Feb

10

 I see that SAC portfolio manager Mathew Martoma, convicted of selling a pharmaceutical company's stock based on insider information received prior to an announcement, faces a sentence of up to 45 years in jail.

While I wouldn't want to stake my freedom on an unsophisticated NY jury's understanding the legal subtleties of insider information (and its ability to resist the powerful US Attorney's office and their 95% conviction rate), I'm not questioning that Martoma may have broken the law and be deserving of some punishment.

But I do question the fairness and proportionality of up to 45 years — or even 10 years or 5 years — when we on this List every day see strong evidence of others trading on inside information prior to an announcement. Beyond Victor's flexions trading prior to government announcements, it is common (usual, one would say) prior to a company's takeover or other highly favorable event to see the stock moving up in the days prior to the announcement. In fact, when there is no prior movement and the announcement comes as a complete surprise, it is remarked upon how unusually well the secret was kept.

I dislike cheats, but this kind of non-violent, non-Madoff-like offense (whether there's an actual victim is questioned by some academic experts) could better be punished, for example, by a monetary fine and a year of community service devoted to helping disadvantaged businesses and families with their financial strategies.

BTW, I'm sure Martoma's legal expenses are already in the millions of dollars. And if the idea is to get him to testify against Steve Cohen, I'm sure some sort of deal was offered to him before his indictment or trial, and if didn't accept then, why should Martoma be pressured now after he apparently thought he was innocent enough to take his chances in a trial, and when his ratting on Cohen on the verge of a long-term prison sentence would be even less reliable?

Why is the prospect, or actual imposition, of this kind of overly severe prison sentence so easily accepted by media reports, legal commentators, and the public? Where is some sense of proportion and fairness?


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