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Posted on Wed, Nov 21, 2012 : 10:08 a.m.

University of Michigan reviewing medical professor's involvement in insider trading case

By Amy Biolchini

Editor's note: This story was updated at 10:45 a.m. with additional background information.

The University of Michigan is carefully reviewing a medical professor's alleged involvement in an insider trading scheme after a civil suit was filed Tuesday by the U.S. Securities and Exchange Commission, according to a statement issued Wednesday by Pete Barkey, director of public relations for the University of Michigan Health System.

Dr. Sid 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 currently the associate director of the Michigan Azheimer’s Disease Research Center at U-M.


Dr. Sid Gilman

Courtesy U-M

Tuesday, 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.

Martoma met with the doctor about 42 times, beginning in the summer of 2006, and eventually convinced him to start talking about the drug trial, prosecutors said, according to the Associated Press report.

Update 10:45 a.m.: Gilman's lawyer, Marc Mukasey, has previously 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.

Wednesday morning, Mukasey issued the following statement:

"We are thankful that the US Attorney's Office has decided not to charge Dr. Gilman with a crime nor to prosecute him. Dr. Gilman will continue to cooperate with the S.E.C. and the US Attorney's Office."

Mukasey is a top white-collar criminal defense lawyer and a partner at Bracewell & Giuliani. He specializes in crisis management, and has represented clients in many high-profile, complex cases.

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.

A copy of the agreement released by federal prosecutors Tuesday showed that Gilman will forfeit nearly $187,000 that he received from Elan for consulting work in 2007 and 2008 and from an expert networking firm for consultations between 2006 and 2009 with Martoma's hedge fund, the Associated Press reported.

At the time the clinical trial research was being conducted, Gilman was working as a paid private consultant for an expert firm and was not acting on behalf of the University of Michigan.

Any action the University of Michigan takes in the matter will be in accordance with University policies, according to the statement issued Wednesday by Barkey.

"The University of Michigan has comprehensive guidelines in place to govern activity in both clinical trials and for University employees engaged in consulting work," Barkey said in the statement. "There is an ongoing legal process, and we recognize the importance of letting that process occur."

Amy Biolchini covers Washtenaw County, health and environmental issues for Reach her at (734) 623-2552, or on Twitter.



Fri, Nov 23, 2012 : 7:37 p.m.

Neurological Basis for Human Behavior: My concern is not about guilt or innocence of the persons who are involved in illegal activity as reported in this story. My concern is about understanding human anatomy and human physiology. Since 1950s, we have developed a variety of drugs that are useful for treating abnormal conditions of the mind and these drugs influence different parts of the brain and hence give us a better understanding of the function of the part of the brain which they influence to induce the drug effect. This understanding provides me the knowledge to claim that Professor Sid Gilman had participated in actions and exhibited a behavior while his Reticular Activating System is knowing his thoughts and actions.


Thu, Nov 22, 2012 : 11:18 p.m.

And, it seems perhaps appropriate to suggest that our own University of Michigan Health System--with one of its senior researchers now at the center of THE largest insider trading scheme in history--perhaps might want to be the institution to get the ball rolling on how to appropriately rein in these relationships and appropriately safeguard patient health/well-being........


Thu, Nov 22, 2012 : 10:59 p.m.

There seem to be TWO important issues in this story: (a) the far too cozy relationship that exists throughout the system between medical researchers and drug companies; and (b) the huge impact on drug company stock values when the NON-effect of some of these drugs becomes widely publicized. These issues represent a very large conflict of interest between patient health and personal/corporate profit that needs to be addressed. Patients are not well-served when physicians receive sometimes millions of dollars in consulting fees and perks over many years from consulting relationships with corporations that have a compelling financial interest in the areas of research in which the physicians are engaged. Whether or not Dr. Gilman engaged in any wrong-doing in this particular instance, such relationships represent a compelling conflict of interest and should not be permitted. This is particular true in the area of Alzheimer's diagnosis/treatment--where NO drug has been shown in clinical trials to have had ANY significant impact on the progression of this set of symptoms. However, drug therapies continue to be advocated by researchers and therefore prescribed by clinicians--thus creating a multi-million dollar industry for drug companies that has to date had NO impact on the progression of patient symptoms that has been documentable scientifically by either researchers or drug companies. It is clear what happens to drug company profits--and therefore lucrative consulting fees--when such information becomes well-publicized. Which seems like an issue that our research and clinical institutions need to address--ASAP.


Thu, Nov 22, 2012 : 1:54 p.m.

