The man at the center of the most lucrative insider trading case ever brought pleaded not guilty on Thursday, raising the stakes in the governmentʼs investigation of his former employer, SAC Capital Advisors.
In denying the charges against him, Mathew Martoma, the onetime SAC portfolio manager, sets the stage for a possible courtroom battle that would put the spotlight on SAC and its owner, Steven A. Cohen, the billionaire money manager and one of the most revered investors on Wall Street.
Federal prosecutors have accused Mr. Martoma of using secret information about a drug trial to help SAC gain profits and avoid losses totaling $276 million. Six former SAC employees have been tied to insider trading while at the firm, but Mr. Martoma's case is the first time that the government has aimed to connect questionable trades to Mr. Cohen.
Mr. Martoma, 38, of Boca Raton, Fla., appeared at his arraignment in Federal District Court in Manhattan accompanied by his wife, Rosemary, and his parents. Flanked at the defense table by his lawyers, Charles A. Stillman and Nathaniel Z. Marmur, Mr. Martoma denied the charges on all three counts of securities fraud and conspiracy brought against him.
“I plead not guilty, your honor,†Mr. Martoma repeated three times to Judge Paul Gardephe before a packed courtroom in Federal District Court in Manhattan.
The authorities have failed at several attempts to get Mr. Martoma to cooperate and help them build a case against his former boss, according to a person familiar with the case.
Mr. Cohen has not been accused of any wrongdoing and has told his investors and employees that he believes that he acted appropriately at all times. Prosecutors have not said that Mr. Cohen was in possession of any inside information related to Mr. Martoma's trades.
The Securities and Exchange Commission, however, has warned SAC that it is considering filing a civil lawsuit against the fund for fraud related to Mr. Martoma's case. Based in Stamford, Conn., SAC is one of the world's largest hedge funds, managing $14 billion and owning one of the best investment track records in the hedge fund industry.
Any trial date for Mr. Martoma would still be months away. Judge Gardephe set March 5 for the next court hearing to hear an update on pretrial discovery in the case. Either side can also file pretrial motions at that time.
Federal prosecutors told the judge that the case will be primarily based on trading records, telephone records, and e-mails. Arlo Devlin-Brown, a prosecutor, said that the government did not plan on using any wiretap evidence in the case.
Key evidence in the case will likely come from the testimony of Sidney Gilman, a Michigan doctor who is said to have leaked to Mr. Martoma secret information about clinical trials for an Alzheimer's drug that he had been overseeing for the pharmaceutical companies Elan and Wyeth. The government has agreed to not bring criminal charges against Dr. Gilman, and as part of a nonprosecution agreement, he has agreed to make himself available to testify against Mr. Martoma.
Mr. Martoma joined SAC in 2006. The son of Indian immigrants, Mr. Martoma was a summa cum laude graduate from Duke with a degree in biomedicine, ethics and public policy . He also earned a business degree at Stanford before pursuing a career as a health care-stock analyst. In 2008, the year he made the Elan and Wyeth trades that form the basis of the government's case, SAC paid him a $9.4 million bonus.
During the hearing on Thursday, Mr. Martoma appeared at ease. As he left the courtroom, his wife by his side, Mr. Martoma kissed the forehead of his mother and hugged his father, who was wearing a necktie decorated with American flags.
