Preet Bharara: University Of Michigan Doctor Financially Compensated For Leaking Confidential Drug Trial Data To Former SAC Trader Just An Innocent Pawn In Big Bad Hedge Fund’s GameBy Bess Levin
As you may have heard, earlier today, Mathew Martoma, a former portfolio manager in SAC Capital’s CR Intrinsic unit, was charged with allegedly running “the most lucrative insider trading scheme ever,” netting $276 million for the fund. He did so based on information that was given to him by Sid Gilman, a University of Michigan neurologist and chair of a “safety-monitoring committee that oversaw a clinical trial by Wyeth LLC and Elan Corp. into whether the drug bapineuzumab, or bapi, was safe for patients with mild-to-moderate Alzheimer’s disease.” Over an 18-month period, Gilman and Martoma met 42 times, in addition to emailing and chatting over the phone. For example:
In the spring of 2008, the doctor told Martoma that bapi was “reasonably safe for a drug of its kind,” according to the FBI. A news release by Wyeth and Elan on June 17, 2008, announced a high-level summary of the drug trial, saying detailed results would be released on July 29. By June 30, the hedge fund amassed holdings of $328 million in Elan equity securities and $373 million in Wyeth securities, according to the FBI. That began to change after Elan flew the doctor to San Francisco on July 15, 2008, to learn the detailed results of the trial, according to the FBI.“The efficacy data was negative, particularly in comparison with market expectations following the June 17 press release,” according to the FBI complaint. On July 17, Elan gave Gilman an encrypted PowerPoint presentation that summarized the results and that was marked “Confidential, Do Not Distribute.” Gilman and Martoma then spoke for an hour and 45 minutes before the doctor sent his friend the PowerPoint with a password needed to open it, according to the SEC.
For his assistance, Gilman was paid approximately $108,000. And while the amount was small in comparison to the bonus of $9.38 million Martoma was paid in January 2009, based on his trades in Elan and Wyeth, and one could make the argument that Martoma screwed Gilman over when it came to compensation, an argument that doesn’t seem plausible is that Gilman was just an innocent old man who had no idea what he was doing when he sent a portfolio manager “an encrypted PowerPoint presentation that summarized results and that was marked “Confidential, Do Not Distribute.” And yet!
“At the center of the scheme was the cultivation and corruption of a renowned medical doctor,” U.S. Attorney Preet Bharara said today at a news conference in Manhattan. “He is prepared to testify in connection with a non-prosecution agreement.”
For those hoping for a little clarity re: why or how Gilman is to be viewed as a victim who is blameless in all this, Bahara’s answer to that is, fuck you, that’s why. Make he’ll explain in more detail at a later time or maybe he won’t.
Bharara declined to say why the doctor, whom he didn’t name, wasn’t charged. “As some future date, there may be more information about that,” he said today.