STAY IN YOUR PEN
Martoma’s insider-trading conviction stands
A federal appeals court on Wednesday denied Mathew Martoma’s request to throw out his insider-trading conviction.
The decision means Martoma, who engineered the most lucrative single insidertrading scheme ever, will likely have to serve out the remainder of his nine-year sentence.
An inmate in the low-security Miami Federal Correctional Institution, Martoma is not slated to be released until September 2021.
In 2014, a federal court jury convicted Martoma, a hedge fund portfolio manager, of masterminding a scam to gain insider info on two pharmaceutical companies, Wyeth and Elan.
The info, obtained from a doctor working on clinical trials of a drug to treat Alzheimer’s disease, was used to make trades that netted Martoma’s employer — SAC Capital, owned by legendary trader Steve Cohen — $275 million, court testimony revealed.
In his appeal, Martoma claimed the jury was given improper instructions.
A three-judge panel of the Second Circuit Court of Appeals rejected the plea in a 2-1 decision.
Martoma’s prosecution came near the climax of a longrunning insider-trading investigation run by then-Manhat- tan US Attorney Preet Bharara.
Bharara’s prosecutors tried unsuccessfully to flip Martoma into testifying against Cohen.
Cohen was never charged — but SAC pleaded guilty to criminal and civil insider trad- ing charges and was fined $1.8 billion.
Martoma had pinned his hopes of overturning his conviction on a controversial 2014 Second Circuit insider-trading decision that held that the government, to gain a conviction, had to prove that the defen- dant knew the original tipster received a benefit in exchange for the tip.
The 2014 decision is known as the Newman ruling because it overturned the conviction of hedge fund trader Todd Newman, of Diamondback Capital.
The Newman ruling would later free Martoma’s SAC colleague Michael Steinberg who, a federal jury found, made $1.9 million for SAC by trading on tips involving Dell and Nvidia.
Steinberg’s conviction was overturned because prosecutors did not prove that he knew the tipster was paid for the info.
The Newman ruling also tripped up Bharara’s probe and led to the lawman dropping cases against several defendants.
The appeals court on Wednesday found that Bharara successfully proved that Martoma’s tipster, Dr. Sidney Gilman, received financial benefits from giving confidential information to Martoma.
In a dissenting opinion, Judge Rosemary Pooler noted that there was not “direct testimony” that Gilman was paid for sharing illicit information.
Paul Clement, Martoma’s lawyer, did not respond to requests for comment.
Martoma’s wife, Rosemary, a striking brunette pediatrician, was at her husband’s side throughout the trial.
The couple have three daughters.
Bharara cheered Wednesday’s decision — and took a swipe at the Newman ruling.
“Unlike Newman, the Martoma decision comports with longstanding law and common sense. Congrats to the SDNY team,” Bharara tweeted.