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Michigan Neurologist Implicated in Insider Trading Case

Federal authorities filed charges this week in what they said is the most lucrative insider trading scheme in history, according to The New York Times:

Mathew Martoma, a former portfolio manager at CR Intrinsic, a unit of [the hedge fund SAC Capital Advisors], was charged with making more than $276 million in a combination of illegal profits and avoided losses by obtaining secret information from a doctor about clinical trials for an Alzheimer's drug being developed by the companies Elan and Wyeth.

The drug in question is bapineuzumab, a once-promising Alzheimer's therapy that ultimately yielded disappointing results in clinical trials. According to documents filed by the Securities and Exchange Commission, Martoma received "actual detailed results of the clinical trial" in advance of a 2008 public announcement regarding the trials from Sidney Gilman, a professor and former chair of the neurology department at the University of Michigan Medical School in Ann Arbor who served as chair of the trial's Safety and Monitoring Committee. Gilman, who received nearly $108,000 for his consultations with Martoma from a New York-based firm that connects investors with technical experts, is cooperating with authorities in exchange for nonprosecution.

Based on the insider information that Gilman provided, Martoma allegedly invested more than $700 million in the companies' stocks when the prospects for bapineuzumab looked good, and later unloaded more than $960 million worth of stock in just over a week when the news turned bad.

*Correction 11:30 a.m., 26 November: Sidney Gilman is a former chair of the neurology department. He does not currently chair the department, as was previously reported.