A federal appeals court in Manhattan ordered a rare second round of arguments on Wednesday as former SAC Capital Advisors portfolio manager Mathew Martoma tries to overturn his insider trading conviction.
The 2nd U.S. Circuit Court of Appeals, which first heard Martoma’s appeal in October 2015, took the unusual step after the U.S. Supreme Court in December issued a decision that made insider trading cases easier to prosecute.
Martoma’s re-argument is scheduled for May 9.
The court had previously asked prosecutors and Martoma to submit new briefs on how the case would be affected by the Supreme Court decision, which held that a trader who gets insider information from a relative or friend can be guilty of insider trading even if the source received nothing in return.
The decision upheld the conviction of Bassam Salman, a Chicago man who made nearly $1.2 million on information from his brother-in-law at Citigroup Inc.
Martoma, 42, was convicted in February 2014 of receiving inside information in 2008 about a clinical trial of an Alzheimer’s drug that prosecutors say allowed SAC to make $275 million. He is serving a nine-year sentence.
The first round of arguments in his appeal centered on an earlier 2nd Circuit decision holding that a tipster must receive a benefit of “some consequence,” not just friendship, to support an insider trading conviction.
Martoma’s tipster, Dr. Sidney Gilman, testified that Martoma had told him he wanted to be friends, and the jury that convicted Martoma was told that friendship could be an illegal benefit.
Martoma’s lawyer, Paul Clement, said that although his client paid Gilman $70,000 for expert consulting, their business relationship was not in exchange for the tip.
In a brief submitted in January in response to the 2nd Circuit’s request, prosecutors said the Supreme Court decision meant Martoma’s conviction should stand even if Gilman had not been paid.
But Martoma’s lawyers have countered with their own brief, saying the decision only applied to cases where the tipster and recipient are family or close personal friends.
SAC agreed in 2013 to plead guilty to fraud charges and pay $1.8 billion in criminal and civil settlements for a broader pattern of insider trading. It has since rebranded itself Point72 Asset Management.
The Alzheimer’s drug in the Martoma case was being developed by Elan Corp, which is now owned by Perrigo Co Plc, and Wyeth, which Pfizer Inc later acquired, according to prosecutors.