Martoma to start insider-trading prison term
NEW YORK — Former hedge fund portfolio manager Mathew Martoma must surrender Thursday to begin a nine-year prison term for his conviction in what federal prosecutors called the most profitable insider-trading scheme in U.S. history.
In a one-sentence ruling filed Monday, Manhattan U.S. District Judge Paul Gardephe set a 2 p.m. deadline for the onetime financial lieutenant of SAC Capital hedge fund billionaire Steven Cohen to report to a facility designated by the U.S. Bureau of Prisons.
Gardephe had recommended that prison officials assign the 40-year-old Florida resident to a facility in Miami, thereby making it easier for Martoma's wife, Rosemary, and the couple's three young children to visit him.
The ruling followed a federal appeals court denial of Martoma's emergency application to remain free pending appeal. The U.S. Court of Appeals for the Second Circuit ruled on Wednesday that Martoma had failed to show his appeal bid raised "a substantial question of law or fact," as required under federal law.
The appeals court, however, is expected to continue its review of other legal issues raised by Martoma's attorneys. They include an argument that Gardephe improperly barred the defense team presenting trial jurors with evidence from a legal deposition of Cohen that was conducted by Securities and Exchange Commission lawyers.
A Manhattan federal court jury in New York City convicted Martoma in February on charges of conspiracy and securities fraud. The conviction led to his prison sentence and an order to forfeit nearly $9.4 million, more than Martoma's current net worth. His wife is challenging the forfeiture ruling.
The case focused on evidence that Martoma obtained disappointing results of clinical tests on an experimental Alzheimer's disease drug before the news became public in 2008 — and then illegally set in motion an SAC Capital sell-off of pharmaceutical company stocks that generated $276 million in profits and avoided losses.
The financial executive obtained the information by cultivating friendships with two doctors who had access to some of the drug trial data and improperly shared it with him. They testified during Martoma's trial that they knew he planned to trade on the secret information.
Martoma ultimately netted a nearly $9.4 million bonus from the transactions, trial evidence showed.
Cohen was not charged in the case. But SAC Capital agreed to a record $1.8 billion insider-trading settlement, an agreement that set the stage for the hedge fund and its affiliates to cease trading for outsiders and instead manage Cohen's personal fortune.
Cohen still faces an SEC administrative proceeding on charges he failed to supervise Martoma and another former portfolio manager and prevent them from insider-trading involvement.