stocks after a doctor overseeing a drug trial run by the two companies warned him that things were not going well. That doctor, Sidney Gilman, is set to testify against Martoma.

Cohen did mention Martoma during his testimony, but noted that Martoma's recommendation was only part of his decision to buy both stocks prior to the poor test results.

"They are both coming at it from different stocks," Cohen said. "Martoma liked both names and Wayne liked Wyeth."

In addition to seeking the admission of Cohen's deposition, Martoma's legal team also asked U.S. District Judge Paul Gardephe to block prosecutors from discussing SAC's sale of Wyeth shares and how the hedge fund shorted Elan and Wyeth.

Martoma's trial is scheduled to begin on Jan. 6.


In Depth

GSAM’s Papagiannis on Liquid Alternatives

May 25 2016 | 5:07pm ET

The popularity of liquid alternatives strategies has blossomed in recent years,...

Lifestyle

From Modern Trader: Stephen Curry is a Black Swan

May 18 2016 | 7:43pm ET

What do the rise of the Internet, the sinking of the Titanic, 9/11, and Stephen...

Guest Contributor

LendingClub and the Question of Internal Hedge Funds

May 19 2016 | 8:42pm ET

Peer-to-peer lending platform LendingClub Corp. has been in the news since the firm...