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Posted on Mon, Nov 26, 2012 : 8:25 a.m.

U-M Health System warns faculty, staff in wake of $276M insider trader scheme

By Cindy Heflin

In the wake of accusations last week that a University of Michigan neurology professor was involved in an insider trading scheme, The University of Michigan Health System sent an email to faculty and staff Saturday reminding them to follow industry and hospital ethical standards, The Michigan Daily reported.

The email did not mention Sidney Gilman, the professor accused of providing the insider information to an investment portfolio manager, but a health system spokesman confirmed that the email was in reference to Gilman, The Daily reported.


Sidney Gilman

The message warned against unlawful release of information that's not public, the newspaper reported.

The university said last week that it is carefully reviewing Gilman's alleged involvement in the case.

Gilman is employed as a full professor in U-M’s Department of Neurology, and was formerly chairman of the department from 1977 to 2004. He is the associate director of the Michigan Azheimer’s Disease Research Center at U-M.

Last week, Gilman was accused of providing a Mathew Martoma, a former portfolio manager at CR Intrinsic Investors, with information in advance of its public release about the outcomes of a clinical trial for an Alzheimer’s drug that Gilman was overseeing between 2006 and 2008.

The information reportedly led to a trade of stocks before the clinical trial’s public results release that netted investment advisers and hedge funds about $276 million in illegal profit and saved losses.

U.S. Attorney Preet Bharara said Martoma gained from "cultivating and corrupting" Gilman, eventually receiving $9 million in bonus pay for the year when the trades were made, the Associated Press reported.

Gilman's lawyer, Marc Mukasey, told The Associated Press his client is cooperating with the SEC and the US Attorney's Office, and has entered into a non-prosecution agreement with federal prosecutors.

Gilman is an Alzheimer's expert. He has served on countless advisory boards and is highly decorated. Before coming to the University of Michigan in 1977, Gilman was a neurology professor at Columbia University and at Harvard Medical School.

Additionally, Gilman has been a consultant for numerous pharmaceutical companies, including Merck, Johnson & Johnson, Elan/Wyeth Pharmaceuticals, Pfizer and GlaxoSmithKline. Gilman has been a member of the Gerson Lehrman Group Scientific Advisory Board since 2002.



Wed, Mar 20, 2013 : 12:29 p.m.

Cindy - here's a similar thread of issues down in Columbus:


Wed, Mar 20, 2013 : 12:31 p.m.

I should have typed "similar, but different issues with running a large academic institution".


Tue, Nov 27, 2012 : 9:25 p.m.

Until UMHS's investigation is complete, the only reasonable action right now is to escort Dr. Gilman off the premises and relieve him of his UMHS responsibilities and privileges. His behavior was egregious and, ultimately, inconsistent with good patient care.


Tue, Nov 27, 2012 : 6:34 p.m.

Morals and Ethics - A Neurological Function : I am not concerned about the actions of Mathew Martoma, a portfolio manager. I am concerned about the science called neurology and as to how its learning is imparted at the University of Michigan. If man has the ability to discern right from wrong, man has the anatomical structures which perform the necessary functions giving the ability to distinguish right from wrong. The Professor of Neurology has no choice other than that of knowingly making a decision to commit an action that is reported in this story. Apart from academic knowledge, the person needs moral authority to occupy a position of trust, respect, and leadership.

Great Lakes Lady

Tue, Nov 27, 2012 : 3:08 p.m.

An email warning?!? Are there no policies and procedures in place outlining consequences of insider trading...such as termination of employment and prosecution???


Tue, Nov 27, 2012 : 5:48 p.m.

Email is just the way most things are done today. I am sure that they have signed contracts with most of this information in it; however, a reminder is a good thing and email is fast and traceable.


Tue, Nov 27, 2012 : 7:05 a.m.

Our tax dollars at work to prevent our government employees from being used to provide inside information that has significant value. Would it be too much to ask our government agencies to require non disclosure agreements from individuals with access to such information, and make it a condition of employment?


Mon, Nov 26, 2012 : 8:41 p.m.

Ethics? Let's talk about Heparin. Drug with a questionable Chinese manufacturing quality past that was whitewashed by the US governmet to briefly create the richest Chinese couple while adding to the coffers of Goldman Sachs now "pushed" by UM doctors at every emergency and post-op opportunity. SSid made only $108k in fees (righteo). Martoma a $9M bonus then $0 after Gilman out before "departing" SAC himself two years later. SAC = Steven A. Cohen effectively made $276M. Not the first time investigated. Maybe the last thanks to Sid.


Mon, Nov 26, 2012 : 3:32 p.m.

The article and previous articles make clear that the hedge fund guy, Martoma, got the $9 million. Dr. Gilman got paid an hourly rate for his consulting services over several years. bruceae is misinformed and careless with the facts. Martoma and his colleagues netted $276 million. Dr. Gilman got none of that illicit $9 million windfall. Which is why this doesn't look like a conspiracy with the highly-respected Dr. Gilman, but one against him, to defraud him. As the US Attorney said "Martoma gained from "cultivating and corrupting" Gilman, eventually receiving $9 million in bonus pay for the year when the trades were made." No doubt that's why the US attorney decided not to prosecute Dr. Gilman.


