SAC Insider Case Second Tipper Said to Be N.J. Doctor
By Patricia Hurtado - 2013-09-06T04:01:01Z
Former SAC Capital Advisors LP manager Mathew Martoma, charged with trading on illicit tips on an Alzheimer’s drug, got some of his information from New Jersey physician Joel Ross, two people familiar with the matter said.
Ross is the physician identified in the revised indictment against Martoma filed Aug. 22 as Doctor-2, who prosecutors said provided confidential information to Martoma about a drug trial in July 2008, said the people with knowledge of the investigation who weren’t authorized to speak because it isn’t public.
Mathew Martoma, a former portfolio manager with SAC Capital Advisors LP, center, holds hands with his wife Rosemary Martoma as he arrives at federal court with attorney John O. Farley, right, in New York on June 5, 2013. Photographer: Louis Lanzano/Bloomberg
Ross, a geriatrician and clinical associate professor of medicine at Mt. Sinai School of Medicine, is the founder and chief executive officer of Memory Enhancement Centers in Eatontown, New Jersey, according to his website.
Prosecutors in the office of Manhattan U.S. Attorney Preet Bharara’s said the second source, identified in court papers only as “Doctor-2,” conducted paid consultations with Martoma, which were arranged through an unidentified “financial services firm” that provided expert networking services to SAC, the hedge fund company founded by Steven A. Cohen.
“Doctor-2 provided confidential information about the drug trial and other Alzheimer’s disease drug trials to Martoma with the expectation that Martoma would assist Doctor-2 in obtaining additional clinical trial business,” according to the revised indictment.
Ross received his medical degree from the State University of New York Downstate Medical Center in Brooklyn, according to his website. His website describes continuing clinical trials of Alzheimer’s medications and says he was named Alzheimer’s Caregiver Humanitarian of the Year in 2011.
The U.S. alleged Martoma used the information from the two doctors, who were involved in the trial of bapineuzumab, or “bapi,” to help the hedge fund make $276 million by trading in shares of Elan Corp. (ELN) and Wyeth LLC. The government has called it the biggest criminal insider-trading case against an individual in history.
Martoma, who has pleaded not guilty to charges of two counts of securities fraud and one count of conspiracy, is scheduled to go on trial on Nov. 4. He faces as long as 20 years in prison if convicted.
Richard Strassberg, Martoma’s lawyer, didn’t immediately respond to a voice-mail message left at his office yesterday after regular business hours seeking comment on the allegations, which were reported earlier by the Wall Street Journal. Ross didn’t respond to a voice-mail message left at his service yesterday seeking comment on the allegations. Jerika Richardson, a spokeswoman for Bharara’s office, declined to comment.
Signage stands outside the offices of hedge fund SAC Capital Advisors LP in Stamford, Connecticut. Photographer: Rick Maiman/Bloomberg
SAC, based in Stamford, Connecticut, was indicted in July. Bharara said SAC reaped hundreds of millions of dollars in illicit profits through separate insider-trading schemes by at least eight former SAC fund managers and analysts, including Martoma.
In the SAC indictment, prosecutors claimed that two unidentified SAC health-care analysts exchanged e-mails with Cohen on April 11, 2008, and the next day about information they’d gotten through a paid consultation with an unidentified clinical investigator on the trial of the Alzheimer’s drug.
The U.S. Securities and Exchange Commission has alleged that the other doctor who tipped off Martoma about the drug trials was Sid Gilman, a neurologist who was head of the safety monitoring committee for the bapi trial. Gilman, who worked at the University of Michigan, has entered into a non-prosecution agreement and agreed to cooperate with the government.
Working for Elan in the clinical trial for bapi, Doctor-2 treated Alzheimer’s patients with the drug, then reported to Elan data about their mental and physical condition, according to the government.
On May 29, 2008, Martoma set up a meeting with Doctor-2 for the evening of July 28, shortly after a briefing in which Doctor-2 was to be told the final results of the bapi trial and a day before they were scheduled to be announced publicly, the U.S. said.
In mid-July 2008, Gilman passed Martoma secret data showing that bapi failed to halt progression of Alzheimer’s in patients in the clinical test, the U.S. said.
When Martoma learned that Wyeth and Elan would report negative data on the drug, Martoma had a 20-minute phone call with Cohen, according to the government. The hedge fund owner, at Martoma’s recommendation, sold almost all of the fund’s $700 million position in Elan and Wyeth, then sold the stock short, prosecutors said.
The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).
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