Rogues: True Stories of Grifters, Killers, Rebels and Crooks

At a conference on Alzheimer’s disease in 2008, attendees were anticipating the results of a clinical trial into a promising new treatment drug, bapinuzemab, often shortened to “bapi.” The results would have implications for humanity as a whole, but were of particular interest to one billionaire: Steven A. Cohen, whose hedge fund, SAC Investments, had invested heavily in the drug. The clinical trial results were presented by respected neurologist Dr. Sidney Gilman of the University of Michigan. Though some feared the drug’s failure to live up to its promise would mean a financial loss for SAC, Cohen had already sold all of his stock in the affected companies in what investors call a “short” (81) sale—a sale banking on the stock decreasing in value—making enormous profit. Federal regulators came to regard Cohen’s nick-of-time sale not as the result of luck or skill, but as evidence of a crime. One of Cohen’s employees, Matthew Martoma, had secret information revealing the trial results early. Gilman was Martoma’s confidential source.

Gilman became the head of neurology at the University of Michigan while still a young man. After his first marriage ended, he lost one son to suicide and another to estrangement. He responded by mentoring generations of neurologists. In 2002, Gilman was recruited as an expert consultant by Gerson Lehman Group (hereafter GLG), a financial services company. GLG specialized in finding experts to consult with its clients about possible investments, including medicine. Keefe points out that by 2005, “nearly ten percent of the physicians in the United States had established relationships with the investment industry” (83). Gilman’s relationship with SAC began in 2006, when Matthew Martoma first consulted him about Alzheimer’s treatments.

Keefe notes that the atmosphere at SAC was hushed and competitive: Cohen kept the trading floor cold and had a camera on him at all times. Martoma was initially ambivalent about working there, as he knew any significant losses would result in immediate firing. Martoma had an elite educational pedigree: He had graduated from Duke with honors, briefly worked at the NIH, attended Harvard Law School for a year, and received a Stanford MBA. The chief commodity at SAC was not money, but “edge”—information that might prove an investment was promising, ideally possessed by no one else. The use of experts like Gilman was one way to get such information.

Martoma grew up in Florida, where his Orthodox Christian parents had immigrated after leaving Kerala, India. They were obsessed with their son’s capacity to excel. Martoma married Rosemary, a doctor from New Zealand, whose parents were also Orthodox Christians from Kerala. His wife recalls his time at SAC as entirely dominated by his work with Gilman.

Looking back, Gilman calls his relationship with Martoma a kind of “intellectual seduction” (89), where Martoma lured him with his warmth, curiosity, and willingness to share about his personal life. Martoma was so persistent Gilman eventually revealed confidential information and violated medical ethics as well as financial regulations. The law against selling stock based on proprietary private information dates back to 1942. While some regard this practice of insider trading as a “victimless crime” (89), this changed in 2009 when Preet Bharara, US Attorney for the Southern District of New York, began to pursue criminal sentences for such cases.

Some subordinates felt that insider trading was so normalized at SAC that ethical conduct was a career setback. In describing law enforcement’s strategy for targeting insider trading, Keefe draws explicit comparisons to prosecuting criminal groups, specifically the Mafia. Given that most hedge fund employees had no experience with prison, it was relatively straightforward to convince them to testify against their bosses for reduced sentences, as Mafia members frequently did. Cohen was the investigators’ chief target.

The scale of investment in bapi was soon apparent within SAC, when Cohen invested personally. Other employees were skeptical, but Cohen seemed confident in Martoma’s source. Meanwhile, Gilman “slid into ethical breaches with an ease bordering on enthusiasm” (93), culminating with Martoma flying to Michigan to discuss drug trial results in person. Upon his return, Martoma met with Cohen, who began his sale of stock in the pharmaceutical companies. Martoma “received a bonus of $9.3 million” (96) for his work and ended contact with Gilman.

Eventually, Cohen’s uncannily fortuitous short sale of bapi attracted federal attention, specifically that of the Securities and Exchange Commission. SAC’s company culture made targeting Cohen difficult, as he instructed subordinates to communicate as little as possible in writing. While other traders were reluctant to implicate Cohen for reasons of loyalty, Martoma had no such ties: He was fired from SAC in 2009 and retired to Florida, intending to use his bonus to become a philanthropist.

In 2011, the FBI came to his residence, threatening to expose “what you did at Harvard,” after which “Martoma fainted” (98). The roots of this threat concerned Martoma’s expulsion from Harvard Law School: He had applied for clerkships using a “doctored” (100) transcript with higher grades than he had earned. He later insisted the fakes were an intentional ploy to please his parents and that he had mailed them in error; when caught, Martoma requested his applications be withdrawn, but was expelled after a lengthy appeal process. Martoma likely hid the entire episode from Stanford, as he did from almost everyone other than his wife.

Despite the fainting episode, the FBI found that Martoma proved impervious to threats and simply “refused to cooperate” (102). Dr. Sidney Gilman was more cooperative, agreeing to testify in exchange for immunity. Martoma’s refusal to consider his own self interest has been a longtime source of speculation. Keefe dismisses the idea that Cohen compensated Martoma for his silence, though SAC did pay for his legal defense. The company faced criminal charges owing to its history of dubious conduct, and finally had to “pay a historic fine of $1.8 billion” in 2014 (103).

Martoma’s criminal trial began in January 2014, with Gilman as the main witness against him. The doctor had become a pariah in his profession, and was now elderly and frail. The defense attempted to argue that Gilman was in cognitive decline, or merely shared publicly available information, but Gilman asserted himself forcefully. He admitted, in a regretful tone, that he had likely fallen prey to Martoma because the younger man reminded him of the son he had lost.

Keefe argues that even if Martoma had testified about his personal exchanges with Cohen, Cohen still might have used “coded language” (106) common to those who know their work is incriminating. Martoma was convicted of fraud and conspiracy, but the judge discouraged any discussion of Cohen’s role.

When Keefe meets the Martomas, and learns that Rosemary will speak on Matthew’s behalf. Rosemary insists Matthew is innocent and that Gilman lied to protect himself. She compares her husband to her grandfather, a fighter for Indian independence. Keefe is surprised that she insists her husband was admitted to Harvard for undergraduate work and chose Duke instead, finding this hard to believe given Martoma’s family history. He notes that testifying against Cohen would have required Martoma to face his own complicity, which would challenge his family’s adulation of him. Martoma’s mentors wonder whether they were “conned” (111), given his early interest in bioethics. Keefe notes in a brief afterword that Cohen retains his fortune and now owns a share of the New York Mets.