A Manhattan federal court jury deliberated for 2 1/2 days before convicting Martoma, 39, a former financial lieutenant for billionaire hedge fund chief Steven Cohen.
Jurors found him guilty of conspiracy and two counts of securities fraud in the case that focused on charges he illegally obtained results of clinical tests on an experimental Alzheimer's disease drug and then traded on the information.
The verdict by the seven-woman, five-man jury means that Martoma faces a potential five-year prison term on the conspiracy charge and up to 20 years for each securities fraud count.
He becomes the eighth present or former SAC Capital employee found guilty on insider-trading charges. The hedge fund itself pleaded guilty to similar criminal charges in a $1.8 billion November settlement that requires it to stop handling investments for outsiders.
Martoma's wife, Rosemary, who had sat behind him throughout the nearly month-long trial, wept as the convictions were announced. "We are disappointed and are planning an appeal," said defense attorney Richard Strassberg.
U.S. District Judge Paul Gardephe, who presided over the case, allowed Martoma to remain free on bail pending sentencing.
"Martoma bought the answer sheet before the exam – more than once – netting a quarter billion dollars in profits and losses avoided for SAC, as well as a $9 million bonus for him," said Manhattan U.S. Attorney Preet Bharara in a statement issued after the verdict. "In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty."
Prosecution evidence in the nearly month-long trial showed Martoma in 2008 secretly persuaded two doctors to give him material, non! -public information about test results from an experimental drug for Alzheimer's disease.
Prosecutors alleged Martoma then triggered an SAC Capital sell-off of shares in Elan and Wyeth, the pharmacy firms developing the drug, before the companies' stocks tanked. Trial evidence showed he called Cohen to discuss something "important" the day before the hedge fund started dumping its roughly $700 million stake.
As a result, SAC Capital reaped approximately $276 million in profits and avoided losses. The hedge fund paid Martoma a $9.3 million bonus for 2008, evidence showed.
Cohen hasn't been charged. But Dr. Sidney Gilman, the star prosecution witness against Martoma, testified that FBI agents told him Cohen was the investigation's ultimate target.
Martoma did not testify in his own defense. That enabled him to avoid being cross-examined by prosecutors about his 1999 expulsion from Harvard Law School for falsifying a transcript of his first-year grades.
Defense lawyers argued that the doctors, who testified for the government under non-prosecution agreements, were unreliable and seeking leniency for themselves. The defense also contended that any drug-testing data obtained by Martoma had already been publicly disclosed, and argued he had no role in the profitable trades.
Steven Cohen, founder and chief executive officer of SAC Capital, shown speaking during the SkyBridge Alternatives (SALT) conference in Las Vegas, Nevada, U.S., on Wednesday, May 11, 2011.(Photo: Ronda Churchill - Bloomberg via Getty Images)
Trial evidence showed Martoma cultivated relationships with Gilman and Dr. Joel Ross after identifying them as involved in the Alzheimer's disease drug trials. Both doctorss testified they ! gave Mart! oma inside information and knew he would trade on the data.
New Jersey-based Ross, 58, in 2008 was a clinical investigator on the Phase II trial of the Alzheimer's drug called Bapineuzumab. He testified that Martoma consulted him about the drug through a company that linked medical specialists with investment professionals interested in their expertise.
Records of emails introduced during the trial showed that Martoma arranged to meet with Ross on the July 2008 night the doctor learned clinical test results that showed the drug showed potentially promising results for part of the population, but not all.
Gilman, a neurologist and former Alzheimer's disease researcher at the University of Michigan, testified that Martoma won him over by appearing to seek out a friendship.
Gilman, now 81, chaired a safety monitoring committee that met regularly during the Phase II drug trial to assess interim results. Martoma, who contacted him through a second consulting firm that linked researchers with investment pros, arranged to meet Gilman after virtually every committee meeting.
Dr. Sidney Gilman, a former University of Michigan neurology researcher and the star prosecution witness against Mathew Martoma, shown leaving the Manhattan U.S. Attorney's office on Jan. 18 2014.(Photo: BRENDAN MCDERMID © BRENDAN MCDERMID/Reuters/Corbis)
"He wanted me to regurgitate the meeting data," said Gilman.
The doctor admitted he complied, thereby betraying university officials, representatives of the pharmaceutical firms and his own research colleagues. Most significantly, Gilman testified he secretly gave Martoma early access to his electronic slide presentation for the formal public disclosure of the Phase II drug trial ! results.
Cross-examination by Strassberg showed Gilman initially had no recollection of meeting with Martoma in his Ann Arbor campus office to discuss the presentation data.
The defense lawyer also ridiculed Gilman's testimony that his memory of the meeting evolved over time,with some recollection only returning just days before the trial.
"How in the world can the prosecutors ask you to convict someone of a serious federal crime based on this testimony," Strassberg asked jurors during closing arguments on Feb. 3. "Without this testimony, the government has no case."
Gilman initially lied to investigators about giving Martoma the test results. After his ultimate confession, Gilman retired from his university post to avoid being fired. He also lost two federal research grants and repaid approximately $186,000 plus interest to settle Securities and Exchange Commission civil charges over his income from consultations with Martoma.
Gilman testified that the last time he met with Martoma before facing him in the courtroom was shortly after he gave the fateful 2008 data handover. More than five years after the episode, he still appeared regretful over the relationship's end.
"I thought we were friends, and I thought he would be in touch just to say hello," said Gilman.
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