Summary: SAC’s Mathew Martoma received the steep sentence of 9-years for inside trading.
Mathew Martoma’s nine year sentence for inside trading, which he received this Monday, may not be the longest sentence doled out, but it nearly is. Though Galleon Group hedge fund founder Raj Rajaratnam received an 11 year sentence in 2011, and corporate lawyer Matthew Kluger an 12 year sentence in 2012, the 9 year toll was a tough blow for Martoma to bear, considering it costs him $9.38 million in bonuses earned working at SAC Capital Advisors in 2008, as well as the luxury home in Boca Raton, Fla., he shared with his wife.
Judge Gardephe, who presided over the case, explained that he was well aware Martoma was a good husband, a good father to his three children, and quite charitable. Nevertheless, he said, as the New York Times reported, “The conduct at SAC was not aberrant conduct,” pointing out that Martoma had been expelled from Harvard Law School for doctoring his transcript.
Martoma was convicted in February for his involvement with inside trading, using information he received about the results of an Alzheimer study to sell $700 million in stocks of Elan and Wyeth. Further, he discussed the matter with SAC Capital owner Steven A. Cohen, the billionaire investor and founder of SAC, who, through his agency has received scrutiny for inside trading, with 8 convictions of their employees so far, has himself not been charged.
Manhattan U.S. Attorney Preet Bharara, the prosecutor of the case, considered the nine-year sentence “well-suited to the audacity of the illegal trading in this case.”
Gardaphe held a similar sentiment, saying, “I cannot and will not ignore that the gain is hundreds of millions of dollars more than ever seen in an insider trading persecution,” noting that this was the largest sum involved with inside trading in U.S. history.
Martoma’s parents, meanwhile, believe their son was framed, and further, that the sentence was so steep because Martoma was of Indian heritage, and this despite that the prosecutor was also of Indian heritage. His father also claimed his son had refused to work with authorities against Mr. Cohen to honor the Commandment against “bearing false witness.”
Though Cohen has not been charged for his involvement with this, he has been chastised for not regulating Martoma and Michael Steinberg better, and thus may be barred from the financial services industry, if the U.S. Securities and Exchange Commission civil action suit against him is successful.