Insider Trading: SAC Capital Advisors Settles with Investors, Former Portfolio Manager Seeks New Trial, and Jury Convicts Ex- MLB Player

Ex-SAC Capital Advisors LP Portfolio manager Mathew Martoma is asking for another trial. Martoma is serving nine years behind bars after he was convicted for insider trading in Wyeth LLC and Elan Corp. stock based on illegal tips and making $275M in the process. He believes his conviction should be overturned because of a ruling issued by the US Supreme Court last year.

The Supreme Court case involved a man accused of engaging in insider trading after his brother-in-law, a former Citigroup (C) investment banker, gave him the illegal tip. The nation’s highest court upheld the conviction against Bassam Salman in a unanimous ruling. The justices said that a person could be convicted for sharing insider tips with a friend or relative regardless of whether or not there was a profit for the tipper.

Martoma is accused of obtaining confidential information from two physicians involved in clinical trials for an Alzheimer’s drug. His defense attorney is contending that the prosecution did not bring enough evidence to demonstrate that the person who tipped Martoma shared the information because he was paid money. The lawyer also claims that instructions the jurors received were flawed because they allowed for a conviction on the grounds of the promise that the tipper was motivated by the possibility of friendship instead of because of a preexisting personal connection. Prosecutors are arguing that the financial relationship between Martoma and one of the physicians, who testified that he was paid $1K/hour for consulting with Martoma, was sufficient to support the earlier conviction.

Meantime, a judge has approved the $135M settlement to investors who brought a securities fraud lawsuit against SAC Capital Advisors. The firm has already pleaded guilty to insider trading and previously consented to pay $1.8B in related criminal penalties as well as civil ones.

The plaintiffs, who are Elan Corp. shareholders, argued that the insider trading by Martoma caused them to lose money. Last year SAC Capital paid $10M to resolve a similar securities case brought by Wyeth shareholders over the insider trading allegations.

In other insider trading news, a jury has found ex-Baltimore Orioles and California Angeles player Douglas DeCinces and his business partner David Parker guilty of tender offer fraud involving insider trading that took place prior to Abbott Laboratories’ acquisition of Advanced Medical Optics. Jurors deadlocked on other criminal counts against the retired MLB player.

DeCinces made $1.3M in illicit profits when he traded prior to the announcement of the acquisition. He is accused of tipping Parker, who made nearly $348K from the insider trading.

DeCinces played professional baseball from 1973 to 1987. He was CEO and president of a real estate development firm in Irvine when he and Parker were indicted in 2012. The year before, the former MLB player consented to pay $2.5M to settle US Securities and Exchange Commission charges over parallel allegations. He resolved the civil charges against him without denying or admitting to wrongdoing.

At The SSEK Partners Group, we are committed to helping high net worth individual investors and institutional clients in trying to recoup their securities fraud losses. Contact us today.

Jailed SAC Manager Martoma Seeks New Insider-Trading Trial, Bloomberg, May 9, 2017

SAC Capital’s $135M Insider Trading Settlement Approved by Judge, Bloomberg, May 12, 2017

Former SAC Manager Martoma Makes Another Case For His Release, Wall Street Journal, May 9, 2017

Ex-Baseball Star Doug DeCinces Guilty of Insider Trading, US News, May 12, 2017