Reutersreports that federal authorities have "expanded" their insider trading investigation, having sent subpoena's to "several large hedge funds" last week. Oddly, the government failed to leak the names of the firms to the press (a rookie mistake for which someone will fired), but that's cool, we'll just take a few stabs.
"We have been remarkably successful in convincing persons to cooperate with the government, and provide evidence to us, and in court of law," SEC director of enforcement Robert Khuzami said during a press conference the day the government went public with its charges of insider trading against former SAC Capital employee Mathew Martoma. To the untrained ear, Khuzami probably appeared to be speaking to no one in particular, just sending a general message to any would-be criminals out there that once the government got to their co-conspirators, it'd be all over. No one wants to do time, and everybody flips. To those who've been following Operations Perfect Hedge, though, and have watched the Feds' relentless pursuit of Steven A. Cohen, it was obvious they were sending a clear message to the Big Guy: "We got ya boy, and ya goin' down." And since its track record of getting people to turn on their colleagues and in some cases, their best friends (see: Noah Freeman/Donald Longueuil, and these guys, and these guys, and this guy) really has been "remarkably successful," and since Martoma has a wife and two young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so.
As you may have heard, in addition to the salary he was paid by the University of Michigan, Dr. Sidney Gilman made about $100,000/year through his side-gig advising "a wide network of Wall Street traders." That network included included Mathew Martoma, recently charged with running “the most lucrative insider trading scheme ever,” based on the information he received from Gilman, who made it a habit of leaking highly confidential information to the former SAC Capital employee. While most people that engage in fraud can't help but spend their ill-gotten gains in a flashy way that attracts unwanted attention (expensive cars, private jets, chinchilla fur coats) the Times reports that Sid Gilman's supplementary income "was not readily apparent in his lifestyle in Michigan." For instance, no second home and no bragging to his colleagues about his life on Wall Street. Still, on at least one occasion, the doctor couldn't help but let the underage girl sitting next to him on a flight home know that she was in the presence of a BSD.