Jury Throws the Book at S.A.C. Capital Executive

MANHATTAN (CN) - A federal jury convicted former S.A.C. Capital executive Matthew Martoma on all three counts of securities fraud Thursday in connection to a $276 million insider-trading scheme involving an Alzheimer's drug.

The Securities and Exchange Commission was the first to take on Martoma in November 2012, claiming that the portfolio manager for the Stamford-based hedge fund adviser CR Intrinsic Investors helped reap more than "$276 million in illegal profits or avoided losses in July 2008 by trading ahead of a negative public announcement involving the clinical trial results for an Alzheimer's drug."

Wyeth was jointly developing the drug with Elan Corp., and Dr. Sidney Gilman, a neurology professor at University of Michigan Medical School, served as the chairman of the Safety Monitoring Committee overseeing the clinical trial, according to the complaint.

Regulators claimed that Martoma's profits for the S.A.C. Capital Advisors subsidiary stemmed from material nonpublic information about the trial that Gilman provided to him.

Martoma was federally indicted the next month, and prosecutors announced in an August 2013 superseding indictment that they were seeking $13.7 million in cash from the portfolio manager, plus his Boca Raton, Fla., home.

The charges also carried a reported 20 years in prison.

They said Martoma received $9.3 million in pay while working for Steven Cohen's hedge fund.

A 12-person jury returned a verdict against Martoma on Thursday after two days of deliberation.

None met the defendant's eyes as they filed into the massive courtroom inside New York's recently reopened Thurgood Marshall Courthouse. The forewoman looked directly at the judge as she read three consecutive counts of guilty.

Praising the jury for their "extraordinary personal sacrifice" in hearing the case, U.S District Judge Paul Gardephe called them "Pilgrims, of a sort," in his regular refrain urging them against speaking to the press.

Martoma's lawyers also had nothing to share with reporters, as they prepared to submit post-trial motions due later this month.

U.S. Attorney Preet Bharara, on the other hand, issued a statement.

"Martoma bought the answer sheet before the exam - more than once - netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him," Bharara said. "In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty. Mathew Martoma becomes the 79th person convicted of insider trading after trial or by guilty plea in this district in the last four years."

As he walked into the elevator, Martoma was holding the hand of his wife, who was wearing a yellow dress and appeared to be pushing back tears.

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