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Insider trading trial of SAC's Martoma delayed to January

09/24/2013 | 07:00pm EDT
Mathew Martoma leaves Manhattan Federal Court after facing charges on an insider trading scheme in New York

NEW YORK (Reuters) - A federal judge on Tuesday pushed back the insider trading trial of former SAC Capital Advisors portfolio manager Mathew Martoma to January 6.

U.S. District Judge Paul Gardephe delayed the trial, originally scheduled for November 4, at the request of Martoma's lawyer, Richard Strassberg, who is taking part in another trial starting this week.

Prosecutors charged Martoma last November with insider trading of the shares of drug companies Elan Corp Plc (>> Elan Corporation, plc) and Wyeth, which is now part of Pfizer Inc (>> Pfizer Inc.). The companies were collaborating on a new drug to treat Alzheimer's Disease.

In a related matter, a lawyer for Steven A. Cohen's SAC Capital refused to comment on reports that it has begun settlement talks with federal prosecutors who filed a criminal indictment against the $14 billion hedge fund this summer. Federal authorities charged the fund, but not Cohen, with being a breeding ground for the kind of insider trading Martoma is alleged to have engaged in.

Prosecutors in the Martoma case initially alleged that a doctor, identified in a corresponding case brought by the U.S. Securities and Exchange Commission as neurologist Sidney Gilman, formed a close relationship with Martoma and shared non-public information with him while supervising a clinical trial of the new drug. Gilman is cooperating with the investigation and agreed to pay a $186,781 disgorgement.

Prosecutors have since expanded the case to say that Martoma not only capitalized on Gilman's information, but also sought other insider sources through expert networking firms. They also say a second doctor gave Martoma inside information.

Strassberg, Martoma's lawyer, is also representing Bank of America Corp's (>> Bank of America Corp) Countrywide unit in a trial over allegations that it defrauded Fannie Mae and Freddie Mac with shoddy home loans.

Because of the proceedings in the Countrywide case, Strassberg arrived, out of breath, in Gardephe's courtroom an hour after the scheduled 12:30 p.m. start of a hearing.

"Yes, I have arrived," Strassberg said, when the court reporter asked if he was present.

Gardephe took the bench a few minutes later, and Strassberg informed him that he had to return to the courtroom of U.S. District Judge Jed Rakoff, who is presiding over the Countrywide case, by 2 p.m.

After Gardephe set January 6 for the start of the Martoma trial, Strassberg requested the trial be pushed back to January 13, saying it would be difficult to prepare witnesses over the holidays. Arlo Devlin-Brown, an assistant U.S. attorney prosecuting the case, said he would have no problem with that.

"I personally appreciate this," Strassberg told Gardephe.

Gardephe said he would consider it if his schedule permits.

"I have my own trial calendar," Gardephe said.

Gardephe also issued an order on Tuesday freezing Martoma's house in Boca Raton, Florida, and more than $4 million he and his wife Rosemary have in various accounts. The government has said the assets were derived at least in part from the alleged insider trading and would want them forfeited if Martoma is convicted.

Martoma is one of 10 one-time employees of billionaire Steven A. Cohen's hedge fund to be charged or implicated by the government in the broad investigation of insider trading.

He was to be the first to face trial. Now, former SAC fund manager Michael Steinberg will be the first in a trial scheduled to start November 18. Antonia Apps, the assistant U.S. attorney prosecuting that case, watched the Martoma hearing Tuesday from the courtroom gallery.

SAC Capital itself was indicted in July on insider trading charges. The firm has pleaded not guilty. Cohen has not been charged.

After a hearing in the SAC case, also on Tuesday, Daniel Kramer, a lawyer for the firm, declined to comment on reports by Bloomberg and the Wall Street Journal that prosecutors and SAC have begun negotiating a possible settlement.

A criminal defense lawyer, who did not want to be identified because he has had some involvement in the SAC Capital litigation, said he would be surprised if the hedge fund's lawyers agree to any deal short of a global settlement. The lawyer said he would not approve of any deal that did not rule out the possibility of prosecutors subsequently charging Cohen.

The Martoma case is U.S. v. Martoma, U.S. District Court, Southern District of New York, No. 12-cr-00973.

(Reporting by Bernard Vaughan. Additional reporting by Matthew Goldstein; Editing by John Wallace and Andre Grenon)

By Bernard Vaughan

Stocks treated in this article : Pfizer Inc., Bank of America Corp, Elan Corporation, plc

© Reuters 2013
Stocks mentioned in the article
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