New York: An Indian-origin portfolio manager,
convicted for his role as the "central figure" in the most lucrative
insider trading scheme in US history, should be ordered to forfeit about USD
9.4 million and pay a fine, federal prosecutor Preet Bharara has told court.
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 September 8.
Manhattan's top
federal prosecutor Bharara had argued earlier that Martoma should be sentenced
to more than eight years in prison.
In papers submitted before US District Judge Paul Gardephe in the federal court
here, Bharara said Martoma should forfeit his 2008 bonus totaling USD 9.4
million and the court should also impose a fine on him.
Bharara said while the USD 9.4 million forfeiture judgment exceeds Martoma's
reported net worth of approximately USD 7.4 million, the forfeiture only
requires him to return ill-gotten gains.
"...This is a serious offense -- the most lucrative inside trading offense
ever proven -- and the penalties imposed by the Court should reflect
that....Accordingly, the government respectfully requests that the Court impose
a fine in addition to the forfeiture," Bharara said in the court papers.
The fine in this case ranges from USD 20,000 to USD 570 million, which is the
amount representing twice the gains to SAC Capital through the insider trading
offence.
The Probation Department has recommended a fine of USD 20,000.
In June, Bharara had asked the federal court to sentence Martoma to more than
eight years in prison for collecting confidential information about a
high-profile Alzheimer's disease drug trial and making profits and avoiding
losses of USD 275 million for SAC Capital.
Martoma, a father of three, had earned the USD 9.4 million bonus for himself
due to the various trades he did 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.
Bharara alleged that Martoma's entire success across 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 guidlines, Martoma faces a 15-19 years 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 offence 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 offense 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," he said,
rejecting claims made by Martoma's defence team that he had "dedicated
himself to a lifetime of (good work) and giving."
Federal prosecutors had also noted that Martoma had been expelled from Harvard
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, 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.