NEW YORK (Reuters) - A federal judge rejected billionaire investor Steven A. Cohen’s bid to dismiss lawsuits by Elan Corp and Wyeth shareholders who claimed they lost money because his firm SAC Capital Advisors LP conducted insider trading in the drugmakers’ stocks.
In a decision made public on Thursday, U.S. District Judge Victor Marrero in Manhattan allowed the entire case against Cohen and SAC to go forward, apart from claims that investors agreed should be dismissed because they were brought too late.
He also rejected dismissal requests by defendants Mathew Martoma, a former portfolio manager at SAC’s CR Intrinsic unit found guilty in February of insider trading, and Sidney Gilman, a University of Michigan medical professor.
SAC is now called Point72 Asset Management, and invests Cohen’s fortune from its Stamford, Connecticut offices. A spokesman, Jonathan Gasthalter, declined to comment. Ethan Wohl, a lawyer for the investors, declined to comment.
The lawsuit stemmed from U.S. charges that Martoma generated $275 million of illegal gains for SAC by trading on Gilman’s confidential tips about an Alzheimer’s drug trial before results were released on July 29, 2008.
Investors claimed to suffer damages by trading in Elan and Wyeth stock and options at the same time as SAC, but without the benefit of inside information. Elan is now part of Perrigo Co, and Wyeth is now part of Pfizer Inc.
SAC was also implicated in other insider trading, eventually pleading guilty to fraud and paying $1.8 billion in settlements with U.S. authorities. Cohen has not been criminally charged.
In seeking to dismiss the investor lawsuit, SAC said “contemporaneous traders are not harmed by insider trading,” and that it had already given up illegal gains in its $602 million settlement with the U.S. Securities and Exchange Commission.
But Marrero, who delayed approving that pact because it did not require SAC to admit or deny wrongdoing, said the settlement did not establish to a “scientific truth” what SAC should owe.
He also said it was too soon to dismiss damages claims over a plunge in Elan’s stock price, two days after the Alzheimer’s drug trial results were released, over problems with its multiple sclerosis drug Tysabri.
Even if SAC didn’t know about the problems, Marrero said it was unclear whether the investors had sufficient time after the results were released to avoid more losses by selling shares.A lawyer for Martoma could not immediately be reached for comment. Marc Mukasey, a lawyer for Gilman, said: “We will continue to press forward and defend the civil suit.”
Martoma faces a Sept. 8 sentencing. Prosecutors said he deserves more than eight years in prison. Gilman was not criminally charged.
The cases are Kaplan et al v. SAC Capital Advisors LP et al, U.S. District Court, Southern District of New York, No. 12-09350; and Birmingham Retirement and Relief System et al v. SAC Capital Advisors LP et al in the same court, No. 13-02459.
Additional reporting by Emily Flitter; Editing by Meredith Mazzilli and Chizu Nomiyama