7. STUFF THAT LEGENDS ARE MADE OF
an application to wiretap Raj Rajaratnam’s cellphone: U.S. v. Rajaratnam, No. 09 Cr. 1184 (RJH), October 6, 2010, Franks Hearing, testimony of FBI Special Agent B. J. Kang.
They must show that a wiretap: Title 18, United States Code 2518, (1) (c), statute regarding wiretapping.
“Unless oil trades down”: U.S. v. Mathew Martoma, No. 12 Cr. 0973 (PGG); Defense Exhibit 505, dated July 7, 2008, introduced during testimony of Timothy Jandovitz.
Martoma arranged a private dinner: David Kaplan et al., v. SAC Capital, et al., No. 12 Civ. 9350 (VM) (KNF), Elan Shareholder Second Amended Complaint, pp. 80-81.
Elan and Wyeth announced: “Elan and Wyeth Announce Encouraging Top-line Results from Phase 2 Clinical Trial of Bapineuzumab for Alzheimer’s Disease,” press release dated June 17, 2008.
Cohen also had a large position: U.S. v. Martoma, GX 298, 299.
“The hair on my head”: U.S. v. Martoma, GX 53, testimony of Gilman.
On July 15, Gilman flew by chartered plane: U.S. v. Martoma, GX 9.
everything he was about to see had to remain secret: U.S. v. Martoma, testimony of Allison Hulme.
“ICAD presentation confidential”: U.S. v. Martoma, GX 11.
“Dear Sid,” it read: U.S. v. Martoma, GX 12.
At home that evening: U.S. v. Martoma, GX 710, testimony of Gilman.
Just after 10 A.M.: U.S. v. Martoma, testimony of Nathan Brown, University of Michigan, re campus-access control system.
he boarded a 4 P.M. Delta Airlines flight: U.S. v. Martoma, GX 1307, introduced during testimony of Mark Manhan of Delta.
They talked for twenty minutes: U.S. v. Martoma, GX 459.
After they hung up: David Kaplan, et al., v. SAC Capital, et al., No. 12 Civ. 9350 (VM) (KNF), Elan Shareholder Second Amended Complaint, p. 86. Before the market opening on July 21, 2008, the portfolios held 10.6 million Elan ADRs, worth $366 million, and 19 million Wyeth, worth roughly $900 million.
They’d sold roughly 1.5 million shares: U.S. v. Martoma, GX 431, introduced during testimony of Phillipp Villhauer.
“400k at 34.97 all dark pools”: U.S. v. Martoma, GX 432, introduced during testimony of Villhauer.
Cohen shorted 4.5 million shares: Elan Shareholder Second Amended Complaint, p. 86; see also SEC v. CR Intrinsic Investors, Mathew Martoma and Dr. Sidney Gilman, and SAC Capital Advisors, No. 12 Civ. 8466 (VM), Amended Complaint, March 15, 2013.
Harvey Pitt arrived: U.S. v. Martoma, GX 595, introduced during testimony of John Casey, SAC compliance officer.
One of SAC’s compliance officers: U.S. v. Martoma, some details from lawyer discussion at bench, January 16, 2014; others from testimony of Casey.
“Stop and think before trading”: U.S. v. Martoma, GX 595, Harvey Pitt talk email invitation, and GX 591, Pitt slide presentation, introduced during testimony of Casey.
Dennis had learned about: SEC v. Matthew G. Teeple, David T. Riley, and John V. Johnson, Complaint, United States District Court, Southern District of New York, March 26, 2013.
When Foundry went up: SEC v. Ronald N. Dennis, No. 14 Civ. 1746, March 13, 2014.
Ross said goodbye: This account is drawn largely from Ross’s trial testimony, U.S. v. Martoma.
He’d had a series of chemotherapy treatments: U.S. v. Martoma, chemotherapy treatment schedule elicited during Gilman cross-examination.
his twenty-two slides: U.S. v. Martoma, GX 19, introduced during testimony of Hulme.
