[January 10, 2014]By Nate Raymond and Joseph Ax and
Emily Flitter
NEW YORK (Reuters) — Years before he
was accused of insider trading, former SAC Capital Advisors
portfolio manager Mathew Martoma forged a Harvard transcript,
falsified an email, and created a dummy forensic computing company
to try to cover his tracks, according to a court document unsealed
on Thursday.
Martoma was eventually expelled from Harvard Law School over the
incident, according to the document, which began with his forging a
Harvard transcript to submit an application for a clerkship.
The revelations, which date back to 1999, came as government and
defense lawyers prepared to make their opening statements in
Martoma's high-profile insider trading trial on Friday.
Martoma's lawyers on Thursday lost a battle to keep the facts
surrounding Martoma's expulsion from Harvard Law out of his insider
trading trial.
News of Martoma's Harvard troubles came to light in two orders
issued by U.S. District Judge Paul Gardephe in which he said
documents related to a disciplinary proceeding against Martoma in
1999, while he was a student at Harvard, should be unsealed.
Martoma's lawyers had fought all the way to the 2nd U.S. Circuit
Court of Appeals to keep the papers secret, arguing he would suffer
embarrassment and his right to a fair trial would be violated. The
2nd Circuit denied his appeal Wednesday.
Lou Colasuonno, a spokesman for Martoma, declined to describe the
event at Harvard, but said it occurred 15 years ago and has no
bearing on the case.
"Raising it now is a transparent effort by the government to unduly
influence the ongoing court proceedings," Colasuonno said.
According to one of the orders, which was unsealed Thursday, Martoma,
then a Harvard Law student, used computer software to create a fake
transcript which he then sent to federal judges in an attempt to
secure a clerkship. Based on his beefed-up transcript, he landed
interviews with several judges.
But the lie caught up with him and Harvard initiated disciplinary
proceedings. During the proceedings, Martoma changed the date of an
email before submitting it as evidence of his innocence. He also
submitted a computer forensic report about the email with the
falsified date, but did not tell the disciplinary committee that the
company that produced the forensic report was his creation.
A spokesman for Harvard, Robb London, said the school does not
comment on disciplinary proceedings, although he said it had no
record of Martoma graduating.
In his ruling, Judge Gardephe noted the government "does not seek to
introduce the law school evidence during its case-in-chief," but
would instead use it "to rebut particular arguments made by the
defendant."
Specifically, according to the judge's order, prosecutors were
planning to use the evidence to counter any point Martoma's defense
team tried to make about the lack of forensic evidence in the
government's case by proving Martoma understood the "importance of
minimizing electronic evidence that could establish his guilt and
his capacity to alter such evidence to fit his version of events."
"It is undisputed that Martoma falsified the grades," Judge Gardephe
wrote, as were the rest of the facts Martoma's team was looking to
suppress.
"The embarrassment Martoma will suffer if the law school evidence is
disclosed does not trump the presumptive right to public access that
attaches to substantive pretrial motions."
Martoma, 39, is one of eight current or former SAC Capital employees
to face criminal insider trading charges.
He chose to go to trial rather than plead guilty and cooperate with
prosecutors, an option six others took. Another, Michael Steinberg,
was convicted on insider trading charges in December.
Prosecutors accuse Martoma of arranging trades in Elan Corp and
Wyeth based on nonpublic information he got from two doctors
involved in a clinical trial for an Alzheimer's drug. Wyeth was
later acquired by Pfizer Inc.
The trades enabled SAC Capital to make profits and avoid losses of
$276 million, a sum prosecutors say is a record in a U.S. insider
trading case.
SAC Capital pleaded guilty to fraud charges in November stemming
from employees' insider trading. The hedge fund has agreed to pay
$1.8 billion in criminal and civil settlements.
Steven A. Cohen, the founder of SAC Capital, has not been criminally
charged but faces an administrative action by the U.S. Securities
and Exchange Commission seeking to bar him from the financial
industry for failing to supervise Martoma and Steinberg. He denies
wrongdoing.
In court on Thursday, Judge Gardephe and lawyers for both sides
agreed on the seven women and five men who will hear the case
against Martoma. The jurors range in age from 24 to 66 and include
an employment lawyer, a city bus driver and a film professor who
spent much of his time in court with an unlit cigar in his mouth.
Four alternate jurors were also expected to be selected on Thursday
afternoon.
The judge said opening statements would start Friday.
After leaving Harvard, Martoma went to Stanford University where he
earned an MBA.
The case is U.S. v. Martoma, U.S. District Court, Southern District
of New York, 12-cr-00973.
(Reporting by Nate Raymond, Joseph Ax
and Emily Flitter; editing by Bernard Orr)
Martoma was eventually expelled from Harvard Law School over the
incident, according to the document, which began with his forging a
Harvard transcript to submit an application for a clerkship.
