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Posted on Tue, Nov 20, 2012 : 5:29 p.m.

University of Michigan medical professor in the middle of $276M insider-trading case

By Amy Biolchini

A University of Michigan Medical School professor is in the middle of what federal investigators are calling the most lucrative insider-trading scheme they’ve ever prosecuted, according to media reports.

Dr. Sid Gilman, a professor of neurology at U-M and an Alzheimer’s expert, was charged Tuesday in a suit by the Securities and Exchange Commission, according to a Forbes report.


Dr. Sid Gilman

Courtesy U-M

While serving as the chairman of the committee overseeing the clinical trial for a new Alzheimer’s drug, Gilman allegedly gave “material, nonpublic information” about the trial from 2006 and 2008 to Mathew Martoma, a former portfolio manager at CR Intrinsic Investors, according to the Wall Street Journal.

Gilman also allegedly gave Martoma the final results of the trial before results were publicly announced July 2008, the Wall Street Journal reported. The trial’s outcome was not positive, and Elan Pharmaceuticals and Wyeth, the corporate backers, killed the development of the drug before it hit the final phase. Wyeth has since been acquired by Pfizer.

According to the Forbes report, Gilman gave Martoma information regarding the clinical trial about July 17, 2008 and the study’s results were publicly announced July 29, 2008.

Martoma has been charged by federal prosecutors with securities fraud for allegedly using information about the clinical trial results to trade shares in advance of the publicly announced trial results, Forbes reported. Investment advisers and hedge funds have reportedly made more than $276 million in illegal profits or avoided losses from the advance trade.

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.

At the time, Gilman was working as a paid consultant for an expert network firm and not legally or technically representing the University of Michigan, said Pete Barkey, spokesman for the University of Michigan Health System.

UMHS declined comment initially, but will be issuing a statement, Barkey said.

Gilman is the director of the Michigan Alzheimer’s Disease Research Center at the U-M Medical School. He served as the chairman of U-M’s Department of Neurology from 1977 to 2004, and is past president of the American Neurological Association.

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



Mon, Dec 3, 2012 : 8:05 a.m.

Gilman will very likely have done this before based on other cases Click on RM1 to see a systematic apologia for him , one which is flagrantly nonobjective The claim he has not profited is nonsense and his being let off is all about his age and the wish to fry bigger fish, he is a criminal pure and simple and going back in his history may be relevant The claim by RM1that it just doesn't figure is also nonsense His U of M salary was 285k, his consulting rate was 1k per hr and his elephantiasis of the ego was fed by this. He has 5 offices listed and patient reports about him are equally mediocre His cv is mediocre see google scholar for Sid Gilman, peppered with so called consensus statements aimed at attracting pharma interest Try and find a single significant contribution in a high impact journal where he is first or senior author that has been cited more than 200x


Thu, Nov 22, 2012 : 3:47 p.m.

The NYT says that Dr.Gilman "has entered into a nonprosecution with the United States attorney's office in Manhattan, meaning that criminal charges will not be brought against him." Why would the prosecutor do that? I see two possible reasons he would agree, early on, not to prosecute. (1) if the case against the individual is at best very weak, marginal; or (2) the prosecutor needs the individual's testimony to make a case against bigger fish, here hedge fund manager Martoma. The second reason doesn't make sense here. From the news reports it appears the prosecution has a very solid case against Martoma -- lots of e-mails, etc. And, most deals offering reduced charges or non-prosecution in return for testimony are not finalized until after the testimony. Here the non-prosecution was quickly finalized, giving up the usual prosecutor's leverage. It seems likely that the prosecutor concluded that Dr. Gilman bears minimal culpability. As well he might. Martoma and his hedge fund cronies netted $276 million. Not a dime of this massive windfall went to Dr. Gilman. That doesn't look much like a "conspiracy" between the predatory Martoma and Dr. Gilman. It looks more like Dr. Gilman was gulled by Martoma's elaborate pretense to be his friend and grateful pupil. (Dr. Gilman apparently was paid an hourly rate for scientific and consulting services over a number of years. That hourly rate was substantial, in light of his scientific eminence -- 400 published papers, two decades as head of the U-M neurology dept., etc.; look at his CV.) It is clear Dr. Gilman made a grave mistake, which he acknowledges and will pay for; but the "hang 'im high" rhetoric in these comments seems inappropriate, way over the top.


