Biz journos should enhance coverage of the sources of insider trading leaks
Lost amid the frenzy over Matthew Martoma’s potentially record-setting insider trading bust is the story of his inside source, the doctor accused of flipping the data. It’s easy to lose sight of a low-profile doctor with otherwise no connection to financial world, especially with sticker shock numbers like $276 million involved. But Matthew Martoma was relatively low-profile to the general public prior to the insider trading allegations, but as hedge fund trader, business journalists naturally glom on to his name and story. Meanwhile Sidney Gilman, the man who leaked the information enabling Martoma’s fall, has slipped through the fray with far less scrutiny. And that’s a problem, according to Reynolds Holding at Reuters:
“Almost lost in the hoopla, however, is the snitch at the heart of the alleged scheme. Sidney Gilman, a neurology professor, consulted with Elan and Wyeth on an Alzheimer’s drug the two developed, chaired the committee overseeing the drug’s safety and sold investors his expertise through a research firm. In each case, he explicitly promised not to reveal confidential information. Yet according to prosecutors he repeatedly broke that promise by passing tips to Martoma.”
In the 1980s and 90s, arbitrage legend and insider trading convict Ivan Boesky lived on as a cultural icon – his sources, like Martin Siegel and John Mulheren, have long been forgotten. And though the dynamics change when celebrity is involved, how well is Sam Waksal, Martha Stewart’s inside source, remembered?
It’s easy to get caught up in the characters that reaped the greatest benefits insider trading scandals, but the people who enabled them are significant and warrant more scrutiny and detailed coverage. When a relatively unknown candidate needs vetting, political reporters routinely come through with detailed profiles and investigative reporting revealing the character and, frequently, missteps of potential candidates for office.
Once somebody breaches the public trust by leaking inside market information, they become a public figure subject to the same scrutiny. Martoma has already learned this. But Gilman, and other leaks, should as well. Reporters should perform deep dives into these people’s histories, interviewing friends and family and coworkers and employers to better reveal this person’s possible motivations and the environment that contributed to him leaking such information. Federal regulators and prosecutors may dig up some of Gilman’s relevant tax, financial and criminal history, where applicable. But they can miss stuff, and moreover, if the source flips and aids the prosecution, authorities may keep some of the information to themselves. Solid investigative reporting, including digging through public documents and records, can better shed light on Gilman and others. It may be time and resource intensive, but it provides a public service.
Martoma may be guilty of a colossal crime, but it wasn’t possible without Gilman. Gilman, and other inside sources like him, should have their stories thoroughly investigated and reported as well.