“I can remember gasping”: Nathaniel Popper and Bill Vlasic, “Quiet Doctor, Lavish Insider: A Parallel Life,” The New York Times, December 15, 2012.
“I saw what u did with WYE”: The stock symbol for Wyeth. U.S. v Martoma, GX 294, Martoma Lyndon email, introduced during Katie Lyndon testimony.
“We’ll catch up over a beer”: U.S. v. Martoma, Defense Exhibit (hereafter “DX”) 328/GX 313, testimony of Jandovitz.
“Anyway,” he added, “no need to call”: U.S. v. Martoma, GX 235, email date September 28, 2008, introduced during testimony of Gilman.
Diamondback Capital, was paying Goyal for his Dell tips: U.S. v. Michael Steinberg, No. 12 Cr. 121 (RJS), testimony of Jesse Tortora. Goyal’s source, it turned out, worked in Dell’s investor-relations department. In 2015, charges against Goyal were dismissed, after the reversal of the Newman and Chiasson convictions.
“Dell checks”: U.S. v. Steinberg, GX 214.
his weekend house in the Hamptons: U.S. v. Steinberg, GX 631.
“Interesting…”: U.S. v. Steinberg, GX 631.
The next day, the stock dropped: Laurie J. Flynn, “Dell’s Profit Drop Surprises Investors,” The New York Times, August 28, 2008.
His boss covered his short: SEC v. Dennis; Patricia Hurtado, “Former Level Global Analyst Says Two SAC Friends Got Inside Tips,” Bloomberg News, November 29, 2012.
8. THE INFORMANT
Tactical Behavior Assessment training: Eamon Javers, Broker, Trader, Lawyer, Spy: The Secret World of Corporate Espionage (HarperBusiness, 2010).
referring to the friend, who worked at the Blackstone Group in London: Michael J. de la Merced, “Blackstone Executive Is Charged with Insider Trading,” The New York Times, January 14, 2009.
as if he were a gangster: Peter Lattman and Ben Protess, “How Pursuit of Billionaire Hit One Dead End,” The New York Times, January 14, 2013.
Lee had been wiring $2,000 payments: U.S. v. Richard Choo-Beng Lee, et al., No. 09 Cr. 0972 (PKC), information filed October 13, 2009; also see Sentencing Submission by government.
“This is your one chance”: Anita Raghavan, The Billionaire’s Apprentice (Business Plus, 2013), p. 302.
The fund had been doing relatively well: Susan Pulliam, “How Associates Helped Build Case,” The Wall Street Journal, October 20, 2009.
The only way to satisfy them: U.S. v. Choo-Beng Lee, Sentencing Submission.
PGR, was one of the worst offenders: In the Matter of: Application of the United States of America to Authorize to Intercept Certain Wire Communications, 11 Cr. 00032 (JSR), filed July 12, 2011. PGR Wiretap Application, pp. 20–25. Kang’s suspicions had been corroborated by Karl Motey, who was working with FBI agents Dave Makol and James Hinkle. Motey, a married father of three, was a consultant who had five portfolio managers at different hedge funds paying him a total of $500,000 a year for his insights on the technology industry, and some of what he passed on to them was inside information. When Motey was asked if there was anything he had observed in the financial industry that struck him as shady but that he wasn’t necessarily involved in himself, he answered: “Expert networks.” U.S. v. Motey, 10-cr-1249.
PGR’s biggest customers: Patricia Hurtado, “SAC Trial Seen by Probe Convict as Latest Abusive Tactic,” Bloomberg News, January 7, 2014.
Dave Makol and James Hinkle, started gathering evidence: PGR Wiretap Application.
getting permission to send out subpoenas: Devin Leonard, “The SEC: Outmanned, Outgunned, and on a Roll,” Bloomberg Businessweek, April 19, 2012.
It was 3 A.M.: U.S. v. Raj Rajaratnam, Rajiv Goel, and Anil Kumar, No. 09 Mag. 2306, October 15, 2009.