Thu, Nov 22, 2012 : 4:20 a.m.

Gilman is ancient. He's well past his prime. This must have been some desperate attempt to make one last big score after a lifetime of living large. If all that seems apparent is true, he's protected his score through transfer to relatives. I hope they go down with his leaky ship.

Barbara Clarke

Wed, Nov 21, 2012 : 6:49 p.m.

If all of this shakes out as being true . . . I am VERY disappointed by Dr.Gilman's behavior. I have a family member with dementia involved in MADRC's research. It is getting to be that there are no professionals who are worthy of our trust.

say it plain

Wed, Nov 21, 2012 : 5:53 p.m.

Okay, apparently we're having some (minor? I can't really tell lol) debate about whether this is a big deal story or not. The feds are calling it "...the most lucrative insider trading scheme..." they've ever prosecuted and all, but that epithet notwithstanding, I ask those who know about this sort of thing... has a person like Gilman in a position of *overseeing* clinical trials ever given results to a money-player prior to official release before?! That seems like a giant deal no matter how much money is won and lost from the act. And excuse my ignorance, but what is this 'expert consultation' network garbage for the investor classes?! Do they really get to pay even the chumpchange rates of hundreds-upon-hundreds per hour to pharma insiders in exchange for info "relevant" to drug trial outcomes?! I'd guess that the people employed in such consulting positions are *very often* hearing a little something here and there about the progress of these trials, you know? The "preliminary results" from colleagues who can't keep their mouths shut about their shoptalk on this or that, at the very least, if not the bottom-lines on specific pipelines drugs. The whole scene seems so rife for this sort of abuse that it wouldn't surprise me a bit to hear that a physician who has felt above reproach because he's just that 'decorated' and connected would just ultimately send the powerpoint to someone.


Wed, Nov 21, 2012 : 3:54 p.m.

This has made the national news - WSJ, although there are no comments on the article: Perhaps, this is chump change for WSJ folks - his fee was only $1,000 an hour.

Steve Hendel

Wed, Nov 21, 2012 : 3:22 p.m.

The reall question is, why did Dr Gilman give this information to Martoma?


Wed, Nov 21, 2012 : 2:50 p.m.

The naming rights to the new Neuroscience Hospital are still available. Perhaps the distinguished Professor can make a charitable remainder gift to the University of say $100 million dollars and then they can name it after him. This will shelter the money from people seeking civil penalties and will embelish his name with greats like Al Taubman. When the development office comes knocking, he better answer!


Wed, Nov 21, 2012 : 2:47 p.m.

It has made the WSJ, but surprisingly no comments. Perhaps, this is small potatoes. He was only making $1,000 an hour consulting for these investors.

Kai Petainen

Wed, Nov 21, 2012 : 1:50 p.m.

i represent myself and not the school on these boards. i have my name on here, because i believe in being transparent and ethical -- you can figure out who i am. out of disclosure, i teach about stocks, and each week i talk about ethics in some manner to my students. what makes this sad, is that i have to tell my students about this story. it's a huge story and it can't be avoided. and to show michigan students a story about unethical behavior... and it has michigan listed... is just sad.


Wed, Nov 21, 2012 : 1:47 p.m.

Let's please concentrate on panhandlers, careless pedestrians, false police reports, "home invasions" through unlocked doors and spray-paint graffiti. These are the crimes bringing about the end of civilization as we know it, at least in Ann Arbor.


Wed, Nov 21, 2012 : 1:37 p.m.

From what little we know about Sid Gilman he seems to be a gregarious, bright, and energetic individual like so many tenured UM professor/chairs are. During that time he was busy on his cell trying to wheel together a big pharma research deal with a commercial partner or underling. And a lot of nice people have homes in Boca Raton,where Martoma was arrested. too. This is no big deal. Until the SEC/FBI get their prime target - investor Steven A. Cohen, hedge fund Billionaire - the full extent of Gilman's conspiracy with the Wall Street money mob or buddy research mill or other shadowy friend networks has yet to be fully detailed. Stay tuned to A2com. As far as anyone knows Gil may have been working sacroficially in a federal sting operation to attract a great future of big pharma R&D at Michigan or help secure big U stock investors like TIACREFF. I mean, who would ever email self-incriminating evidence? Remember, some other unhappy investors lost their $276 Million on this.

