Back in late November, I did a post about Dr. Sidney Gilman, a neurologist and former chair of the Department of Neurology at the University of Michigan, and the fact he had been implicated in the largest insider trading scheme known to date. At the time, most reports focused mainly on Mathew Martoma, the person who actually made the trades, and his boss, Steven Cohen, while the complete story behind Dr. Gilman’s involvement was somewhat glossed over.
The Ann Arbor Observer has corrected that with a long story that details Dr. Gilman’s role in this alleged scheme.
In many ways, it really is quite sad. Dr. Gilman was (is) an extremely accomplished neurologist with hundreds of publications to his name. And now, he will pretty much only be known as the doctor who got caught up in the largest insider trading scheme ever.
As one person said in a news story I listened to about this, “This will be in the first paragraph of his obituary.”
What follows are some of the points from the article I found most interesting.
-Dr. Gilman began working for Wall Street in 2002. He received permission from the University of Michigan (UM) to do so because “It’s essential that the University of Michigan and other universities have a voice and interact in the business world through partnerships, collaborations, and other efforts” according to a UM spokesperson.
-His first Wall Street job in 2002 was with Gerson Lehrman, a company that hires experts in different fields to function as consultants to corporations. Dr. Gilman was paid $1,000 per hour ($1276 per hour in 2012 dollars).
-Gerson Lehrman paired Dr. Gilman with Mathew Martoma, a trader with CR Intrinsic, whom Dr. Gilman later viewed as a friend and pupil.
-CR Intrinsic, which is owned by S.A.C. (Steven A. Cohen) Capital, took a $700 million position in Wyeth and Elan stock in 2008 after the two companies released a summary-to-date of the ongoing trial into bapineuzumab (bapi), a monoclonal antibody against amyloid.
-Elan also paid Gilman $79,000 in 2007 and 2008 to be a safety monitor in the bapi trial.
-Gerson Lehrman, which knew of Dr. Gilman’s position with the drug companies, allegedly warned him not to discuss non-public information with Martoma. They monitored phone calls between them, but did not listen in.
-Dr. Gilman is alleged to have concealed the true nature of his conversations with Martoma.
-Gilman allegedly gave Martoma an encrypted Power Point presentation—with the necessary password—containing the results of the bapi trial eight days before the trial went public.
-In that time, CR Intrinsic made trades on Wyeth and Elan stocks that netted CR Intrinsic $276 million in profit and “loss avoidance”.
-Gilman hired attorney Michael Mukasey, the namesake and son of former attorney general Michael Mukasey, who made a deal with the government that will include no criminal charges against Gilman.
-Gilman agreed to repay $234,000—the amount he was paid plus interest.
-Gilman, who could have faced 15-19 years in prison, will apparently testify against Martoma.
Turning eighty last year, neurologist Sid Gilman proudly displayed all the hallmarks of a distinguished career: An endowed chair at the U-M med school. National acclaim as an expert in Alzheimer’s disease. The hospital’s neurology service named after him. A CV with hundreds of published articles, noted lectures, and key committee posts.
Gilman had always been involved in important research. He’d worked with many big pharmaceutical companies–Pfizer, Merck, Johnson & Johnson–on drug trials, trying to find a cure for Alzheimer’s. In the last decade, he also began consulting with Wall Street investors.
In 2002, Gilman began serving on the Gerson Lehrman Group’s scientific advisory board; in 2005, he started working for investment firm Pequot Capital; and in 2007, he became a paid expert for Longitude Capital. In each case, he did exactly as he’d done with all his other consulting work over the years, as specified in the U-M faculty handbook: He “obtain[ed] approval from the appropriate University authority, usually the dean or the director of the academic unit, [for] outside employment …”
His bosses at the U-M approved of Gilman’s wielding his expertise on Wall Street. In fact, just like his consulting work for med tech businesses and drug firms, it was viewed as a positive.
“It’s essential that the University of Michigan and other universities have a voice and interact in the business world through partnerships, collaborations, and other efforts,” emails U-M Health System spokesperson Pete Barkey. “Such interaction allows business to tap into the knowledge of leading academicians and researchers, and it is part of the university’s mission to engage in such an exchange of ideas.”
Tap into Gilman’s knowledge the business world certainly did. But not in the way the university intended.
Gilman’s next outside work is scheduled to be testifying as a “cooperating witness” for the prosecution in the largest insider trading case ever brought by the federal government.
He’s doing so to avoid spending the rest of his golden years in prison.
For the full article, click here The Corruption of Sid Gilman – Ann Arbor Observer.