At 6 A.M. the following morning: Danielle Chiesi, a trader at New Castle Funds; Chiesi’s boss, Mark Kurland; an IBM senior vice president named Robert Moffat; and Raj’s friends Rajiv Goel, an Intel executive, and Anil Kumar, from McKinsey. Chiesi had allegedly been having affairs with both Kurland and Moffat, whom she’d milked for leaks about IBM. Michael J. de la Merced, “Hedge Fund Chief Is Charged with Fraud,” The New York Times, October 16, 2009.
9. THE DEATH OF KINGS
“If you got a 98”: Ed Beeson, “When U.S. Attorney Preet Bharara Speaks, Wall Street and the World Listens,” The Star-Ledger, August 19, 2012.
“School, studying, grades”: Carrie Johnson, “Family Ties,” Columbia Law School Magazine, Fall 2011.
Michael Mukasey: Also the father of Marc Mukasey, Dr. Sidney Gilman’s defense attorney.
inspired Bh
arara to become a prosecutor: Benjamin Weiser, “For Manhattan’s Next U.S. Attorney, Politics and Prosecution Don’t Mix,” The New York Times, August 9, 2009. Preet wasn’t the only Bharara son with the overachiever gene. The younger Bharara brother, Vinny, also attended Columbia Law School, three years behind his older brother. He co-founded an Internet retailer that sold diapers, which was sold to Amazon for $540 million in 2010; see also Johnson, “Family Ties.”
“Schumer Aide Is Confirmed”: Benjamin Weiser, “Schumer Aide Is Confirmed as United States Attorney,” The New York Times, August 8, 2009.
“Greed, sometimes, is not good”: U.S. v. Raj Rajaratnam, et al., 09-Mag-2306, October 16, 2009; prepared remarks for U.S. Attorney Preet Bharara in press conference announcing charges.
Rengan had even worked at SAC: Rajarengan Rajaratnam testimony before the SEC, In the Matter of: Sedna Capital Management, file No. NY-7665.
People could only speculate: Just three days after Raj’s arrest, The Wall Street Journal posted an article on its website that publicly identified C. B. Lee and Ali Far, for the first time, as government cooperators. It was hugely damaging to the investigation. Susan Pulliam, “How Associates Helped Build Case,” The Wall Street Journal, October 20, 2009.
Biovail’s lawsuit against SAC had been dismissed: Valeant Pharmaceuticals eventually bought Biovail, and in 2010 settled claims brought by SAC Capital for vexatious litigation by agreeing to pay SAC $10 million. Shira Ovide, “SAC Capital, Biovail Finally Bury the Hatchet,” The Wall Street Journal, November 4, 2010.
SEC had charged the company with fraud: Judith Burns, “SEC Charges Biovail Officers with Fraud,” The Wall Street Journal, March 25, 2008.
In the course of reading the SEC files about Cohen: Patricia Cohen v. Steven A. Cohen, et al., First Amended Complaint, No. 09 Civ. 10230 (WHP), April 7, 2010.
Lurie was bankrupt, a wrecked man: Steven Cohen and SAC Trading Corp. v. Brett K. Lurie and Conversion Trading Corp., No. 8981/87, Affidavit in Support of Order to Show Cause, N.Y. State Supreme Court, May 12, 1987. See also Douglas Montero, “Slippery Scammer an Elusive Daddy, Too,” New York Post, October 26, 2004, and “Agents Catch Up with U.S. Citizen on the Run,” A.M. Costa Rica, Vol. 5, No. 224, November 11, 2005.
she demanded $300 million in damages: Patricia Cohen v. Steven A. Cohen, et al., December 16, 2009.
The son of a nurse and a fighter pilot: Story of the Riely family: Virginia Grantier, “Four Boys Thank Her for Courage After Husband’s Death,” Bismarck Tribune, May 11, 2002.