Kent Rest

Wed, Nov 21, 2012 : 12:24 p.m.

A crook is a crook not matter where you find him.


Wed, Nov 21, 2012 : 12:23 p.m.

Oh no! This can't be! Another black eye for our precious U-M.


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

He needs to be dismissed.

say it plain

Wed, Nov 21, 2012 : 5:55 a.m.

Lol, @LXIX... this is really a *giant* news story, yikes!


Wed, Nov 21, 2012 : 12:25 p.m.

Yes - the pssiblity of criminal actions at U-M. You bet it is big news. My guess, it will hit the national news outlets too.


Wed, Nov 21, 2012 : 5:50 a.m.

As this Corruption plays-out, it will reveal whether Univ Mich has No Shame! Gilman consulted with Martoma 42 times. He emailed 24 pages of detailed confidential (not yet released to the investing public) drug trial results. Kwame and General Petraeus were "outed" by emails. "Qui Tam" federal district court lawsuits anyone? (Google it dudes, and Stay Tuned!). I expect more "outings." Some A2 "researchers" need to "lawyer-up!"

Laura Jones

Wed, Nov 21, 2012 : 1:54 p.m.

It depends on what the U knew about his consulting activities, the security of the findings and their contractual role in the research. It could end up being very much their concern - or not.


Wed, Nov 21, 2012 : 12:01 p.m.

This has nothing to do with U of M and has everything to do with Dr. Gilman. The two are not the same.


Wed, Nov 21, 2012 : 5 a.m.

Ho hum. Just another $276M insider trading story involving Wall Street Billionaire Steven Cohen's SAC hedge fund.. Not all that much bigger than Marth Stewart's profit of $45,673 for her insider's information. Yawn. No news here about the prestigious University of Michigan and it's now corrupted pharma Research ethic. Or the dependence upon the drug industry to sustain it's functional university budget and A-grade R&D image. Both here and overseas. Or affect any future graduate research applications. Bah!, boring old website.


Wed, Nov 21, 2012 : noon

U of M got nothing from this except bad press.


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

Man is a Moral Being: I have studied Neurology and have come to the understanding that man is a moral being. The most important mental function that man performs is the act of discernment. Man has the ability to distinguish right from wrong, and good from evil. Man lives his life while an instant called future is churned into past without giving him the chance to experience it as present. Hence, the mental function called memory is the most important living function that gives the ability to experience his own living condition. This Professor of Neurology will now assist the prosecutor using his memory function and share the facts about this illegal activity.

Laura Jones

Wed, Nov 21, 2012 : 2:44 a.m.

I assume he will be fired, since the non prosecution agreement is a fairly bald admission of guilt.

Laura Jones

Wed, Nov 21, 2012 : 5:48 p.m.

I believe it was the consulting fees he was paid which were his compensation. They pale in comparison to the scandal, but he seems to have been paid none the less. Consultancies are not free.

Ed Kimball

Wed, Nov 21, 2012 : 2:18 p.m.

Laura, you may eventually be proven right, but so far I have not seen any allegations that Dr. Gilman personally benefitted from his actions.

Laura Jones

Wed, Nov 21, 2012 : 1:50 p.m.

1) Violation of ethics for conducting research. 2) Breaking several SEC laws, of which he wold have been aware, for personal gain. (I would be surprised if they were also not contractually advised to him prior to the start of his position) 3) Violation of fiduciary responsibilities with the University & whomever sponsored the research. 4) Opening the U up to potential legal liabilities. 5) Being a greedy man who placed his own monetary gains in front of those of the general public. When the fund sells their long options, the loss becomes someone's - the money does not come out of thin air. Could have been anyone's pension or holdings that took that hit,


Wed, Nov 21, 2012 : 11:59 a.m.