Gilman's behavior was egregious. I wonder what made him think he would not be caught?


Thu, Nov 22, 2012 : 2:07 p.m.

Maybe because nobody else ever was.


Thu, Nov 22, 2012 : 1:12 p.m.

This is not an isolated instance. It's a matter of time before others' cozy outside interests and self-dealings are exposed. There will probably be a plea deal in the Gilman case that includes giving up information on other faculty involved in similar activities. Stay tuned.


Thu, Nov 22, 2012 : 1:34 p.m.

You're right. These expert consulting firms had already been put on notice that consultants were divulging insider/confidential information. This is not the first instance but just one of the more egregious. There will be more of this to come...


Thu, Nov 22, 2012 : 5:27 a.m.

Dr. Gilman knew better than to do this. He knew as chairman of the scientific advisory board that he should not disclose the results of the trial to anyone. The expert consulting firm that arranged the meeting is also very clear about not disclosing confidential information. So why did he do it? Greed? Ego? Both? It's a shame. Forfeiture of the consulting fees is the first step. I wonder if he will be liable from a civil standpoint for violating the non-disclosure agreement he must have signed.

Kai Petainen

Thu, Nov 22, 2012 : 3:53 a.m. "Gilman's conduct raises fresh questions about firms that match investors with experts in subjects that could move stock prices, said Erik Gordon, a University of Michigan business professor who follows the pharmaceutical industry. If the allegations are true, it's reprehensible conduct for someone who has misused a position of trust," said Gordon, who added that he doesn't know Gilman. "This is crookery of really the lowest possible ethical standards. It doesn't get much lower."

Kai Petainen

Thu, Nov 22, 2012 : 1:10 p.m.

In the link that I provided, that is from Bloomberg... and then I noticed this. "Kara Gavin, a spokeswoman for the University of Michigan Health System, didn't immediately return a call seeking comment on Gilman" When Bloomberg calls, be ready for a comment. It's your chance to speak, defend, inform the public.... Or are people eating turkey?

Kai Petainen

Thu, Nov 22, 2012 : 3:54 a.m.

I applaud Gordon for taking a stand. We teach about ethics... I'm glad to see Gordon making a strong statement about ethics.


Thu, Nov 22, 2012 : 1:17 a.m.

Nothing more than greed!


Thu, Nov 22, 2012 : 12:38 a.m.

Financial frauds are not uncommon in UM health system. Not long time ago, one professor moved NIH research fund to his own startup. Did he get fired? No.

Barbara Clarke

Wed, Nov 21, 2012 : 11:46 p.m.

Please remember how Martha Stewart served prison time for behavior similar to this kind of behavior. I believe the good doctor should have known the consequences of his behavior and probably adheres to the policy that as long as I am not caught this is an "OK" practice. Really, really disappointed in this man.

Great Lakes Lady

Wed, Nov 21, 2012 : 11:02 p.m.

"At the time the clinical trial research was being conducted, Gilman was working as a paid private consultant for an expert firm and was not acting on behalf of the University of Michigan." But he was still an employee of the university.....disgraceful, greedy unethical insider trading behavior that would land most people in federal prison.


Wed, Nov 21, 2012 : 10:56 p.m.

The Michigan Daily had a more informative story.....this is not shocking just look around the place


Wed, Nov 21, 2012 : 9:59 p.m.

The good Dr. Gilman should immediately be escorted off U of M premises. He brings disgrace both to a great university and his profession. The Michigan Board of Medicine should revoke the guy's license. Doesn't the Hippocratic oath say do no harm? This guy's lack of integrity has undermined the very pinnings of our financial system with his greed. How can the average citizen have any confidence that their hard earned dollars will be safe on Wall Street when people do what he did. The guy was caught red-handed in this scam. It is outrageous that just because he is singing to the Feds that they agreed not to prosecute Gilman. The good doctor belongs breaking rocks a federal prison the rest of his days. The sole reason that investors lost $286 million dollars of value is solely because of Sid Gilman. And the University should know that when their professors are being paid $1000 an hour, that that is payola, not a legitimate consulting fee. Shame on you, Dr. Gilman! Such activity should be barred when these big professors are already receiving more than generous compensation from us taxpayers!

Billy Bob Schwartz

Wed, Nov 21, 2012 : 9:54 p.m.

And a physician, at that! I am stunned! LOL


Wed, Nov 21, 2012 : 8:54 p.m.