Martoma had received a $9.38 million bonus: U.S. v. Mathew Martoma, No. 12 Cr. 0973 (PGG), GX 555, Dan Berkowitz testimony.
whether Esbriet would obtain FDA approval: Andrew Pollack, “FDA Rejects InterMune’s Drug for Fatal Lung Disease,” The New York Times, May 4, 2010.
almost 4.5 million shares: Suzy Kenly Waite, “Hedge Funds Hemorrhage on InterMune,” Institutional Investor, August 31, 2010.
“Federal authorities, capping a three-year investigation”: Susan Pulliam, Michael Rothfeld, Jenny Strasburg, and Gregory Zuckerman, “U.S. in Vast Insider Trading Probe,” The Wall Street Journal, November 20, 2010; Ernest Scheyder and Matthew Goldstein, “U.S. to Lift Lid on ‘Pervasive Insider Trading’: Report,” Reuters, November 20, 2010.
he became friends with another SAC portfolio manager in Boston named Noah Freeman: Steve Eder, Michael Rothfeld, and Jenny Strasburg, “They Were Best of Friends, Until the Feds Showed Up,” The Wall Street Journal, February 17, 2011.
Freeman was so intense: Eder, Rothfeld, Strasburg, “They Were Best of Friends, Until the Feds Showed Up.”
“the log”: FBI notes from interviews with Noah Freeman, hereafter Freeman 302s.
his numbered Gmail accounts: Details of Longueuil’s Gmail accounts; Freeman 302s.
most of his instant-message chats through Skype: Longueuil use of Skype; FBI notes from interviews with Samir Barai, hereafter Barai 302s.
They didn’t get home until 2:30 A.M.: U.S. v. Samir Barai and Donald Longueuil, No. 11 Mag. 332, February 7, 2011; reference to video surveillance, exit and return times from affidavit filed by FBI Special Agent B. J. Kang. See also Eder, Rothfeld, Strasburg, “They Were Best of Friends, Until the Feds Showed Up.” Note: Longueuil’s fiancée was never charged with any wrongdoing.
Barai and Longueuil had developed a close, if nasty, friendship: The three of them merged all their ill-begotten information every quarter, a week or so before earnings season, by meeting at the Santa Clara Hilton, which they referred to in emails as planned “threesomes” or as “Don, Sam, Noah—sex”; Barai 302s.
increasingly ugly divorce: Bree Sposato, “One Enchanted Evening: Bhavana Pothuri & Samir Barai,” New York, April 15, 2006; Barai 302s.
Pflaum had only a minimal understanding: Barai 302s; also, FBI interview notes with Jason Pflaum, hereafter Pflaum 302s.
“You should not ask”: Barai 302s.
Then, a minute later: “Fuuuuuck”: U.S. v. Barai, et al.
Kang took pictures of the entire exchange: Pflaum 302s.
10. OCCAM’S RAZOR
across the street from Carnegie Hall: Level Global address, 888 Seventh Avenue; Level Global Search and Seizure Warrant, November 21, 2010.
they had a search warrant: Warrant authorized them to search the offices of Ganek, his partner Anthony Chiasson, and two analysts, Sam Adondakis and Greg Brenner; Level Global Search Warrant.
That Saturday night: Ganek was scheduled to appear on a panel that weekend with SEC chair Mary Schapiro, a fellow graduate of Franklin & Marshall College; Peter Lattman, “In Insider Case, the Odd Couple Won’t Meet,” The New York Times, November 23, 2010.
making images of the firm’s servers: Level Global Search Warrant. See also David Ganek v. David Leibowitz, Reed Brodsky, David Makol, et al., No. 15 Civ. 1446, February 26, 2015.
he had worked out a deal: Katherine Burton, “Goldman Sachs Fund Buys Stake in Ganek’s $4 Billion Hedge Fund,” Bloomberg News, April 2, 2010.
had attempted to turn his life around: U.S. v. Noah Freeman, 11-Cr.-116 (JSR), Sentencing submission on behalf of Noah Freeman, filed January 28, 2015, letter from Silas Bauer.
blood doping with Epo: Freeman 302s.
