Rare re-argument ordered in insider trading appeal of SAC’s Martoma

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By Brendan Pierson

<span class="articleLocation”>A federal appeals court in Manhattan ordered a
rare second round of arguments on Wednesday as former SAC
Capital Advisors portfolio manager Mathew Martoma tries to
overturn his insider trading conviction.

The 2nd U.S. Circuit Court of Appeals, which first heard
Martoma’s appeal in October 2015, took the unusual step after
the U.S. Supreme Court in December issued a decision that made
insider trading cases easier to prosecute.

Martoma’s re-argument is scheduled for May 9.

The court had previously asked prosecutors and Martoma to
submit new briefs on how the case would be affected by the
Supreme Court decision, which held that a trader who gets
insider information from a relative or friend can be guilty of
insider trading even if the source received nothing in return.

The decision upheld the conviction of Bassam Salman, a
Chicago man who made nearly $1.2 million on information from his
brother-in-law at Citigroup Inc.

Martoma, 42, was convicted in February 2014 of receiving
inside information in 2008 about a clinical trial of an
Alzheimer’s drug that prosecutors say allowed SAC to make $275
million. He is serving a nine-year sentence.

The first round of arguments in his appeal centered on an
earlier 2nd Circuit decision holding that a tipster must receive
a benefit of “some consequence,” not just friendship, to support
an insider trading conviction.

Martoma’s tipster, Dr. Sidney Gilman, testified that Martoma
had told him he wanted to be friends, and the jury that
convicted Martoma was told that friendship could be an illegal

Martoma’s lawyer, Paul Clement, said that although his
client paid Gilman $70,000 for expert consulting, their business
relationship was not in exchange for the tip.

In a brief submitted in January in response to the 2nd
Circuit’s request, prosecutors said the Supreme Court decision
meant Martoma’s conviction should stand even if Gilman had not
been paid.

But Martoma’s lawyers have countered with their own brief,
saying the decision only applied to cases where the tipster and
recipient are family or close personal friends.

SAC agreed in 2013 to plead guilty to fraud charges and pay
$1.8 billion in criminal and civil settlements for a broader
pattern of insider trading. It has since rebranded itself
Point72 Asset Management.

The Alzheimer’s drug in the Martoma case was being developed
by Elan Corp, which is now owned by Perrigo Co Plc, and
Wyeth, which Pfizer Inc later acquired, according to

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