Dr. Sidney Gilman, the key witness for prosecutors in the insider trading trial of Mathew Martoma, a former portfolio manager at SAC Capital Advisors, told the jury on Friday that he retired from a teaching position at the University of Michigan rather than be fired after it emerged that he passed on confidential information to Mr. Martoma.
“I retired rather than being fired,†said Dr. Gilman, 81, who took the stand on the fifth day of the trial. Explaining why he retired in November 2012, Dr. Gilman said, “I revealed information that was confidential about a clinical drug trial to Mathew Martoma, inappropriately.â€
Dr. Gilman’s testimony is the most striking yet to bolster prosecutors’ charges that Mr. Martoma used insider information in July 2008 to help SAC avoid substantial losses in shares of the drug companies Elan and Wyeth. Authorities have called the insider trading scheme the largest on record.
The crux of the government’s case against Mr. Martoma, 39, is that Dr. Gilman provided him with confidential information about negative results from a clinical trial for an experimental Alzheimer’s drug that Elan and Wyeth were developing.
Dr. Gilman was chairman of the safety committee for Elan during the clinical trial and a consultant with an expert network firm, the Gerson Lehrman Group. Mr. Martoma became acquainted with Dr. Gilman through his association with Gerson Lehrman.
Early in Dr. Gilman’s testimony, Arlo Devlin-Brown, an assistant United States attorney, asked him whether he recognized Mr. Martoma in the courtroom. Dr. Gilman scanned the room for a few moments and then said he needed to put on his glasses, at which point he stared at the table where the defendant was seated and proceeded to describe Mr. Martoma to the jury.
Dr. Gilman kept his eyes on Mr. Martoma for a few minutes after Mr. Devlin-Brown asked him another question. At times Dr. Gilman asked for questions to be repeated, saying he couldn’t hear them and noting that he wears hearing aids.
Prosecutors contend Mr. Martoma “seduced†and then “corrupted†the doctor by encouraging him to leak confidential information about the safety of the experimental drug that not even employees at Elan and Wyeth were privy to.
The jury was shown confidentiality agreements related to Dr. Gilman’s role on the safety committee and his work as a paid consultant for Elan.
In a sign of support, three friends of Mr. Martoma attended the trial on Friday, joining Mr. Martoma’s wife, Rosemary, and his parents and his wife’s mother. The family has been a constant presence in the courtroom.
When Dr. Gilman entered the courtroom, Ms. Martoma, who is a pediatrician, turned her body to watch him and noticeably kept her eyes on him as he walked slowly to the witness chair. At other points during Dr. Gilman’s testimony, Mr. Martoma’s parents were seen taking notes, as were the seven women and five men on the jury.
Dr. Gilman testified about his job on the safety committee, saying that “all the material we saw was to be kept confidential.†But he said he violated that when it came to passing information on to Mr. Martoma.
Earlier this week, another doctor, Joel S. Ross, testified that he also provided Mr. Martoma with inside information over the years and said he was impressed by the level of detail Mr. Martoma knew about the clinical trials for the experimental drug. Dr. Ross testified that it was almost as if Mr. Martoma “was in the room†when the clinical trials were being discussed because his information about matters he should not have known about was so good.
Both doctors are cooperating with the government and received nonprosecution agreements in return for their help and testimony against Mr. Martoma. Dr. Gilman testified in a settlement with regulators that he paid back $186,000 in consulting fees he had received.
But it is Dr. Gilman and his credibility on the stand that will be most critical because he is the one prosecutors contend told Mr. Martoma directly about the troubled clinical trial several weeks before Elan publicly announced the results.
Dr. Gilman says that he sent a detailed presentation about the clinical trial to Mr. Martoma by email and that the two men talked about it on the phone. A few days later, Mr. Martoma flew to Ann Arbor, Mich., to meet Dr. Gilman in person to discuss the results some more, prosecutors say.
After that meeting, prosecutors charge that Mr. Martoma called SAC’s owner and founder, the billionaire investor Steven A. Cohen, and had a 20-minute phone call with him. The next day, July 21, 2008, SAC began to dump its shares in Elan and Wyeth, unwinding a $700 million stake in the two companies.
Prosecutors contend the inside tip helped SAC avoid losses and generate profits totaling $276 million during a year in which SAC lost about 20 percent, its worst year on record.
Mr. Cohen has not been charged with any wrongdoing, but prosecutors and federal authorities remain interested in learning what Mr. Martoma said to his former boss during that 20-minute phone call.
The defense on cross-examination may seek to push Dr. Gilman on why prosecutors have found no evidence that Dr. Gilman actually sent the presentation to Mr. Martoma by email, as he has testified.
Before Dr. Gilman took the stand, an SAC compliance officer testified that on July 21, the same day that SAC was beginning to sell the shares in Elan and Wyeth, a former chairman of the Securities and Exchange Commission, Harvey Pitt, was giving a lecture to SAC employees about compliance issues, in particular about insider trading laws.
To some degree, before Dr. Gilman took the stand, the most interesting part of the case involving Mr. Martoma has taken place outside of the courtroom. Last week, the judge unsealed court papers in which it was disclosed that Mr. Martoma was expelled from Harvard Law School in 1999 for doctoring his law school transcript.
Prosecutors have not yet sought to introduce that evidence to the jury and it is not clear that Judge Paul G. Gardephe would permit it to be presented to the jury.