“I understood that this involved”: Freeman 302s.
“Everything’s gone”: The exchange recounted in U.S. v. Samir Barai and Donald Longueuil, 11-Mag-332, February 7, 2011.
Sullivan was a former advisor: Tory Newmyer and Kate Ackley, “Sullivan’s Hiring Hedge Bets on Sully,” Roll Call, April 18, 2007.
Sullivan argued to the senator’s investigators: Some details in Jenny Strasburg and Michael Siconolfi, “Senator Probes Trades at SAC,” The Wall Street Journal, May 21, 2011.
On May 24, Grassley released another letter: Letter to the Honorable Mary Schapiro, Chairman, U.S. Securities and Exchange Commission, from Charles E. Grassley, Ranking Member, Committee on the Judiciary, May 24, 2011.
“you are only a grain of sand”: U.S. v. Mathew Martoma, No. 12 Cr. 0973 (PGG); cross-examination of Sidney Gilman.
a five-bedroom, $1.9 million house at the Royal Palm: The Martomas spent $1.9 million on the house, according to Florida real estate records.
Mathew and Rosemary Martoma Foundation: According to records, the foundation was incorporated in Florida with $1 million on December 10, 2010; according to its Form 990, the foundation donated a few hundred dollars in $50 or $100 increments to a handful of local charities in 2011 and charged more than $20,000 in expenses. There are no 990s filed for subsequent years.
“Your former business partner, Stephen Chan”: Bob Van Voris and Saijel Kishan, “SAC’s Martoma Harvard Expulsion Revealed as Trial Starts,” Bloomberg News, January 10, 2014.
Martoma fainted: This account, based on interviews with people directly familiar with what occurred, conflicts with a version that Rosemary Martoma provided to The New Yorker: Patrick Radden Keefe, “The Empire of Edge,” October 13, 2014. In that version, she said that when Kang and Ca
llahan approached, Kang told her to “Get inside the house,” but she refused. She said that Kang then turned to Martoma and said, “Do you want to tell her or should I?” Martoma told Kang, “You can go ahead and tell her if you like.” According to Rosemary, Kang said to Martoma, “We know what you did at Harvard,” and Martoma then fainted. According to my reporting, Rosemary was not present when Martoma fainted during the encounter and did not hear what Kang said before Martoma passed out.
11. UNDEFEATABLE
he presented his son with a plaque: U.S. v. Mathew Martoma, No. 12 Cr. 0973 (PGG), GX 65, Mathew Martoma Sentencing Memo, filed May 28, 2014; letter from Bobby D. Martoma.
Martoma spent the year after graduation: U.S. v. Martoma, GX 106, Martoma Sentencing Memo, letter from Manju Varghese.
“He was ambitious”: Patrick Radden Keefe, “The Empire of Edge,” The New Yorker, October 13, 2014.
The clerk tried again, on February 4: U.S. v. Martoma, January 9, 2014, Disciplinary Hearing on Charges Against Ajai Mathew Thomas, Findings of Fact and Decision of the Administrative Board, May 12, 1999, filed as exhibit to Government’s Motion in Limine to Admit Evidence Concerning the Defendant’s Expulsion from Harvard Law School in Response to Potential Defenses.
Kane had expelled a Harvard Law student: Jal D. Mehta, “Law Student Expelled for Forging Transcript,” The Harvard Crimson, January 30, 1997.
The letters were all dated January 31: U.S. v. Martoma, Exhibit to Government’s Motion to Admit Harvard Evidence.
In its final report: U.S. v. Martoma, Exhibit to Government’s Motion to Admit Harvard Evidence, Disciplinary Hearing.
His father took out a second mortgage on their house: U.S. v. Martoma, Mathew Martoma’s Memorandum of Law in Support of His Motion to Exclude Evidence Concerning Events Unrelated to the Charged Offenses and Preceding Mr. Martoma’s Employment at SAC, filed under seal, January 9, 2014.
Black Edge Page 36
