U.S. officials urge record prison term for ex-SAC trader Martoma

NEW YORK (Reuters) - U.S. court officials said Mathew Martoma may deserve a record prison term for insider trading, perhaps approaching 20 years, prompting strenuous opposition from lawyers for the former SAC Capital Advisors LP fund manager.

Martoma, 39, faces sentencing next month following his Feb. 6 fraud conviction for seeking and trading on confidential tips about a clinical trial for an Alzheimer's drug.

Prosecutors said this enabled billionaire Steven A. Cohen's hedge fund firm to make about $275 million in July 2008 from trades in Elan Corp and Wyeth, the nation's largest insider trading scheme by dollar value. According to a filing late Tuesday in the Manhattan federal court, the probation department for the court deemed a prison term for Martoma of between 15 years, 8 months and 19 years, 7 months appropriate under federal guidelines.

Martoma's lawyers, led by Richard Strassberg at Goodwin Procter, countered that such a long term would be "outrageous" and "irrational," and "should not even form the starting point" for U.S. District Judge Paul Gardephe at the June 10 sentencing.

The lawyers said Martoma should be sentenced only on his $6.3 million of personal profit from his trades, resulting in a recommended prison term as short as 5-1/4 years. They also cited similar cases in which terms as short as two years were imposed.

Judges may impose stiffer or lesser punishments than federal guidelines recommend.

A spokeswoman for U.S. Attorney Preet Bharara in Manhattan declined to comment.

The longest U.S. insider trading sentence is a 12-year term imposed in 2012 against lawyer Matthew Kluger for a $37 million scheme in which he pleaded guilty.

Galleon Group hedge fund founder Raj Rajaratnam received an 11-year prison term in 2011 for a $72 million scheme, and is appealing his conviction to the U.S. Supreme Court.

Martoma's lawyers said the government has admitted that their client's alleged fraud "does not even begin to approach" Rajaratnam's, which spanned several years and dozens of stocks and co-conspirators.

"Simply put, the scope of unlawful trading at issue in Mr. Martoma's case is far narrower in many important respects than the unlawful trading in nearly all other recent insider trading cases," Strassberg wrote. More than 100 people wrote letters supporting Martoma, a son of immigrant parents from India. The married father of three young children graduated from Duke University and Stanford University's business school, and attended Harvard Law School. His Stanford degree was voided following his conviction.

Eight onetime SAC employees have been convicted of or pleaded guilty to insider trading charges. SAC pleaded guilty to fraud and agreed to pay $1.8 billion in criminal and civil settlements.

Cohen has not been criminally charged. He has renamed his Stamford, Connecticut-based firm Point72 Asset Management, and shifted its focus to managing his fortune.

The case is U.S. v. Martoma, U.S. District Court, Southern District of New York, No. 12-cr-00973.

(Reporting by Jonathan Stempel in New York; Editing by Bernadette Baum and Sofina Mirza-Reid)