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Securities Regulation, Keyed to Choi
United States v. Martoma
Citation:
894 F.3d 64 (2017)Facts
Mathew Martoma worked as a portfolio manager at S.A.C. Capital Advisors, managing a pharmaceutical-focused investment portfolio worth $400-500 million and advising the fund’s owner, Steven Cohen. To obtain information about bapineuzumab, an experimental Alzheimer’s drug being jointly developed by Elan Corporation and Wyeth, Martoma arranged paid consultations with medical experts, including Dr. Sidney Gilman, chair of the drug trial’s safety monitoring committee. Over approximately 18 months, Dr. Gilman participated in about 43 consultations with Martoma at roughly $1,000 per hour, during which he provided confidential updates on the drug’s safety and trial results, despite contractual obligations to maintain confidentiality. Dr. Gilman knew Martoma was an investment manager seeking information for trading decisions. In July 2008, after being unblinded to disappointing final efficacy results, Dr. Gilman met with Martoma and shared detailed confidential data. Shortly thereafter, Martoma contacted Cohen, and S.A.C. Capital began liquidating its positions and entering short positions in Elan and Wyeth. When the negative results were publicly announced on July 29, 2008, the stocks declined significantly (Elan by 42%, Wyeth by 12%), resulting in approximately $80.3 million in gains and $194.6 million in averted losses for the fund. Martoma personally received a $9 million bonus based largely on this trading activity.
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