It has been a bit of a mystery figuring out how Mathew Martoma, who is on trial on federal insider-trading charges, was accepted into Stanford Business School after being expelled from Harvard Law School for forging his transcript. Typically, universities do not look too kindly on academic violations when considering whether to admit applicants.
Stanford is not saying much on the situation. Barbara Buell, a Stanford spokeswoman, confirmed that Mr. Martoma - who would later go on to work at SAC Capital Advisors, the hedge fund run by the billionaire Steven A. Cohen - enrolled at the university in 2001 and graduated with an M.B.A. in 2003.
The university’s application process, however, would have required Mr. Martoma to disclose his expulsion from Harvard in 1999. The application for the graduate business program asks prospective students to provide information about any academic disciplinary actions taken against them, including suspension or expulsions.
A person familiar with Stanford’s admission process but not authorized to discuss it publicly said the expulsion of an applicant from another university, if it was disclosed on an application or otherwise known, would create a “serious impediment†to a candidate’s admission.
Lou Colasuonno, a spokesman for Mr. Martoma, has previously said that the revelation of Mr. Martoma’s expulsion from Harvard “is entirely unrelated†to his trial in Federal District Court in Lower Manhattan on charges that he used inside information while working at SAC to help the hedge fund avoid substantial losses and generate profits that collectively totaled $276 million. On Tuesday, he said he had nothing else to add on the matter.
Mr. Martoma’s expulsion from Harvard for creating a false transcript was disclosed in court papers unsealed on Thursday, a day before opening arguments began in what is expected to be a four-week trial. The court documents reveal that Mr. Martoma changed some of his first-year law school grades from B’s to A’s, including one in criminal law. He then sent the forged transcript to 23 judges when he applied for federal clerkships.
Federal law clerks are top law school graduates who assist judges in researching and drafting decisions.
After Harvard expelled him, Mr. Martoma, who at the time was known as Ajai Mathew Thomas, legally changed his name to Mathew Martoma in 2001, the same year he entered Stanford. It is not known what name Mr. Martoma used on his Stanford application.
Three years after graduating from Stanford, Mr. Martoma landed a job as health care stock portfolio manager at SAC Capital. Jonathan Gasthalter, an SAC spokesman, has declined to comment about whether Mr. Cohen’s hedge fund was aware of the Harvard incident when it hired Mr. Martoma.
Federal prosecutors charge that in July 2008, Mr. Martoma used inside information about a clinical drug trial being conducted by Elan and Wyeth to recommend that SAC dump a substantial $700 million stock position in shares of both companies. The firm even shorted some shares and netted profit totaling $276 million.
Prosecutors say a cooperating witness, Dr. Sidney Gilman, provided Mr. Martoma with inside information about problems with the drug trial before the companies made the results public.
Dr. Gilman, 81, received a nonprosecution agreement from the government. He is expected to take the stand to testify against Mr. Martoma this week.
