Former SAC Capital portfolio manager Mathew Martoma was convicted today for insider trading, and there is much discussion that SAC Capital founder Steve Cohen might be next, despite earlier reports that Cohen was to escape criminal charges even as the DOJ described Cohen as operating a hedge fund that was a criminal enterprise through and through.
That, in itself, is big news, and the government continues to advertise this case as the largest crackdown on Wall Street crime since the 1991 conviction of Michael Milken on charges of insider trading. It is also crack-down long in coming given that the SEC (way back in the 1980s) investigated (but did not charge) Steve Cohen for allegedly trading on inside information that Cohen had received from Milken’s shop at Drexel Burnham Lambert.
What the government and the media seem to be missing, however, is that SAC Capital has done far worse than trade on inside information, just as Milken did far worse than engage in the insider trading for which he was famously convicted. As has been documented at great length by Deep Capture, Milken and his associates operated a global market manipulation and money laundering network that busted out (i.e. deliberately destroyed) numerous public companies, including some of the nation’s most important savings and loan banks.
In more recent years, Milken and his associates, including Steve Cohen, have similarly busted out numerous public companies, with a component of those bust-outs being manipulative short selling. In light of revelations during the trial of Martoma that SAC Capital profited to the tune of more than $275 million from short-selling a pharmaceutical company, anyone interested in the real damage done by SAC Capital would do well to read my book, “The Dendreon Effect: How Felons, Con-men, and Wall Street Insiders Manipulate High-Tech Stocks.”
That, I confess, is shameless advertisement, but it is also a plea for justice because my book documents the fact that a network of short sellers, including the proprietors of SAC Capital and the famous Michael Milken, have (in recent years) not only traded on inside information about multiple pharmaceutical companies, but also nearly destroyed a company called Dendreon, which had a promising treatment for prostate cancer (a disease about which Milken’s “philanthropic” organization, the Prostate Cancer Foundation, purports to be concerned).
During the trial of Martoma, DOJ prosecutors confirmed that SAC Capital traded on inside information provided by a doctor at the University of Michigan, which was all well and good, but as I documented in my book, SAC Capital not only traded on inside information from another University of Michigan doctor, but also profited from short selling Dendreon’s stock after multiple doctors (some of whom had financial relationships with Milken) conspired to undermine Dendreon’s treatment by convincing the FDA (also corrupted by Milken and his associates) to delay approval of Dendreon’s treatment (which had already been proven effective).
Some journalists and their Wall Street sources have argued that insider trading is an essentially harmless offense and that SAC Capital deserves leniency, but their arguments obscure the fact that SAC Capital’s insider trading has involved the wholesale corruption of the FDA and some of the nation’s most prominent doctors, all of whom have (as my book documents in detail) shown themselves more than willing not only to provide inside information to Steve Cohen and his associates, including Milken, but also to undermine pharmaceutical companies with effective treatments while promoting other companies (i.e., companies that are financed by Milken and his associates) whose treatments were actually killing people.