Former hedge fund manager charged in big insider-trading case

WASHINGTON — Federal prosecutors on Tuesday charged a former hedge fund portfolio manager with securities fraud in connection with what they said was the most lucrative insider-trading case ever prosecuted.

In complaints filed in New York, authorities said investment advisers and hedge funds made more than $276 million in illegal profits or avoided losses by trading before the announcement in 2008 of negative results from clinical trials for an Alzheimer’s disease drug being developed by Elan Corp. and Wyeth.

Prosecutors charged Mathew Martoma, a former portfolio manager at CR Intrinsic, an unregistered investment adviser, with securities fraud for allegedly illegally using information about the clinical trial results that he obtained from a neurologist at a hospital involved in the testing.

The criminal complaint did not name the neurologist, which it said was a cooperating witness in the case.

The Securities and Exchange Commission filed a related civil suit Tuesday against Martoma, CR Intrinsic and Dr. Sidney Gilman, a neurology professor at the University of Michigan Medical School. The SEC suit said Gilman was chairman of the safety monitoring committee overseeing the clinical trials of the Alzheimer’s drug.

Martoma met Gilman some time between 2006 and 2008 through paid consultations, the SEC complaint says. “During these consultations, Gilman provided Martoma with material, nonpublic information about the ongoing trial,” the SEC complaint said.

In mid-July 2008, “Gilman provided Martoma with the actual, detailed results of the clinical trial” before an official announcement on July 29, 2008, the SEC said.

“The charges unsealed today describe cheating coming and going — specifically, insider trading first on the long side, and then on the short side, on a scale that has no historical precedent,” said Preet Bharara, U.S. attorney for Manhattan. “As alleged, by cultivating and corrupting a doctor with access to secret drug data, Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time.”

More in Herald Business Journal

Driving the Dodge Demon, the world’s fastest production car

Our test took place at US 131 Motorsports Park, on a fully prepped professional drag strip.

Mountlake Terrace-based 1st Security Bank wasn’t traded publicly during the recession, but it has seen a steady growth since the recession. (Jim Davis / HBJ)
How stocks in local banks fared since the recession

Every bank was hit hard during the recession, but most have bounced back in a big way.

A look at what some stores have planned for Black Friday

With unemployment low, stores are hoping customers are in a mood to shop.

Boeing bolsters team for potential 797 with leading engineer

Terry Beezhold has been chief project engineer for the 777X program.

Tom Hoban
Are millennials warming up to life in suburbia?

They dominate the apartment market and their wants need to be accounted for, says columnist Tom Hoban.

Camano artist mixes flask, paintings for successful cocktail

Art flasks prove popular as bachelorette gifts, birthday presents and wedding favors.

Katie Garrison
New agent joins Re/Max Elite’s office in Snohomish

Re/Max Elite welcomed a new agent to its Snohomish office. Katie Garrison… Continue reading

UW Bothell Pub Talk looks at Greenhouse Gas Mystery

The Greenhouse Gas Mystery is the topic for the next UW Bothell… Continue reading

EvergreenHealth Monroe pharmacy interns travel to Ghana

Earlier this year, University of Washington School of Pharmacy students and EvergreenHealth… Continue reading

Most Read