Stanford MBA Guilty Of Insider Trading

Mathew Martoma apparently lied his way into Stanford’s MBA program

Mathew Martoma, the hedge funder trader who was accepted by Stanford after being kicked out of Harvard Law School for doctoring his transcript, was found guilty today (Feb. 6) of insider trading by a federal jury in Manhattan.

It took a jury of seven women and five men a little more than two days of deliberation to convict Martoma, 39, a former portfolio manager at SAC Capital Advisors hedge fund. Martoma, who graduated with an MBA from Stanford in 2003, is the eighth person who has worked for SAC to be convicted at trial or to plead guilty of insider trading charges.

U.S. Attorney Preet Bharara, who brought the case against Martoma in Manhattan, said after the verdict that “cheating may have been profitable for Martoma, but in the end, it made him a convicted felon, and likely will result in the forfeiture of his illegal windfall and the loss of his liberty.”

A STILL PUZZLING SILENCE FROM STANFORD GSB

Martoma reportedly sat stone-faced in court when the verdict was read as his wife wept quietly behind him. His lawyer said he would appeal the conviction which could result in a prison sentence of between seven and 10 years.

While the outcome of the case is not surprising, given the previous convictions of SAC lieutenants and the evidence gathered against Martoma, what remains puzzling is why Stanford Graduate School of Business has not yet rescinded Martoma’s MBA degree.

Though Stanford declines direct comment on the Martoma case, the school does make clear that applicants who are admitted to its MBA program on false pretenses can have their degrees revoked. Most observers assume that Martoma, who legally changed his name from Ajai Mathew Thomas to Mathew Martoma when he applied to Stanford, failed to admit that he was thrown out of Harvard Law School for a disciplinary reason.

WHAT IF HE ACTUALLY TOLD STANFORD HE HAD BEEN KICKED OUT OF HARVARD

“Consistent with federal law, we do not disclose application information about individual students,” says spokesperson Barbara Buell. “Expulsion from another institution due to fraud, if it were disclosed or known, would create a serious impediment to admission…we regard misstatements or material omission as very serious matters and application fraud can lead to dismissal.”

But it is also possible that Marie Mookini, then director of MBA admissions at Stanford, knew that the applicant was expelled and that he actually leveraged his misfortune to convince the business school to give him a second chance. Mookini, now an MBA admissions consultant based in Palo Alto, declined comment. That scenario would be highly embarrassing to the school and, some Stanford professors believe, extremely unlikely.

“As I understand his trajectory, after the expulsion from Harvard Law he changed his name,” says Jeffrey Pfeffer, a long-time professor at Stanford’s business school. “I suspect he applied under the new (now current) name, had good test scores and undergraduate transcripts, and never mentioned Harvard Law at all.  With a different name, unless one was on to something, the odds of discovering this would be very, very low.”

Pfeffer adds that “in today’s litigious society, it is not clear at all that rescinding a degree that was granted a decade ago is possible. I suspect there are rules for these things and his case falls outside of those rules.”

Martoma was accused of illegally trading on insider information he had gained on Elan and Wyeth, two drug firms working on an experimental Alzheimer’s drug known as bapineuzumab. Dr. Sidney Gilman, who had been hired by Elan to consult on a clinical drug trial, testified at the trial that he supplied information to Martoma that the drug trials had run into difficulties.

DON’T MISS: HOW A CROOK GOT INTO STANFORD BUSINESS SCHOOL or THE TACTICS THAT LED TO THE EXPULSION OF A HARVARD LAW SCHOOL STUDENT