Richard Strassberg, Martoma's attorney, argued there were "many,
many independent reasons" for the hedge fund to have made the trades
at the heart of the case.
"The story just doesn't add up because in the haste to make a case,
the prosecution rushed to judgment," Strassberg said.
Arlo Devlin-Brown, an assistant U.S. attorney, acknowledged that
Martoma did research before trading in the stocks and making
investment recommendations to Steven A. Cohen, the founder of SAC
"But the evidence is going to show Mathew Martoma also sought out an
illegal edge," Devlin-Brown said.
Martoma had "corrupted" two doctors involved in a clinical trial
being conducted by Elan Corp and Wyeth of an Alzheimer's drug in
order to gain inside information, the prosecutor said.
Strassberg and Devlin-Brown were making opening statements on Friday
in the criminal trial of Martoma, 39, before a standing-room-only
crowd in federal court in New York. Prosecutors say Martoma engaged
in the most lucrative insider trading scheme in U.S. history,
helping SAC make profits and avoid losses of $276 million.
The case is one of a series of prosecutions by U.S. authorities
since 2009 with the aim of cracking down on insider trading by hedge
Much of the government's attention has centered on Cohen's SAC
Capital, a once $14 billion hedge fund that has agreed to pay $1.8
billion in criminal and civil settlements and plead guilty to fraud
charges stemming from insider trading by its employees.
Martoma is one of eight current or former SAC employees to be
charged with insider trading. A resident of Boca Raton, Florida,
Martoma worked at the hedge fund's CR Intrinsic Investors division
before being charged with three conspiracy and securities fraud
An indictment against Martoma accuses him of arranging trades in
Elan and Wyeth based on confidential information he got from two
doctors, Sidney Gilman and Joel Ross, who took part in a clinical
trial for an Alzheimer's drug. Wyeth is now a unit of Pfizer Inc.
FOCUS ON DOCTORS' CREDIBILITY
During the opening statements Friday, Strassberg urged jurors to
question the credibility of the doctors, who he said received
"sweetheart" deals promising they would not be prosecuted if they
cooperated with the investigation.
He focused in particular on Gilman, a former neurology professor at
the University of Michigan, saying he first told government
investigators he had not provided Martoma with confidential
"Dr. Gilman felt pressure to tell a story the prosecutors wanted to
hear," Strassberg said.
He also questioned the memory of Gilman, 81, who at the time was
undergoing chemotherapy and taking a drug whose side effects include
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Devlin-Brown, the prosecutor, acknowledged there was "no question
these doctors broke the law and disgraced themselves and their
He called them "valuable witnesses" who had agreed to testify about
their "corrupt" relationships with Martoma.
Martoma came to connect with the doctors through so-called
expert-networking firms, which connect sophisticated investors with
industry experts, Devlin-Brown said.
Ross, a New Jersey doctor who was a clinical investigator on the
Alzheimer's drug trial, earned $1,500 per hour to consult with
Martoma, he said.
Ross oversaw a couple of dozen patients participating in the trial
and "started telling Mathew Martoma virtually everything he knew
about the drug trial," Devlin-Brown said.
Gilman earned $70,000 through more than 40 paid consultations with
Martoma, Devlin-Brown said. The doctor also began considering
Martoma a friend, in what Devlin-Brown said could be seen as an "odd
Gilman too began telling Martoma about "virtually everything he was
learning," about the drug, bapineuzumab, Devlin-Brown said,
including ultimately on July 17, 2008, about the final trial
results, which he was scheduled to present at a conference in
Chicago on July 29.
Martoma flew out to meet Gilman in Michigan on July 19,
where he reviewed a presentation about the trial, Devlin-Brown said.
"The evidence will show that he knew these results would not be
good," he said.
After the meeting, SAC sold off its $700 million position in Elan
and Wyeth, and placed bets against the companies.
For his part, Strassberg said SAC had always planned to sell off its
stake. He said by the time the sale took place, Elan's stock had
become "overheated" and the global financial crisis was building.
"You're going to see the evidence doesn't match the story," he said.
The case is U.S. v. Martoma, U.S. District Court, Southern District
of New York, 12-cr-00973.
(Reporting by Nate Raymond; editing by
Eddie Evans and Andrew Hay)
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