Mon, Nov 26, 2012 : 9:10 p.m.

For some bizarre reason Dr. Gilman may have joined a sting operation as the SEC was hot on the trail of SAC for repeated insider "practices" encouraged by its founder. That would explain why the poor doctor voluntarily e-mailed (trackable) shocking drug trial information to his contact Martoma nearly two weeks before it was scheduled to be released. Other than being threatened by the SAC mob if Gilman didn't know any better than that then the UM should just close its esteemed medical doors.


Mon, Nov 26, 2012 : 8:20 p.m.

Reading the actual indictment might give more insight into whether Gilman was duped or was an active participant. (Note to I'm not arguing either way. I'm just saying that before attacking or defending Gilman, it would be good to know what he actually did.)

Basic Bob

Mon, Nov 26, 2012 : 5:16 p.m.

Or because they needed a witness to testify that a crime occurred. Dr. Gilman should know what he did is not only unethical but also potentially illegal. The university doesn't need their employees engaging in this activity, even on their own (?) time.


Mon, Nov 26, 2012 : 3:19 p.m.

"U.S. Attorney Preet Bharara said Martoma gained from "cultivating and corrupting" Gilman, eventually receiving $9 million in bonus pay for the year when the trades were made . . ." This is a confusing sentence. Grammatically, it tells us *Martoma* got the $9 mil, but reaction here seems to be that Gilman received it. Which is it, please??

Cindy Heflin

Mon, Nov 26, 2012 : 3:50 p.m.

Martoma got the $9 million, according to the U.S. attorney.


Mon, Nov 26, 2012 : 3:05 p.m.

A previous article said Sid had to pay a $250,000 dollar fine and he is free from prosecution because he is talking to the Fed's. So he shares confidential information, gets a 9 MILLION DOLLAR bonus, pays a 250K fine and walks away? At a minimum they should be taking the bonus back from him. How is this in anyway going to stop people from doing this in the future? Sounds like a net profit of 8,750,000 to me. Sign me up for that.


Mon, Nov 26, 2012 : 5:26 p.m.

Gilman doesn't get the $9 million bonus, the hedge fund manager he shared the information with got the bonus. And that guy is going to jail.

Cindy Heflin

Mon, Nov 26, 2012 : 3:52 p.m.

bruceae: The U.S. attorney alleges Martoma got the $9 million, not Gilman.


Mon, Nov 26, 2012 : 2:58 p.m.

Last year the University made a big deal about how it would no longer allow drug companies to sponsor continuing education because that might corrupt what was being taught. However, the big money is in the drug trials, like this one, but the University gets too much money from the drug trials to find that the money may corrupt the drug trial results or what is done with the results (think, not publishing negative results or spinning the results to please the sponsor). There are many drug patents that a granted based upon minor supposed improvements, like this anti-histimine causes less drowsiness, and allow drug companies to make huge profits by extending patents so that they can charge more. We need an honest middle man like the FDA to sponsor drug trials (paid for by the drug companies) based on competitive proposals like the NIH grant proposals. This would remove the incentive to please the sponsor or keep negative results secret.


Mon, Nov 26, 2012 : 2:41 p.m.

Also, academics really are not good at this stuff by nature. They're used to sharing information and talking to colleagues about their work. They do need to be taught, and reminded frequently.


Mon, Nov 26, 2012 : 1:51 p.m.

The university cares about this -- very much. They will not get approval for overseeing clinical trials if their researchers have the reputation for violating ethical boundaries. This has the potential to affect researchers all across the university, not just at the hospital. So yes, the university is very concerned.


Mon, Nov 26, 2012 : 1:43 p.m.

Do you really think that sending an email to greedy, corrupt "professionals" telling them to be ethical is anything other than a feeble PR stunt? If the University cares about this problem ( a dubious proposition), it will create and impose serious sanctions and start auditing all of this industry 'partnered' research. It is, after all, your reputation that is at stake.

John Beck

Mon, Nov 26, 2012 : 1:41 p.m.

Ethics email?? I thought the hospital staff learned about ethics with the pediatrician child pornography scandal. So they sent out a reminder email. hhhhhhhhhmmmmmm Is he still employed with the Might U??????????? How can he still have a job with the hospital? Oh that's right, he makes over $250,000 and is untouchable.

Basic Bob

Mon, Nov 26, 2012 : 5:07 p.m.

Probably he is on paid leave during his "cooperation". Which does not imply guilt of actual crime. Nor does the hundreds of thousands of dollars he will forfeit. The general counsel is deserving of twice his salary if he can shed the U of its outlaws.

Ron Granger

Mon, Nov 26, 2012 : 1:36 p.m.

Did you see that? Probably not, because that horse bolted years ago. How many clinicians, docotrs, nurses, interns, janitors, etc, talk about drug trials and other inside information to friends and relatives? Their small trades fly under the "radar" that barely manages to notice quarter billion dollar securities fraud.

Always Amazed

Mon, Nov 26, 2012 : 1:35 p.m.

His full first name is Sid.