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Preet Bharara lashes again, says Indian American accused of insider trading must be jailed

Saturday, 28 June 2014 - 6:07pm IST | Place: Mumbai | Agency: PTI
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An Indian-origin portfolio manager, convicted for his role as the "central figure" in one of the most lucrative insider trading schemes in US history, should be sentenced to more than eight years in prison, Manhattan's top federal prosecutor Preet Bharara has said.

Mathew Martoma, 39, was convicted in February of one count of conspiracy to commit securities fraud and two counts of securities fraud.

A former portfolio manager of CR Intrinsic Investors, a division of hedge fund giant SAC Capital, Martoma will be sentenced on July 28 and and faces a maximum of 20 years in prison.

Ahead of the sentencing, India-born Bharara asked the federal court here to sentence Martoma to more than eight years in prison for collecting confidential information about a high-profile drug trial and making profits and avoiding losses of USD 275 million for SAC Capital.

Martoma, a father of three, even earned a USD 9.3 million bonus for himself due to his various trades for SAC.

"Martoma was the central figure in the most lucrative insider trading scheme ever charged. Over a period of approximately 18 months, the defendant cultivated and corrupted two doctors legally bound to guard confidential information concerning a high-profile drug trial, ultimately obtaining an advance preview of the highly anticipated public announcement of the results," Bharara said in the government's sentencing memorandum submitted in court yesterday.
Bharara alleged that Martoma's entire success in his four years at SAC Capital was based on illegal insider trading.
Days after beginning his employment at SAC Capital, Martoma began searching for doctors who would be willing to provide him access to confidential information about an Alzheimer's disease drug trial conducted by Elan Pharmaceuticals and Wyeth Corporation.

Bharara said Martoma caused approximately USD 750 million

worth of Elan and Wyeth securities to be traded based on the illegal inside information, netting profits and avoiding losses of USD 275 million for SAC Capital.

According to federal sentencing guidelines, Martoma faces a 15- to 19-year prison term. 

Bharara said while the government does not oppose a sentence below the 15-19 years range, Martoma should be given "a sentence that nevertheless includes a substantial period of incarceration that is commensurate with the seriousness of the offense conduct and the unprecedented ill-gotten gains that it generated".

"A significant period of imprisonment toward the high end of the insider trading sentences imposed by courts in this District – and above Probation's recommendation of 96 months – is warranted," Bharara said.

"Martoma's role in the offence was central. Martoma was not a passive recipient of inside information; he urged those with duties to Elan and Wyeth to share with him information that breached these duties," Bharara said rejecting claims made by Martom'a defence that he had "dedicated himself to a lifetime of (good work) and giving".
"Martoma's post-graduate working life has been limited to highly-paid work for hedge funds. The bulk of Martoma's earnings from his hedge fund career – the entirety of his USD 9 million bonus from SAC Capital – were the proceeds of securities fraud," Bharara said.

Federal prosecutors also noted in the sentencing memorandum that Martoma had been expelled from Harvard University in 1999 for allegedly doctoring his law school transcript to try to gain a federal clerkship.

Martoma had even changed his name from Ajai Mathew Thomas before applying to Stanford University, where no one knew that he had been expelled from Harvard.
Following his conviction, Martoma was stripped of his MBA degree by Stanford business school, the first time the prestigious US institution has revoked a graduate's degree.




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