Not necessarily. What would be the grounds for firing him?


Wed, Nov 21, 2012 : 3:33 a.m.

It will be interesting to see how UMHS spins this less than positive news.


Wed, Nov 21, 2012 : 2:31 a.m.

Did Dr. Gilman know Mathew Martoma as a hedge fund manager? The good thing is that Dr. Gilman was honestly telling the truth that the clinic trial was not working. Do you know how difficult it is for many of them at UM to tell the truth that they are wrong?


Wed, Nov 21, 2012 : 11:58 a.m.

He would have known and he also knew that you never divulge the results of a clinical trial to anyone prior to its publication/formal announcement.

Laura Jones

Wed, Nov 21, 2012 : 2:51 a.m.

He emailed the confidential report, and the password to access it. At a minimum he knew that was against his contract and SEC rules. Reports indicate he knew and was consulting with the hedge fund.manager as a side job. It sounds more like he was caught and then sang like a canary to avoid prosecution. They don't hand out non prosecution deals without serious quid pro quo.


Wed, Nov 21, 2012 : 1:29 a.m.

"It takes 20 years to build a reputation and five minutes to ruin it." - Warren Buffett


Wed, Nov 21, 2012 : 1:19 a.m.

The merit of this story seems to be exclusively the "local angle." It is unfortunate that Dr. Gilman allowed himself to be placed in the position he's in now, but it isn't much a news story.


Wed, Nov 21, 2012 : 11:20 a.m.

I completely disagree--this story has made national news and is circulating on most of the major news sites. Here's just one of many examples: It is being described as "the largest insider trading case ever brought by the SEC". To have a UM former chair implicating is major news.

Eugene Daneshvar

Tue, Nov 20, 2012 : 11:57 p.m.

What's even more shocking is that is covering the story! -defendingmythesis

Eugene Daneshvar

Wed, Nov 21, 2012 : 5:30 p.m.

Hi Steve, Thanks for asking. The reason I said that it was shocking was because wouldn't cover another case of alleged grant fraud by U of M they were made aware of. Feel free to read all about it at defendingmythesis[dot]com. -Eugene

Steve Hendel

Wed, Nov 21, 2012 : 3:19 p.m.



Tue, Nov 20, 2012 : 11:34 p.m.

How much did Dr. Gilman and UM get by doing so?


Wed, Nov 21, 2012 : 11:56 a.m.

rm1: This is not new in the field of expert consulting. The firms that set up the consults have, for years now, told consultants not to divulge any potentially proprietary information. Dr. Gilman, as chair of the committee, should have known better than to discuss ANYTHING related to the drug or trial and probably signed non-disclosure agreements that he violated. Although he may not be prosecuted by the government (for which he is lucky), he may still be subject to civil lawsuits by the company conducting the trial (and maybe their investors, though I am no lawyer).


Wed, Nov 21, 2012 : 4:26 a.m.

That is the right question - and requires an FBI investigation to learn the truth as to how deep the conspiracy really goes. Gilman consulted with Martoma 42 times over a two year period where he delivered illegal insider information that net Billionaire Stephen A. Cohen's SAC hedge fund $276M. $1/4 Billion that other honest investor's lost. Anyone else or any other institutions trading on the information during that time get more than a dime? The consultations with Martoma ended after Gilman emailed him a 24 page "powerpoint presentation" of detailed secret drug results long before its scheduled public debut. The only way Gilman could be inocent was if the NY mob made him an offer for data he couldn't refuse. And then decided to work as a snitch for the SEC.


Wed, Nov 21, 2012 : 12:33 a.m.

That's the right question. Neither Dr. Gilman nor UM was got a dime out of the illegal trading, while this predatory Wall Street sharpie and his hedge funds netted $276 Million. Some "conspiracy". According to the various reports (WSJ, NY Times, Forbes, etc.), Dr. Gilman was paid for his scientific work for the expert witness network by those who hired him for it (not by Martona or his hedge funds). That work was independent of his UM work.

Kai Petainen

Tue, Nov 20, 2012 : 11:14 p.m.

This is bad/sad stuff. =(