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Former SAC Capital Advisors LP portfolio manager Mathew Martoma lost his bid remain free on bail while he appeals his insider-trading conviction.
The U.S. Court of Appeals in New York on Nov. 12 said Martoma’s appeal lacks a “substantial question” likely to result in a reversal. The panel didn’t rule on the merits of the claim, which will be decided later. Earlier on Nov. 12, Martoma’s lawyer, Paul Clement, told the judges that the trial judge erred by refusing to allow jurors to hear testimony SAC founder Steven A. Cohen’s gave to the U.S. Securities and Exchange Commission.
Martoma was convicted at a trial for using illegal tips to make $275 million on trades in Wyeth LLC and Elan Corp. He had been scheduled to begin a nine-year prison sentence Nov. 10.
The court previously granted him a delay while it decided whether he may remain free during his appeal. The appeals court today didn’t say when Martoma must surrender to prison.
Richard Strassberg, a lawyer for Martoma, said he is “disappointed in the court’s ruling.”
At Martoma’s trial, U.S. District Judge Paul Gardephe ruled that defense lawyers couldn’t show jurors Cohen’s 2012 testimony, in which he told the SEC about the firm’s July 2008 sale of its Wyeth position. Cohen declined to testify at the trial, citing his Fifth Amendment right not to incriminate himself.
‘Significant Role’
Cohen told the SEC that he sold Wyeth after learning that Ridgeback Capital Management LLC founder Wayne Holman was doing so, said Gardephe, who reviewed the testimony. That didn’t clear Martoma of complicity, the judge said.
Cohen’s account showed that Martoma “played a significant role” in SAC’s decision to buy shares in Elan and Wyeth, and Martoma’s discomfort with the Elan position was the impetus behind Cohen’s decision to sell, Gardephe said.
At the trial this year, prosecutors said Stamford, Connecticut-based SAC liquidated a $700 million position in Elan and Wyeth in July 2008 within days after Martoma learned inside information about negative clinical tests on the Alzheimer’s disease drug bapineuzumab.
Martoma and his wife, who have three children, were both in the appeals court for today’s argument. Martoma isn’t a risk to flee and doesn’t present a danger to others while outside prison, argued Clement, a former U.S. solicitor general. He and Assistant U.S. Attorney Eugene Ingoglia instead focused on whether Martoma’s appeal presents a “substantial question of law or fact” likely to result in a reversal.
Clement told the panel that Cohen’s testimony was “clearly exculpatory.” He also said that Gardephe erred by excluding testimony from a defense expert that Elan’s share price was too high in July 2008, and that prosecutors failed to prove that a doctor who gave Martoma inside tips received a personal benefit for the information.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).
– Bloomberg News
