Judge: Steven A. Cohen Testimony Can’t Be Used In Insider Trading Trial
NEW YORK (CBSNewYork/AP) — Billionaire Steven A. Cohen’s testimony to a financial regulatory agency cannot be shown to jurors at the insider trading trial of one of the former money managers at the hedge fund he founded, a judge said in a ruling made public Wednesday.
U.S. District Judge Paul Gardephe’s decision regarding the founder of Stamford, Conn.-based SAC Capital Advisors came as a jury was being selected at the trial of Mathew Martoma in Manhattan. Jury selection was to resume Thursday with opening statements likely to follow.
Martoma is accused of persuading a medical professor to leak secret data from an Alzheimer’s disease trial. The Boca Raton, Fla., resident has pleaded not guilty.
Martoma’s lawyers wanted to use Cohen’s May 3, 2012, testimony to show Cohen didn’t use Martoma’s information to make pivotal trades. Prosecutors say Martoma’s tips helped other traders at SAC earn a quarter-billion dollars illegally.
The judge said a Securities and Exchange Commission inquiry that included the questioning of Cohen was “exploratory and investigatory in nature” and irrelevant for the criminal trial.
“The SEC lawyers taking Cohen’s deposition were not attempting to persuade a jury to convict, or even attempting to persuade a grand jury to indict,” the judge wrote, though he pointed out that some of Cohen’s testimony would be more useful to prosecutors than the defense if permitted in the trial.
He noted that Cohen’s deposition was taken before the development of much of the evidence against Martoma, including an admission by a doctor that he had provided the final results of the Alzheimer’s test to Martoma before they were publicly announced.
He said Cohen also had a strong motive to provide self-serving testimony because he knew that his company was under investigation by the SEC for insider trading.
SAC Capital has pleaded guilty to fraud charges and agreed to pay $1.8 billion.
Cohen has not been criminally charged, but the SEC has accused him in a civil action of failing to prevent insider trading at the company.
On Monday, Gardephe ruled that jurors will not hear about how Martoma fainted in front of his mansion when federal agents showed up to question him about his alleged involvement in insider trading.
While prosecutors described the incident as “consciousness of guilt,” the judge said being accused of insider trading is likely shocking and highly disturbing, whether someone is guilty or innocent.
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