Business

Martoma tries new tack to overturn conviction

Mathew Martoma, who is serving nine years in prison for carrying out the most lucrative insider trading scheme in history, said he should be freed after an appeals court tossed two other insider-trading convictions.

The former portfolio manager for Steve Cohen’s SAC Capital Advisors said in new court papers filed Tuesday that a recent appeals court decision narrowing the definition of insider trading “at the very least… demands a new trial.”

Martoma is one of a handful of inside traders who are appealing their convictions based on the stricter standard. He is also the most profitable, helping SAC avoid losses and generate $275 million in profits during the summer of 2008, prosecutors said.

Martoma, who has spent the past six months in federal prison in Miami, was also ordered to pay $9.3 million, the size of his bonus the year the trades were made.

But Martoma’s lawyers say the evidence doesn’t hold up based on an appeals court ruling that raised the bar for prosecutors and set a new standard for illegal trading.

In December, a three-judge panel overturned the convictions of former hedge fund managers Todd Newman and Anthony Chaisson because prosecutors failed to show that the tipper received a personal financial “benefit” in exchange for divulging inside information.

At Martoma’s trial, the government’s star witness, Dr. Sidney Gilman, admitted giving Martoma secret drug test data but “openly conceded on the stand that he neither sought nor received any financial benefit for disclosing the only inside information that matters,” Martoma’s lawyers said in papers filed late Tuesday night.

In the Martoma case, the judge told jurors that they need only determine that a personal friendship was enough of a benefit. In light of the Newman appeals decision, “the government’s myopic focus on its misguided friendship theory demands a new trial,” Martoma’s lawyers wrote.

Likely anticipating a wave of appeals based on the Newman decision, the government earlier this year filed court papers in Martoma’s case that sought to lay out the financial gain for Gilman.

As a paid consultant to SAC Capital, Gilman “had already been paid” for disclosing the data before its alleged disclosure, or “expected to be paid” in the future, or hoped to obtain unspecified “additional paying business” from Martoma, according to prosecutors.

In his appeal, Martoma’s lawyers also claimed racial bias because the only Indian in the jury pool was kicked out by prosecutors. Martoma is of Indian descent.