Insider trading: Indian-American gets 9 yrs in jail

  • Yashwant Raj, Hindustan Times, Washington
  • Updated: Sep 09, 2014 09:58 IST

A Manhattan court on Monday sentenced Mathew Martoma, son of immigrants from India, to nine years in prison in one of the stiffest sentences granted yet for insider trading.

Forty-year-old Martoma, who was born Ajai Mathew Mariamdani Thomas, was also ordered to pay a fine of $9.3 million, the amount he gained from insider trading.

“Today’s sentence of a lengthy prison term is well-suited to the audacity of the illegal trading in this case,” said Preet Bharara, US attorney whose office prosecuted Martoma.

Martoma is one of Bharara’s insider trading busts that had an uninterrupted run stopped recently by Rengan Rajaratnam, younger brother of Galleon founder Raj Rajaratnam.

Raj Rajaratnam, who is serving 11 years in the same prison complex as Goldman Sachs director Rajat Gupta, was among the two with lengthier sentences than Martoma’s.

His younger brother, Rengan Rajaratnam, was acquitted.

Martoma’s insider tips helped his then employer SAC Capital make $275 million in profits and avoided losses, earning him a bonus of $9 million, which he has to pay back now.

Martoma’s scam and life before are made for the big screen.

Starting as an SAC employee in 2006, Martoma developed a network of informants to keep him in the loop for a company’s search of a cure for Alzheimer’s disease.

He knew exactly what was happening in the research, which held the key to the fortunes of the company that had financed it. He had the lead researchers on his pay.

Through an exploitation of Martoma’s personal and financial relationships with these doctors, he obtained inside information about the research, said Bharara’s office in a statement.

The company, Elan and Wyeth, reported positive results initially, which made Martoma recommend its stocks to SAC Capital, which soon held $700 million worth equity.

But the research findings were not as happy as expected. The drug being tried was a dud, in fact, And Martoma got to know that days before the company’s formal announcement.

SAC got rid of its stocks in the company, all of it.

When investigators showed up at Martoma’s house, he fainted.

His trial brought him even more remorse, when it was alleged, and proved, that he had, in fact, been thrown out of Harvard in 1999 for falsifying records and documents.

Known as Ajai Mathew Mariamdani Thomas till then, he now changed his name to Mathew Martoma (collapsing his last two names Mariamdani and Thomas).

He applied at the prestigious Stanford business school using his new name. And went on to earn a degree, which was taken away recently when his fraud was exposed.

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