At 1:51 p.m. Thursday, 12 jurors filed into a courtroom in lower Manhattan to deliver the latest insider trading verdict against an Indian Amercian. In what has become something of a déjà-vu, the defendant was found guilty on all counts. It was another shameful moment for Indian Americans, complete with two shocked sets of parents, a crying wife, and three young children waiting offsite with a babysitter—reminders of the human carnage that accompanies most criminal cases.

But after four weeks of trial, the testimony of two Alzheimer’s doctors and that of drug company executives, traders, compliance officers and academics, two days of jury deliberations, and now a unanimous verdict, a huge unanswered question lingers: Why didn’t Mathew Martoma flip?

Martoma was charged in November 2012 with insider trading in two drug stocks, Elan (PRGO) and Wyeth (PFE), in what the government described as the largest insider trading case in history, with $275 million in profits and avoided losses. Some of the trades at the heart of the case involved Martoma’s former boss, SAC founder Steven Cohen, who, the government alleged, sold off SAC’s position after a 20-minute phone conversation with Martoma that took place on July 20, 2008. No one knows what took place during that phone call, and it’s possible that no one ever will. Cohen himself has not been charged criminally. SAC Capital pled guilty to securities fraud in November. The U.S. Securities and Exchange Commission filed a civil charge against Cohen for failing to supervise his employees that has yet to be resolved.

When law enforcement showed up at his Boca Raton Home in 2011 to question him, Martoma fainted.  But if he was shocked with by being arrested, the following year, experts observing the trial, including those working for the New York Times were perhaps as surprised by the fact the case actually went to trial. Fired by SAC Capital Advisers in 2010, Martoma seemed like the ideal disgruntled employee, especially when most assumed that the Government’s real target was billionaire CEO of SAC, Stephen A. Cohen.  In fact, Martoma seemed optimally positioned to cut a favourable deal for himself in an environment when getting a company insider to roll-over on his boss is a standard tactic in such prosecutions. Add to that: the case against Martoma was entirely circumstantial.

Martoma had a 20 minute conversation over phone with Stephen A. Cohen after which Mr. Cohen reversed his trading position on two pharmaceutical companies, Elan and Wyeth – a decision that netted him $275 Million.  What did these two men talk about? This ought to have been the burning question for prosecutor Preet Bharara and his team, especially, if ostensibly their target was Cohen – the big fish in all of this.

However, what is not known is whether a deal was even offered to Martoma by Bharara, who has made his career convicting high profile brown-skinned Americans.  Some say that Martoma’s conduct at Harvard University Law school, falsifying transcripts for which he was expelled, would have impugned his credibility had Bharara offered him a deal in exchange for testimony. But this evidence was ruled inadmissible as a prior bad act, precisely because of its prejudicial nature. And, corroborating witnesses in such criminal cases are hardly boy scouts – Sammy (The Bull) Gravano is a case in point: this mass murderer was found to be credible in the conviction of his boss, Mafia Don John Gotti in one of the highest profile racketeering trials in American history.

If Martoma’s credibility was an issue, this did not seem to be the case for Dr. Sidney Gillman, the prosecution’s star witness, who testified that he passed on a power point presentation to Martoma containing advance results of an Alzheimers drug trial ahead of its release.  The thing is: there was absolutely no evidence presented that Martoma actually received this presentation, much less used it in his decision-making. His lawyer, Richard Strassburg argued that the trading activity was based on rational analysis and not inside information. So, proving the case hinged upon the credibility of Gillman vs. that of Martoma.

And, Gillman, despite admitting that he originally lied to the FBI on the matter due to his “embarrassment”, claiming to be confused and “divorced from reality”, suffered from bouts of memory loss followed by selective memory recall. He admitted in court that it wasn’t until two weeks ago that he remembered in detail a July 19, 2008, meeting in his Ann Arbor, Michigan, office with Martoma, who had flown to Detroit, and allegedly took a cab 25 miles to meet the doctor during which Gillman alleges that Martoma and he went over the final results of the drug trials of pharmaceutical companies Elan and Wyeth. As if that wasn’t a stretch, Gillman claims to have been “unconciously” mesmerized by Martoma because the dark skinned Malayalee-Indian origin trader had reminded Gillman of his white skinned son, who had previously committed suicide. Apparently, like Martoma Gillman’s son was also smart and “into science”, hence the inscrutable similarity leading to his being hypnotized by the Swengali like trader, more than forty years his junior.

Is this nuts or what? But the jury bought it – as Bharara knew they would based on his experience convicting other Indian and South Asian Americans. White skinned juries in the US, it seems, have real trouble believing brown-skinned defendants, especially if testimony against them is from fellow white-skinned witnesses – and here’s the kicker – IT REALLY HELPS TO HAVE A BROWN-SKINNED PROSECUTOR, WHOSE PRESENCE GLOSSES OVER THE GLARING RACIAL BIAS!

By the way, Gillman while appearing to be a grandfatherly academic was living a parallel life, one in which he regularly advised a wide network of Wall Street traders through a professional matchmaking system. Those relationships afforded him payments of $100,000 or more a year — on top of his $258,000 pay from the University of Michigan — and travels with limousines, luxury hotels and private jets.

Once a dedicated researcher, Gilman made a sharp shift in his late 60s, from a life dedicated to academic research to one in which he accumulated a growing list of financial firms willing to pay him $1,000 an hour for his medical expertise, while he was overseeing drug trials for various pharmaceutical makers. Among the firms he was advising was another hedge fund that was also buying and selling Wyeth and Elan stock, though the authorities, Preet Bharara included have given no sign they have questioned those trades. Why would they? Asking too many questions about Gillman might have impugned the testimony of their star witness in the Martoma case!

Gillman retired shortly after charges were filed in the Martoma case. And, the University of Michigan has severed its ties to him.   A spokesman for the university, Pete Barkey, said the parting of ways was “caused by the faculty member’s unethical and illegal behaviour during the conduct of external activities.”

In exchange for prosecutors’ not charging Dr. Gilman, he agreed to share information about “any matters” they want to ask him about.

Martoma, 39, husband and father of three, on the other hand, by all accounts wasn’t afforded the same treatment, and could face a prison term that far exceeds his entire life span.

For more on Dr. Gillman, read the New York Times Article, QUIET DOCTOR, LAVISH INSIDER: A PARALLEL LIFE

©The Global Calcuttan
All Rights Reserved