NEW YORK (Reuters) - Mathew Martoma sought out a “canary in the coal mine” to give him inside information on drug companies, a federal prosecutor said on Monday, urging jurors to convict the former SAC Capital Advisors portfolio manager of insider trading.
Martoma, 39, built up contacts with doctors involved in a clinical trial of an Alzheimer’s drug, which paid off in a “dramatic way” when one of them told him the final results, Assistant U.S. Attorney Eugene Ingoglia said.
But Martoma’s defense lawyer, Richard Strassberg, told jurors the entire case came down to the unreliable testimony of a single doctor who cooperated with the government in the hopes of avoiding prison.
Martoma, Strassberg added, was the victim of a “rush to judgment” by investigators whose true target was Steven A. Cohen, the founder of SAC Capital, who has not been criminally charged.
The competing arguments came at the close of a four-week trial over what prosecutors call the most lucrative insider trading episode in U.S. history.
The jury is expected to begin deliberating on Tuesday.
Martoma, who worked in SAC’s CR Intrinsic Investors division, is accused of using confidential information to trade the stocks of the drug’s developers, Elan Corp Plc and Wyeth, which is now owned by Pfizer Inc.
Based on that information, SAC Capital made profit and avoided losses of about $275 million, prosecutors say.
Ingoglia told a packed courtroom that Martoma had “corrupted” two doctors involved in the trial, beginning in 2006.
After an earlier trial for an Alzheimer’s drug developed by Elan had been halted due to safety issues, “Martoma needed the equivalent of a canary in the coal mine,” Ingoglia said.
Martoma began speaking with Joel Ross, a clinical investigator on the trial who oversaw patients at his clinic in Eatontown, New Jersey.
Ross, 58, earned $1,500 an hour to speak with Martoma, Ingoglia said. Ross also “very badly” wanted Martoma to help use his contacts to bring business to his newest clinic, he said.
“He was going to return the favor or return the courtesy by giving insider information to Mr. Martoma,” Ingoglia said.
Ingoglia said Martoma received “an illegal sneak preview” in July 2008 of negative results of the drug trial from Sidney Gilman, then a professor at the University of Michigan who chaired the drug trial’s safety monitoring committee.
SAC Capital then began selling off its $700 million position in Elan and Wyeth before the data was made public later that month, Ingoglia said.
Most of the trading took place in accounts controlled by Cohen, who was informed about the negative results by Martoma during a 20-minute telephone call, Ingoglia said.
Gilman, 81, testified under a nonprosecution agreement, as did Ross.
With Martoma’s wife, Rosemary, nodding from her seat in the courtroom’s first row, Strassberg said Gilman’s story was rife with inconsistencies - a result of tailoring his story to the government’s case, rather than telling the jury what he actually recalled.
“He’s not telling you a story he remembers,” Strassberg said of Gilman, whose memory became an issue during the trial. “He’s telling you a story the prosecutors like, so he can get his deal.”
Strassberg also referred to testimony by Gilman, who said an FBI agent who approached him September 2011 called Martoma only a “grain of sand” in a probe targeting Cohen.
Strassberg said prosecutors erred “in their haste to make a case against someone who is not even in this courtroom: Mathew Martoma’s boss, Steven Cohen.”
Cohen, 57, has not been charged and denies wrongdoing. The U.S. Securities and Exchange Commission is seeking to bar him from the financial services industry for failing to supervise Martoma and another employee.
SAC Capital agreed last year to pay $1.8 billion in criminal and civil settlements and plead guilty to fraud charges stemming from insider trading by its employees.
The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, 12-cr-00973.
Editing by Andre Grenon and Matthew Lewis