Millennium Post

PIO hedge fund manager Mathew Martoma seeks to overturn US conviction

Indian-origin hedge fund portfolio manager Mathew Martoma, convicted for his role in the most lucrative insider trading scheme in US history, has asked a court to overturn the verdict or give him a new trial as jury bias ‘tainted’ the ruling. Martoma, 39, said his conviction should be thrown out because ‘unrelated’ information about his dismissal from Harvard Law School biased the jury against him and the US government failed to prove beyond reasonable doubt that he traded on material, non-public information. Alternatively, he said in a 45-page motion in a federal court here, that he should face a new trial.

The motion by the former portfolio manager of CR Intrinsic Investors, a division of SAC Capital, seeks ‘a judgement of acquittal on all counts’. Martoma, convicted on February 6, will be sentenced on June 10. He was found guilty by a federal jury for his role in the $275 million insider trading scheme after a month-long trial on one count of conspiracy to commit securities fraud and two counts of securities fraud related to a clinical trial involving Elan Corp and Wyeth, now part of Pfizer Inc, for an experimental drug to treat Alzheimer’s.

While the maximum prison sentence on all the three counts is 45 years, Martoma could face up to 15 to 20 years in prison based on US federal sentencing guidelines, which will take into account the gains reaped by SAC from the trading. Martoma also faces a fine of over $5 million on the charges. In his motion, Martoma said the government failed to prove beyond reasonable doubt that he committed any of the crimes he was charged with and that he obtained non-public information from two doctors who knew about the clinical trial. The government also could not prove that the two doctors obtained a personal benefit from sharing confidential material with Martoma, the motion said.

The prosecutors could not prove that Martoma agreed with the doctors who knew of the information about the clinical trial to commit insider trading or had the ‘requisite criminal intent to do so’, it said. Martoma said a new trial should be ordered since ‘the jury was tainted by evidence unrelated to the charged offenses...and the jury was presumptively biased by the unsealed motions... concerning Martoma’s dismissal from Harvard Law School’. The motion said information that Martoma was kicked out of Harvard for allegedly doctoring his law school transcript to try to gain a federal clerkship emerged in the midst of jury selection and ‘garnered widespread media attention and negative publicity, rendering the jurors presumptively biased’.

The motion said the government argued that Martoma obtained inside information concerning clinical trial details like enrolment data, dropout rates and lack of dose response. ‘But all such information was already public and/ or immaterial’ to the drug’s efficacy.

‘The Government did not show that Martoma and SAC sold Elan and Wyeth securities based on inside information,’ the motion said, adding that SAC’s business model was to take and sell large positions in short periods of time and SAC healthcare specialists recommended that SAC sell its Elan
and Wyeth positions. It said the two doctors who knew about the trial received consulting fees irrespective of what was discussed.
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