Mathew Martoma Must Forfeit USD 9.4 Million, Pay Fine: Preet Bharara Tells Court

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.