Martoma cannot use testimony from SAC's Cohen at trial: judge

Wed Jan 8, 2014 6:35pm EST
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By Jonathan Stempel and Joseph Ax

NEW YORK (Reuters) - Former SAC Capital Advisors portfolio manager Mathew Martoma cannot introduce excerpts from a deposition of his former boss, billionaire Steven A. Cohen, in his defense against criminal insider trading charges, a Manhattan federal judge ruled.

While not offering an opinion on its truthfulness, U.S. District Judge Paul Gardephe said Cohen's testimony to the U.S. Securities and Exchange Commission on May 3, 2012 was not sufficiently reliable under federal evidence rules to be admissible at Martoma's trial, now in its second day of jury selection.

"When Cohen's deposition was taken, SAC Capital - his company - was under investigation by the SEC for insider trading," the judge wrote in a decision released on Wednesday. "Accordingly, Cohen had a strong motive to offer an exculpatory version of events at SAC. Allowing such self-serving testimony to be admitted, without any opportunity for cross-examination, would clearly undermine the purposes of the hearsay rule."

Gardephe also rejected Martoma's bid to exclude evidence about his role in SAC's trading in drugmakers Elan and Wyeth, saying it would present issues for jurors to resolve. He deferred ruling on Martoma's request to exclude evidence of other enforcement actions involving SAC and its employees.

The decision is a setback for Martoma, who has pleaded not guilty to securities fraud and conspiracy charges that were brought by the U.S. Department of Justice.

Martoma chose to go to trial rather than cooperate with prosecutors, while six other SAC employees pleaded guilty to criminal insider trading charges, and a seventh, Michael Steinberg, was found guilty of insider trading last month.

Richard Strassberg, a lawyer for Martoma, was not immediately available to comment as he was involved in jury selection.

Both Jerika Richardson, a spokeswoman for U.S. Attorney Preet Bharara in Manhattan, and Jonathan Gasthalter, a spokesman for Cohen, declined to comment.   Continued...

Former SAC Capital portfolio manager Mathew Martoma (C) arrives at the Manhattan Federal Courthouse with his lawyer (L) and an unidentified woman in New York, January 7, 2014. REUTERS/Brendan McDermid