(Bloomberg News) Dr. Sid Gilman, a University of Michigan neurologist, was a $1,000-an-hour consultant who leaked confidential drug trial data that helped hedge fund SAC Capital Advisors LP illegally avoid losses or make a profit of $276 million, according to U.S. authorities.
Gilman, 80, was chairman of a safety-monitoring committee that oversaw a clinical trial by Wyeth LLC and Elan Corp. into whether the drug bapineuzumab, or bapi, was safe for patients with mild-to-moderate Alzheimer's disease. Gilman also moonlighted for a New York-based expert network, providing advice at a fee to former SAC portfolio manager Mathew Martoma, according to the Securities and Exchange Commission and Justice Department.
Gilman treated Martoma, 38, as a "friend and pupil" as he leaked him secret data for 18 months, authorities said. Gilman told Martoma on July 17, 2008, that bapi wasn't helping patients as expected, according to the SEC. Prosecutors today charged Martoma with insider trading and the SEC sued him, saying Gilman's tips let Stamford, Connecticut-based SAC and its CR Intrinsic Investors unit sell more than $960 million in Elan and Wyeth securities before a July 29, 2008, announcement of the drug-trial results.
"At the center of the scheme was the cultivation and corruption of a renowned medical doctor," U.S. Attorney Preet Bharara said today at a news conference in Manhattan. "He is prepared to testify in connection with a non-prosecution agreement."
Gilman wasn't charged with a crime or mentioned by name in the Federal Bureau of Investigation arrest complaint against Martoma unsealed today in federal court in New York. He didn't return calls to his house and office in Ann Arbor, Michigan.
"He is cooperating with the SEC and the U.S. Attorney's Office," his lawyer, Marc Mukasey, said.
Martoma's lawyer, Charles Stillman, has said he is confident his client will be exonerated.
Bharara declined to say why the doctor, whom he didn't name, wasn't charged. "As some future date, there may be more information about that," he said today.
Matthew Callahan, the FBI agent who wrote the 21-page criminal complaint, mentioned five times that he spoke with a cooperating witness whom he described as a neurology professor at a "leading medical school." The SEC complaint names Gilman.
Gilman worked as a consultant for Gerson Lehrman Group Scientific Advisory Board starting in 2002, according to a curriculum vitae posted online by the University of Michigan. Loren Riegelhaupt, a spokesman for Gerson Lehrman, a New York-based expert-network firm, declined to comment on the case.
Gilman earned almost $108,000 for 59 consultations with Martoma, CR Intrinsic and the firm referred to as "Investment Adviser A," according to the SEC. He also served as a consultant to Elan and Wyeth from 2003 until 2009. Elan paid him $79,000 for his work on bapi in 2007 and 2008, the SEC said.
Gilman's conduct raises fresh questions about firms that match investors with experts in subjects that could move stock prices, said Erik Gordon, a University of Michigan business professor who follows the pharmaceutical industry.
"If the allegations are true, it's reprehensible conduct for someone who has misused a position of trust," said Gordon, who added that he doesn't know Gilman. "This is crookery of really the lowest possible ethical standards. It doesn't get much lower."