SAC’s Chief Lawyer Called by Martoma at Insider-Trading Trial

Jan 29, 2014 12:01 am ET

Jan. 29 (Bloomberg) -- SAC Capital Advisors LP General Counsel Peter Nussbaum was called to testify at the insider- trading trial of Mathew Martoma as the defense opened its case by trying to show someone else advised the firm on trades tied to an Alzheimer’s drug trial.

SAC Capital had a contract with Ridgeback Capital Management LLC founder Wayne Holman to pay it a percentage of the money it made from the sale of its Wyeth stake in exchange for investment advice, Nussbaum told jurors yesterday in Manhattan federal court. Martoma’s lawyers claim it was Holman and not Martoma who told SAC Capital founder Steven Cohen to sell the firm’s position in Wyeth stock in July 2008.

The government accuses Martoma of using illegal tips to benefit the Stamford-Connecticut-based firm by $276 million in the most-lucrative insider-trading scheme. Martoma contends the trades in Wyeth and Elan Corp. were based on public information and, for Wyeth, also on the advice of Holman, a former SAC Capital fund manager who left to start Ridgeback Capital.

Prosecutors claim SAC Capital sold $700 million in shares of Wyeth and Elan in one week after Martoma got inside information about the results of clinical drug trial of bapineuzumab, a drug they were developing to treat Alzheimer’s disease. Prosecutors rested their case yesterday after presenting 12 days of testimony against Martoma.

$700 Million

Nussbaum’s testimony is scheduled to continue tomorrow. Richard Strassberg, a lawyer for Martoma, told U.S. District Judge Paul Gardephe that the defense case may finish tomorrow. Gardephe said closing arguments in the case may come as soon as the following day.

Before Nussbaum, Martoma’s lawyers called as a witness Anthony Cecchini, a former Piper Jaffray Cos. employee who set up expert consultations between investors and Joel Ross, a New Jersey geriatrician. Prosecutors claim Ross and former University of Michigan neurologist Sidney Gilman passed inside information about the bapineuzumab trial to Martoma.

Martoma, who denies wrongdoing, is charged with conspiracy and two counts of securities fraud. He faces as long as 20 years in prison if convicted of the securities-fraud charges.

In November, SAC Capital agreed to plead guilty to securities fraud and end its investment advisory business as part of a record $1.8 billion settlement of the government’s investigation of insider trading at the firm. The agreement must be approved by a judge before it can take effect. Cohen, who denies wrongdoing, hasn’t been charged.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).

--Editors: Michael Hytha, Joe Schneider