Former SAC trader is indicted

A former SAC Capital Advisors portfolio manager was indicted on Friday on securities fraud and conspiracy charges in a case that federal prosecutors have called the most lucrative insider trading scheme ever uncovered.

A federal grand jury in Manhattan indicted the former portfolio manager, Mathew Martoma, a month after the government arrested him on charges that he used inside tips about a clinical drug trial to help SAC earn profits and avoid losses. Prosecutors said the total benefit to SAC was $276 million.

SAC, based in Stamford, Conn, has been touched by several insider trading cases in recent years, but there is heightened attention surrounding the Martoma prosecution. For the first time, the government has tied questionable trades to Steven A Cohen, the billionaire owner of SAC.

"Though disappointing, today's events come as no surprise," Martoma's lawyer, Charles A Stillman, said in a statement. "The simple fact is that Mathew Martoma did not trade on inside information, is innocent of all these charges, and we look forward to his ultimate vindication."

Before Friday's indictment, there had been speculation that the government, before formally presenting evidence to a grand jury, was trying to gain Martoma's cooperation in building a case against Cohen. Martoma has rebuffed several earlier efforts by the authorities to enter into plea talks and implicate his boss.

Cohen has not been charged with any wrongdoing, and a spokesman for SAC has said that he thinks that he and SAC have acted appropriately at all times. The Securities and Exchange Commission, which brought a parallel civil action against Martoma, has warned SAC that it is likely to file a fraud lawsuit against the firm related to the Martoma case.

Martoma, 38, is set to appear in Federal District Court in Manhattan for his arraignment on January 3, when he will enter a plea. The case was assigned to Judge Paul G Gardephe, a former federal prosecutor who assumed his seat on the bench in 2008 after an appointment by President George W Bush.

The government says that Martoma obtained secret, negative information from a doctor about clinical trials of an Alzheimer's drug being developed by the pharmaceutical companies Elan and Wyeth. He then had a 20-minute telephone conversation with Mr. Cohen, prosecutors say.

A day after the phone call, SAC sold $700 million in Elan and Wyeth stock and made a large negative bet on the companies. The companies' shares plummeted after they announced the disappointing trial results, and SAC booked big profits.

 

© 2012 The New York Times News Service