Saturday, 23 August 2014
Last updated 1 day ago
Jan 7 2014 | 2:12am ET
The jury that will decide the fate of former SAC Capital Advisors portfolio manager Mathew Martoma will never hear about the defendant's fainting spell when confronted by the Federal Bureau of Investigation.
Martoma's trial on insider-trading charges begins tomorrow with jury selection. Prior to its start, U.S. District Judge Paul Gardephe disposed of a few pre-trial matters, including prosecutors' request to be allowed to tell the jury that Martoma fainted when FBI agents told him that he was the subject of an investigation.
"When an individual who works in the hedge fund industry is approached by the FBI and is accused of having engaged in insider trading in specific stocks while employed at a specific company, it is likely to be a shocking and highly disturbing event, whether the person is innocent or guilty," Gardephe wrote. Prosecutors had argued that Martoma's collapse was "evidence of his consciousness of guilt."
Gardephe also barred prosecutors from telling jurors that Martoma was fired for poor performance in 2010 or that he told an analyst to pretend she was "in town due to unrelated matters" when she was actually there to seek information about a drug trial.
But the judge rejected Martoma's lawyer's request that prosecutors be forbidden from alleging that his client's actions were motivated by greed and ordered Martoma to tell prosecutors whether he'll offer an alibi for July 19, 2008, when the government alleges he flew to Detroit to meet with a doctor before a set of drug trial results were made public. Gardephe has yet to rule on whether Martoma's lawyers can introduce SAC founder Steven Cohen's 2012 deposition before the Securities and Exchange Commission.
Prosecutors call the case against Martoma, who is accused of illegally trading two pharmaceutical stocks based on drug-trial information provided him by two doctors, the "most lucrative insider-trading scheme ever charged." Martoma is alleged to have earned or saved SAC a combined $276 million. His trial begins less than a month after SAC trader Michael Steinberg was convicted of separate insider-trading charges.
Both of Martoma's alleged tipsters, Sidney Gilman and Joel Ross, are set to testify for the prosecution. Gardephe yesterday ordered prosecutors to turn over material related to the SEC's communications with Gilman and Ross.
Prosecutors could also call several former SAC traders and analysts. The New York Times reports that, in addition to Cohen, several of Martoma's former colleagues at the hedge fund, including Jason Karp, the former research director at SAC's CR Intrinsic unit, where Martoma worked, were also deposed. Among the interviewed were SAC President Thomas Conheeney, research director Perry Boyle, chief operating officer Solomin Kumin, head trader Phillipp Villhauer, and several former healthcare analysts, David Munno, William Hoh and Benjamin Slate.
Martoma's trial is expected to last up to three weeks. If convicted, he could face decades in prison.
Aug 4 2014 | 7:42am ET
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The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.
The Alpha Pages Editor's Note