The Morning Brief: Guilty Verdict for Mathew Martoma

Former SAC Capital Advisors portfolio manager Mathew Martoma was found guilty of two counts of securities fraud and conspiracy to commit securities fraud in a high-profile insider trading case. Martoma is the seventh person to work for Steven Cohen’s Stamford, Connecticut–based SAC Capital to be found guilty at trial or plead guilty to insider trading charges. He is also the 79th person convicted of insider trading after trial or by guilty plea in cases brought by federal prosecutors.

He was accused of using confidential information about clinical trials of an Alzheimer’s drug to trade the shares of Wyeth and Elan. He earned more than $250 million in profits and losses avoided for SAC, as well as a $9 million bonus for him, according to the government.

“In the short run, cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty,” said U.S. Attorney Preet Bharara in a statement following the conclusion of the three-week trial. Martoma is widely expected to serve between 7 and 10 years in prison when sentenced. Market watchers now are speculating whether the government will eventually bring criminal charges against SAC founder Steve Cohen, which would clearly be the government’s biggest target.

David Einhorn’s New York–based Greenlight Capital suffered a big setback on Thursday, when shares of one of his big, high profile shorts, Green Mountain Coffee Roasters, surged about 26 percent to close at $102.03. That was after Coca-Cola announced it agreed to buy a 10 percent stake for $1.25 billion and sign a distribution agreement for Green Mountain’s new soft drink machine. The stock is up 36 percent this year alone and 150 percent since the end of 2012. Ouch.

William Ackman’s New York–based Pershing Square Capital Management is once again on the offensive in its bid to expose Herbalife as a pyramid scheme. On Thursday the hedge fund released two more new papers on its website — www.herbalifepyramidscheme.com — detailing what he calls the company’s deceptive sales practices.

“Lead generation, in use since at least 2001, is one of the pernicious practices employed by Herbalife and its top distributors,” Pershing Square alleges. Meanwhile, The League of United Latin American Citizens (LULAC), which supports Ackman’s claims, met with Federal Trade Commission Chairwoman Edith Ramirez to detail alleged abuses by Herbalife, according to a Bloomberg report. It claims the multi-level marketer of nutrition supplements takes advantage of Latinos and falsely leads them to believes they will attain wealth and success working for Herbalife.

“She’s not going to tip her hand one way or another,” LULAC National Executive Director Brent Wilkes said after the meeting. “I can tell you she is concerned about the stories she hears and I’m sure as the agency looks at all this they’ll take into consideration our testimony.”

Shares of New York–based Och-Ziff Capital Management Group surged nearly 4 percent Thursday after the publicly traded hedge fund firm headed by Daniel Och reported fourth quarter earnings and revenues that easily beat Wall Street expectations.

Alan Howard’s BH Macro Ltd., a multi-strategy fund which invests substantially all of its assets in the Brevan Howard Master Fund, lost 1.40 percent in January.

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