Evidence

Defendant in high-profile insider-trade trial was expelled from Harvard Law School, prosecutors say


A 39-year-old defendant in a high-profile insider trading case didn’t simply drop out of Harvard Law School to earn a master’s in business administration degree at Stanford University, as has been previously reported, prosecutors say.

They contend in a federal court filing that former SAC Capital Advisors fund manager Mathew Martoma was expelled from the law school in 1999 after he submitted a forged law school transcript in applications for federal judicial clerkships, the Associated Press reports.

A spokesman for Martoma says his experience at Harvard was 15 years ago and has nothing to do with his insider-trading trial scheduled to open Friday before U.S. District Judge Paul Gardephe.

“Raising it now is a transparent effort by the government to unduly influence the ongoing court proceedings,” said spokesman Lou Colasuonno of the Harvard matter.

However, Gardephe and a federal appeals court disagreed, Reuters reports.

Gardephe ruled that documents concerning Martoma’s alleged conduct leading to his 1999 law school expulsion could be used by the government to rebut any effort by the defense to argue that a lack of forensic evidence weakened the prosecution’s insider-trading case. And the New York City-based 2nd U.S. Circuit Court of Appeals agreed with the trial judge that his rulings should be unsealed, the news agency reports.

“It is undisputed that Martoma falsified the grades,” Gardephe wrote in one order, and the defendant also falsified a date on an email he submitted in his defense in the Harvard disciplinary matter, along with a forensic report from a company he established, according to court filings. However, Martoma didn’t disclose his creation of the company that provided the forensic report to the Harvard disciplinary committee, the Reuters article says.

This is relevant rebuttal evidence in the insider-trading case to show that Martoma understood the “importance of minimizing electronic evidence that could establish his guilt and his capacity to alter such evidence to fit his version of events,” the judge explains.

The defendant is accused of persuading a medical professor to leak information about an Alzheimer’s disease drug trial. Prosecutors say the information was used in a massive insider-trading scheme that the government claims to have racked up as much as $276 million in illegal profits. He was one of eight defendants charged in the case; six have previously taken pleas.

See also:

ABAJournal.com: “Ex-Hedge Fund Manager Accused in Possibly ‘Most Lucrative Inside Tip of All Time’”

ABAJournal.com: “Unprecedented Era of Insider-Trading Enforcement Casts a Wide Net, With Help of Electronic Evidence”

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