Ex-SAC fund manager Martoma found guilty of insider trading

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Former SAC Capital Advisors fund manager Mathew Martoma was found guilty Thursday in the most lucrative insider trading scheme ever as federal prosecutors racked up a seventh conviction in their six-year probe of the hedge fund and its billionaire founder, Steven A. Cohen.

Jurors in Manhattan federal court found Martoma, 39, used secret tips on clinical trials of an Alzheimer’s disease drug to trade Wyeth and Elan Corp. shares. In doing so, he reaped a $275 million benefit for the hedge fund. Martoma chose to risk a trial after rejecting U.S. offers of a deal for cooperation. He faces as long as 20 years in prison on the most serious counts.

A Martoma conviction “is a major win for the government,” said Anthony Sabino, a law professor at St. John’s University in New York, in an interview. “It may embolden them to go after Cohen.”

The conviction follows a similar verdict against SAC Capital fund manager Michael Steinberg, who was found guilty in December of a different scheme at the hedge fund. He hasn’t been sentenced and may yet seek to strike a deal with prosecutors.

Martoma’s conviction raises the possibility that he also may seek to cooperate against Cohen in exchange for leniency, said Sabino. The disclosure of Martoma’s expulsion from Harvard Law School for creating a phony transcript may lead prosecutors to reject such a deal, however, given the possible damage to his credibility as a witness.

The case is U.S. v. Martoma, 12-cr-00973, U.S. District Court, Southern District of New York (Manhattan).