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: Read more »
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
Members Of Insider Trading “Club” Were Good At Obtaining Material Non-Public Information, Not So Good At Playing It Cool On Conversations Recorded By The FedsBy Bess Levin
Later this week, Anthony Chiasson, a Level Global co-founder, and Todd Newman, a former Diamondback portfolio manager, will go to trial in Federal Court for allegedly making $67 million in ill-gotten gains, based on inside information they obtained about Nvidia Corp and Dell Inc. According to U.S. Attorney Preet Bharara, Chiasson and Newman, who’ve both pleaded not guilty, were able to rack up all their profits by teaming up with a bunch of friends and forming an insider trading club, which is a lot like a book club or fight club in that they took roll, traded canapé duties, and drank Pinot Grigio, but different in that instead of discussing The Art Of Fielding or punching each other in the face, they spent every Monday night from 7 to 9 sharing material non-public information with each other.
“This case describes a tight-knit circle of greed on the part of professionals willing to traffic in confidential information,” Bharara said when the charges were announced in January. “It was a circle of friends who essentially formed a criminal club, whose purpose was profit and whose members regularly bartered inside information.”
In the beginning, when the club was first formed, there was a spirit of camaraderie, as the members happily traded tips for everyone’s mutual benefit. Unfortunately, things started to break down when some people agreed to cooperate with the government by recording their friends admitting wrongdoing in exchange for leniency. Former Diamondback analyst Jesse Tortora, for instance, attempted to incriminate fellow club member Danny Kuo on a call the FBI directed him to make on December 1, 2010, a conversation that Chiasson and Newman’s lawyers are now trying to use as evidence that Tortora, who will be testifying against them lacks credibility, based on the fact that when asked by Kuo if his phone was being tapped, Tortora didn’t say “Yup! Helping the Feds build a case against you, actually.” Instead he went with this:
“What’s happening, man?” Tortora asked during the call, according to a transcript prosecutors submitted to the court.
“Dude, is your phone tapped?” Kuo replied.
“Wait, is the phone tapped?” Tortora asked, adding, “Why do you ask that?”
High-Priced Raj Rajaratnam Attorney John Dowd Earned His Fees With Behind The Scenes Rhetorical Questions About “Sucking” Prosecutors’ “Teats”By Bess Levin
Toward the end of the Raj Rajaratnam trial, the Galleon founder’s lead attorney John Dowd told reporters this would be his last case, noting that defending alleged insider traders is “a young man’s game.” At the time, we didn’t think it any great loss. But after he was asked by a CNBC camera crew if he wanted to give a comment and told them “Get the fuck out of here. That’s what I’ve got for CNBC,” we started to wonder if perhaps we’d been wrong to let him go without a fight, a feeling that only grew when, following Raj’s guilty verdict, Dowd declared the outcome a “23-14″ victory, for the defense. Then this morning we read the email he fired off to a Wall Street Journal reporter whose coverage of the Galleon trial Dowd believed was slanted in favor of the prosecution and have decided there is no way in “sucking Preet’s teet” hell we can allow this guy to bid us adieu just yet. Read more »