Judge Tosses Some Evidence As Martoma Trial Opens

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.


In Depth

Fitch Says Alternative Asset Managers 'Stable' Despite Dry Powder

Nov 20 2014 | 9:30am ET

Ratings agency Fitch says the outlook for seven publicly traded alternative asset...

Lifestyle

Cohen Buys $101 Million Sculpture

Nov 12 2014 | 9:17am ET

Steven Cohen was the sole bidder for a rare Alberto Giacometti sculpture at Sotheby...

Guest Contributor

Why The Big Money Is Going To Europe

Nov 14 2014 | 6:03am ET

Peer-to-peer lending was invented with the individual investor in mind. But despite...

 

Sponsored Content

    For Hedge Funds, Mastering Data Is Key To Success

    Nov 4 2014 | 9:45am ET

    Data management is important to every business, but for hedge funds, it is critical. FINalternatives recently asked Peter Sanchez, CEO of Northern Trust Hedge Fund Services, how fund managers can deal with the demands of managing data while at the same time remain transparent and abide by operational best practices. Read more…

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

November 2014 Cover

Building a better market

Reg NMS created a huge bifurcation in equity markets and while much of what has followed has been positive, in terms of lower fees and greater liquidity, many traders would like to see the market come...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.