World

Tuesday 29 July 2014

Ex-portfolio manager charged over $276m 'insider scheme' on Elan

Bob Van Voris and Patricia Hurtado

Published 21/11/2012|05:00

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A FORMER portfolio manager was charged yesterday with taking part in an alleged record insider-trading scheme that involved Elan shares and netted as much as $276m for a hedge fund.

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US prosecutors charged Mathew Martoma in New York with trading on insider tips from a doctor about clinical trials of bapineuzumab, a drug to treat Alzheimer's disease.

Mr Martoma (38) is accused of advising hedge fund manager Steven Cohen of SAC Capital Advisors to sell Elan and Wyeth shares before bad news about the drug's prospects was announced. Mr Cohen's firm made $276m in profits or losses avoided after receiving the advice, prosecutors said in a criminal complaint.

Mr Martoma is charged with conspiracy and securities fraud, a crime that carries a maximum 20-year prison term. The complaint does not state if Mr Cohen knew Mr Martoma's advice was based on illegal insider tips. Mr Cohen was not charged or sued over the matter.

"Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time," prosecutors said in a statement.

"As Martoma allegedly got sneak peeks at drug data, he first recommended that the hedge fund build up a massive position in Elan and Wyeth stock, and then caused the fund to shed those shares after getting a secret look at the unexpectedly bad results of a clinical drug trial," the statement said.

Mr Martoma worked as a portfolio manager for CR Intrinsic Investors in Stamford, Connecticut, a unit of SAC Capital, according to a lawsuit filed against him yesterday by the US Securities and Exchange Commission. He's the sixth current or former SAC employee implicated in alleged insider trading by US prosecutors.

"Mathew Martoma was an exceptional portfolio manager who succeeded through hard work and the dogged pursuit of information in the public domain," his lawyer, Charles Stillman, said in an emailed statement.

"What happened today is only the beginning of a process that we are confident will lead to Mr Martoma's full exoneration," he added.

Jonathan Gasthalter, a spokesman for Stamford-based SAC, had no comment. Mr Martoma was arrested at his home in Boca Raton, Florida, at 6.30am yesterday. He appeared before US magistrate David Brannon in federal court later that day. (Bloomberg)

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