Key Doctor Says He Warned Martoma About Drug Trial Troubles

Jan 21 2014 | 12:23pm ET

The government's star witness against former SAC Capital Advisors trader Mathew Martoma had a shaky start on the stand Friday, but still clearly and unequivocally implicated the former hedge fund manager in a massive insider-trading fraud.

Sidney Gilman, 81, appeared frail, had difficulty identifying Martoma in the courtroom, and had to have questions repeated to him several times, citing his hearing aid. Once he heard them, however, the former University of Michigan medical professor told the jury that Martoma had sought—and he had provided—confidential information about Alzheimer's drug tests, which prosecutors say Martoma then used to earn or save SAC $276 million.

Gilman is cooperating with the government. He has agreed to return the $187,000 million he earned consulting for Martoma and SAC and will not be charged criminally.

Gilman told the jury that Martoma worked to ingratiate himself with the doctor, who led the drug trial's safety committee. His initial tip to Martoma—about the drug's side effects—was a "slip," he testified. But over time, he gave over the information willingly.

"He said he wanted to be friends," Gilman testified. "He said that to me several times."

Gilman said several times that he knew he wasn't supposed to be giving such detailed information to Martoma, telling the jury he retired from his university post because he "revealed information that was confidential… inappropriately."

"He wanted very specific information," Gilman said. "It sounded like he was copying numbers down" when they spoke by phone. The doctor told the jury that he warned Martoma about disappointing results in the clinical trial several days before they became public—after which SAC sold its $700 million stake in the companies developing the drug.

Gilman also had praise for Martoma, calling him bright and inquisitive. "I wish I had students like him," he said.

Gilman is expected to face tougher questioning about his memory and motives when Martoma's lawyers begin their cross-examination of him this week.

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