"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 and direct 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 young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so.
So far, Martoma has declined to cooperate at every opportunity, and time is running out for him to do so...The fact that Martoma, a 38-year-old father of three young children, has held out so far is baffling to authorities, according to the person familiar with the investigation.
You can imagine how upsetting this must be to the people who thought Martoma was going to be their ticket to nailing the Big Kahuna. Confusing, too. Fox Business reporter Charles Gasparino thinks the fact that SAC is covering Martoma's legal bills may have something to do with it. Others believe it may be simply of case of the ex-CR Intrinsic trader not having anything useful on the BG. A couple other theories that account for Martoma's loyalty, for those searching for answers, include:
1. He's been plotting a way back into the Big Guy's good graces for two years. This is his chance. ("I'm going to go to jail for Steve Cohen.")
2. The SAC alumni newsletter* Martoma can't get out of his head, sent the day the charges dropped, that had an item reminding people Cohen had commissioned a new "mammal in formaldehyde" by Damien Hirst and that they were still on the hunt for "the perfect subject."
3. The termination agreement Martoma signed when he left SAC that says if he flips, he has to spend an hour in a windowless conference room with Ping Jiang.
Why Hasn't Ex-SAC Capital Manager Mathew Martoma Turned on Steve Cohen? [BusinessWeek]
*Pretty typical in that it includes Class Notes and a Spotlight column featuring one noteworthy alum and what he's been up to. Ex: "Don Longueuil recently pleaded guilty to fraud and is on his way to a federal prison. He looks forward to seeing all of his Stamford buddies when he gets out."