Mathew Martoma, the former SAC Capital Advisors employee at the center of what the government calls the most lucrative insider trading case ever brought, appeared in Federal District Court in Manhattan on Monday to face the charges against him.
Federal prosecutors have accused Mr. Martoma, 38, with using secret information about a drug trial to help SAC gain profits and avoid losses totaling $276 million. Three former SAC employees have already pleaded guilty to unrelated illegal trading at the firm, but Mr. Martoma's case is the first time that the government has aimed to connect questionable trades to Steven A. Cohen, the billionaire founder of SAC, one of the world's most powerful hedge funds.
Mr. Cohen has not been accused of any wrongdoing and, through his spokesman, has said that he at all times acted appropriately. Prosecutors have not said that Mr. Cohen was in possession of any inside information related to Mr. Martoma's trades.
Mr. Martoma appea red before United States Magistrate Judge James Cott. Lean and square-jawed with close-cropped hair, Mr. Martoma sat at a table flanked by his lawyers, with his wife, Rosemary, seated in the spectators' gallery. Judge Cott informed of his rights as a criminal defendant and freed him on a $5 million bond. His next court appearance was scheduled for Dec. 26.
F.B.I. agents arrested Mr. Martoma at his home in Boca Raton, Fla., on Nov. 20 at 6:30 a.m. The government charged him via a criminal complaint instead of using a grand jury indictment, a tactic that suggests prosecutors are trying to secure Mr. Martoma's cooperation in its investigation of Mr. Cohen and SAC.
Charles A. Stillman, Mr. Martoma's lawyer, declined to comment after the hearing. Last week, he said that he expected his client to be fully exonerated.
The government says that Mr. Martoma was fed confidential data about clinical trials for an Alzheimer's drug being jointly developed by Elan and Wye th. His tipster, according to prosecutors, was Dr. Sidney Gilman, a neurology professor at the University of Michigan Medical School. Elan and Wyeth hired Dr. Gilman, 80, to oversee the trial and present the results at a medical conference.
Dr. Gilman has secured a nonprosecution agreement with the government, meaning he will not be charged in the case. He has also agreed to testify, said a person familiar with the case, giving the government another pressure point in its bid to gain Mr. Martoma's cooperation.
Mr. Martoma joined SAC, which is based in Stamford, Conn., in 2006. A summa cum laude graduate of Duke University with a degree in biomedicine, ethics and public policy, Mr. Martoma graduated from business school at Stanford University before pursuing a career as a health care analyst on Wall Street.
Prosecutors say that Mr. Martoma and Mr. Cohen worked closely together in accumulating large blocks of Elan and Wyeth shares for SAC. But the fund did an about-face, selling its entire position in both stocks - and proceeding to make a large negative bet against the companies - after Dr. Gilman told Mr. Martoma about problems with the drug trial, according to the complaint.
In 2008, the year of the Elan and Wyeth trades, SAC paid Mr. Martoma a $9.4 million bonus. But in early 2010, the firm fired Mr. Martoma for poor performance. In an internal e-mail discussing his abilities, an SAC executive called Mr. Martoma a “one trick pony.â€
Before Monday morning's hearing, Mr. Martoma and his wife, who have three young children, appeared relaxed, smiling and chatting over breakfast in the courthouse cafeteria with Mr. Stillman and his law-firm partner, James A. Mitchell. As they left the building a few hours later, throngs of photographers and cameramen surrounded them as they fought their way into a town car and drove off.
