Key Witness in Martoma Trial Says He Lied to F.B.I.

Dr. Sidney Gilman, the government’s star witness in its case against Mathew Martoma, a former SAC Capital Advisors portfolio manager, testified on Tuesday that he lied to F.B.I. agents and regulators for nearly a year about passing inside information to Mr. Martoma.

“I was intensely ashamed of it,” Dr. Gilman said. “I was hoping the whole thing would go away.”

The disclosure emerged as prosecutors questioned Dr. Gilman, a retired University of Michigan professor, for a second day. It could take the sting out of the defense’s strategy to discredit him.

Dr. Gilman’s testimony is at the heart of the government’s case against Mr. Martoma who, they contend, cultivated a friendship with Dr. Gilman and then “corrupted” him by seeking to gain confidential information about a clinical trial for an experimental Alzheimer’s drug being developed by Elan and Wyeth.

This gave Mr. Martoma an “illegal edge” that allowed him to make profits and avoid losses of $276 million by trading in Elan and Wyeth stock, prosecutors contend. The insider trading case is the biggest the government has brought on record and is part of a wider decade-long investigation into SAC.

From 2006 to 2008, Dr. Gilman was chairman of the safety committee for the clinical trial and had access to regular confidential updates about patients. He was also working as a paid consultant for the Gerson Lehrman Group, a firm that connects industry experts with hedge funds. Mr. Martoma and Dr. Gilman began to speak in January 2006 through consultations arranged by Gerson Lehrman. The two continued to talk until the end of July 2008.

Last week, Dr. Gilman, who is 81, told the jury that although he signed confidentiality agreements related to both positions, at some point at the end of 2006 or beginning of 2007 he “slipped” and breached those agreements in a meeting with Mr. Martoma, disclosing in “minute detail” the side effects of the drug.

The doctor also testified on Tuesday that he had given inside information to David Munno, another SAC employee, after Mr. Martoma asked him to give Mr. Munno specific dropout rates of patients. Dr. Gilman said he gave Mr. Munno this information during a consultation set up through Gerson Lehrman.

Mr. Munno’s lawyer could not be reached for comment.

When asked whether he had admitted to F.B.I. agents during an interview on Sept. 1, 2011, that he had provided inside information to Mr. Martoma, Dr. Gilman said that while he recalled providing inside information, he told agents that he had not.

Dr. Gilman continued to deny passing any confidential information on to Mr. Martoma until the next summer, when he changed his story.

“I told them the truth, meaning I told the government that I had provided inside information to Mr. Martoma repeatedly,” Dr. Gilman testified.

Facing the jury, seated in the front row of the gallery behind Mr. Martoma and wearing an oversize knitted sweater with deer on it, Mr. Martoma’s wife, Rosemary, focused her gaze at individual jurors. Other members of Mr. Martoma’s extended family also attended court on Tuesday, as well as their parents. The family took up the first two rows of the gallery. During a 20-minute break, the family members embraced Ms. Martoma and then convened downstairs in the courtroom canteen.

Last week, another doctor involved in the clinical trial, Joel S. Ross, testified that he had also provided inside information to Mr. Martoma. The jury heard how Mr. Martoma arranged to meet Dr. Ross immediately after a crucial meeting during which other doctors involved in the clinical trial received the final results. Dr. Ross told the jury he was impressed with the level of knowledge Mr. Martoma had about the results. “It was as if he was in the room with me and the slides I had just seen,” he told them.

Both doctors have signed nonprosecution agreements that give them immunity. Dr. Gilman said he paid back the $186,000 he received in consulting fees.

Mr. Martoma’s lawyers plan to seek to discredit Dr. Gilman’s testimony and told the jury during opening statements that the government gave Dr. Gilman an offer he could not refuse. After accepting the agreement, he would take the witness stand to “sell that deal,” they said.

Mr. Martoma’s lawyers will begin their cross-examination of Dr. Gilman when court reconvenes.