Prosecutors Say Martoma 'Corrupted' Doctor, Defense Lawyer Sees 'Rush To Judgment'

Jan 13 2014 | 12:46pm ET

Former SAC Capital Advisors portfolio manager Mathew Martoma "corrupted" a medical professor who allegedly passed him confidential information about drug trials, prosecutors said on Friday.

Martoma's trial on insider-trading charges is expected to hinge largely on the testimony of two doctors who have admitted tipping him off about the trials, especially that of Sidney Gilman, who helped oversee the tests. And while Assistant U.S. Attorney Arlo Devlin-Brown admitted that the 81-year-old Gilman, who has pleaded guilty in the case, is "far from perfect," he added that Martoma charmed the doctor with compliments and with tens of thousands of dollars.

Devlin-Brown, who was briefly a classmate of Martoma's at Harvard Law School, before Martoma's expulsion for doctoring his transcript, walked the jury through its case, alleging that Martoma and SAC built huge positions in Elan Corp. and Wyeth LLC, before selling the lot and opening a short position after Gilman tipped Martoma about negative results in the Alzheimer's trial. The trades earned or saved SAC $276 million, prosecutors said, and produced a $9.3 million bonus for Martoma.

Martoma's lawyer, Richard Strassberg, dismissed Gilman's claims as "moving target." He said that the former University of Michigan professor, faced with the choice of dying in jail or turning state's evidence, made the obvious choice.

"Literally, the prosecution made him an offer he couldn't refuse," Strassberg said.

Strassberg added that prosecutors "rushed to judgment" and ignored the "many, many independent reasons" that SAC might have made the trades in question.

After the opening statements were completed, jurors heard not from Gilman nor from Joel Ross, the other doctor accused of tipping off Martoma, but from Martoma's former analyst at SAC, Timothy Jandovitz.

Jandovitz said he feared that Martoma had suffered losses "north of $100 million" after word of the poor drug test results came out.

"I believed that we had incurred significant losses in our portfolio," Jandovitz said of the 2008 news. "I was concerned about the security of my boss' job and my job, as well. Normally, Steve Cohen doesn't like it when you lose him money."

What Jandovitz did not know was that SAC had sold its positions in Elan and Wyeth—Martoma, he said, hadn't told him about the sale at Cohen's direction.

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