Problems in the Neurology Department - say it isn't so! This department seems to be one of the worst and most mismanaged: difficult to schedule appointments with Physicians, unfriendly and rushed visits, Residents who seem to over-talk and not listen to patients leads to the need for multiple visits, ignoring family member questions, etc. Does behavior come from the top?

Laura Jones

Thu, Nov 22, 2012 : 3:44 a.m.

Yeah, I have to disagree about some of the doctors in Nuro at the U. You are using too broad a brush. My experience with some of them has been excellent - very comprehensive, informative and not rushed, or at least willing to take a lot of time when required. I cannot attest to them all, but with respect to Dr. Kevin Kerber in particular, top notch from start to finish. I think its a difficult field as well, not a lot of concrete answers in the field. through no fault of the docs, just the nature of the beast.

Ron Granger

Wed, Nov 21, 2012 : 8:43 p.m.

Maybe the U can bring in that lawfirm to do another secret report, and make it look like they "take this sort of thing seriously".

Ricardo Queso

Wed, Nov 21, 2012 : 8:18 p.m.

And he also sat on the FDA Advisory panel for many neurological drugs.


Wed, Nov 21, 2012 : 7:57 p.m.

Sounds like his actions are contrary to the Corporate Compliance program that UMHS has.


Thu, Nov 22, 2012 : 1:17 p.m.

I wouldn't disagree, but that policy is part of the larger compliance program, which is required when you receive federal money.


Thu, Nov 22, 2012 : 1:06 a.m.

This matter falls under the medical school's conflict of interest policies.


Wed, Nov 21, 2012 : 7:40 p.m.

The aa dot com article needs to be more forthcoming about what this case is about. If you read the accounts of this criminal activity in the NY Times, the WSJ and other publications, you will see that Gilman is accused of leaking negative results from the clinical trials for the Alzheimer's drug ahead of the public release of that information, which allowed the trader, Martoma, to dump his shares in the two drug companies (and avoid a tremendous loss) and also short the companies' shares (betting the shares will plunge, which they did after the public release of the negative data from the drug trial), thus giving the trader tremendous profit based on the insider information. Martoma made more than $276 million in a combination of illegal profits and avoided losses by obtaining secret information from Gilman about the clinical trials for an Alzheimer's drug being developed by the companies Elan and Wyeth. Gilman has likely cut a deal with authorities to avoid prosecution. He has to forfeit the $187,000 collected as a consultant as stated above, and will probably avoid jail time, but draw your own conclusions. Here is a good article from the NY Times about this case:


Wed, Nov 21, 2012 : 6:38 p.m.

The University of Michigan's "comprehensive guidelines" don't work. It allows its doctors to have cozy, lucrative relationships with drug companies through consultancies, etc, and various other "outside employment" entities -- i.e. outside employment = extra pay. For example, doctors are permitted to take 4 work days/MONTH and use these 48 days per year to participate in 'outside employment', all while they are being paid their university salaries. Then the doctor can come back from 'outside employment' travel and receive reimbursement (even from gift funds) for expenses that the doctor says are "supposedly" not covered by the outside employment entity. There are no checks/balances. It's a free-for-all for the unethical doctor who also happens to bring in grant/research funds to the university. Does anyone else think this is crazy?

Great Lakes Lady

Thu, Nov 22, 2012 : 1:30 p.m.

1bit: in large corporations employees can't consult on the outside and receive a salary for's called "conflict of interest".


Thu, Nov 22, 2012 : 5:17 a.m.

Actually, Great Lakes Lady, people in private companies do expert consulting all the time.

Great Lakes Lady

Wed, Nov 21, 2012 : 10:58 p.m.

Yes. You can't do that while working for a private company. Sounds unethical.


Wed, Nov 21, 2012 : 7:40 p.m.



Wed, Nov 21, 2012 : 6:16 p.m.

This No Looka good!


Wed, Nov 21, 2012 : 3:49 p.m.

Dr. Gilman has been fined $250,000, according to other accounts. If he's agreed to the fine and has paid it is another matter. UM's position that a member of its faculty or staff can do outside work without acting in behalf of the university is laughable. Directly involved or not, UM's reputation is always on the line when one of its senior members is in the public eye or privately contracted.

Ron Granger

Wed, Nov 21, 2012 : 3:41 p.m.

I'll wager quite a lot that this is not an isolated incident. I mean, are we to believe that inside information almost never ever leaks out of the University? Or just that people don't get caught?


Wed, Nov 21, 2012 : 7:41 p.m.

People don't get caught.