Martoma Is 79th Conviction In Feds' Insider Trading Sideshow (Update 1)

Updated from 3:42 p.m. ET with changes throughout.

NEW YORK ( TheStreet) --Former SAC Capital Advisors portfolio manager Matthew Martoma Thursday became the latest insider trading conviction as federal prosecutors continue to do their best in the wake of the financial crisis to show taxpayers how tough they are on Wall Street, while hopefully padding their resumes in the process.

Martoma, 39, got two doctors to give him privileged information tied to an experimental drug to treat Alzheimers being developed by Elan Corp. and Wyeth Pharmaceuticals. Elan was acquired by Perrigo (PRGO) last year and Wyeth was bought by Pfizer (PFE) in 2009.

After Martoma learned the drugs weren't ready to market, SAC sold Elan and Wyeth shares and took short positions, avoiding losses and earning $275 million, according to news reports.

The conviction by a Manhattan federal jury on one count of conspiracy and two counts of securities fraud could lead to up to 20 years in prison for Martoma. It is part of a roughly 10-year investigation of Steven A. Cohen and his hedge fund SAC Capital Advisors.

Cohen has so far avoided criminal charges, though SAC pled guilty to insider trading in November and was forced to stop managing money for outside investors. Cohen also faces civil charges brought by the Securities and Exchange Commission for failing to adequately supervise his employees. Still, he continues managing a $9 billion "family office."

The conviction is the 79th for the Manhattan U.S. attorney's office as party of a multi-year insider trading crackdown. It hasn't yet lost a case.

Still, rather than typing up another rave review for U.S. Southern District Attorney Preet Bharara, who has overseen the insider trading sweep, I'd prefer to cite Gary Aguirre, an iconoclastic former SEC attorney who got drummed out of the Securities and Exchange Commision for pushing too hard on an insider trading case involving former Morgan Stanley (MS) and Credit Suisse (CS) CEO John Mack. (Aguirre later won a large wrongful termination settlement and was vindicated by a Senate Investigation.)

Referring to the inside trading crackdown in the August issue of Wall Street Lawyer, Aguirre wrote, "this huge commitment of resources over the past six years comes with a cost, perhaps too high. Resources are finite. Allocating those resources to insider trading cases obviously means those resources are unavailable to investigate and prosecute those responsible for the 2008 financial crisis. That crisis brought the U.S. and the world to their knees. Insider trading was not a cause of that crisis."

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