SAC Capital boss Steven Cohen's advice from other hedge funds guided his trading, he said in a deposition, not tips from his employees. Photographer: Scott Eells/Bloomberg.
SAC Capital boss Steven Cohen's advice from other hedge funds guided his trading, he said in a deposition, not tips from his employees. Photographer: Scott Eells/Bloomberg.

If Mathew Martoma was ever going to strike a deal with the government and turn against his former boss, Steven A. Cohen, he probably would have done it a long time ago. The odds that he ever will look even more remote now.

Lawyers for Martoma, the former SAC Capital Advisors fund manager, filed excerpts from a May 2012 deposition in which Cohen told attorneys for the Securities and Exchange Commission that he decided to sell SAC’s stakes in Wyeth and Elan Corp. based on advice from the head of a different hedge fund. Martoma’s insider-trading trial is scheduled to begin next month. His lawyers say the previously undisclosed testimony shows Martoma wasn’t involved in Cohen’s decisions on the trades.

Prosecutors, by contrast, have said that Martoma and Cohen had a 20-minute phone conversation the day before SAC began trading in shares of the two drugmakers, and that the trades were based on confidential information that Martoma had received from a doctor who worked as an adviser to Elan. The government has accused Martoma of making $276 million in profits and avoided losses for SAC based on inside information about the companies.

We don’t know whose version is true, of course. Yet here’s what I found noteworthy: Martoma’s stance is consistent with the notion that he isn’t in a position to implicate Cohen. And that’s an important point. Whether Martoma might agree to testify against Cohen someday has long been a subject of speculation in the financial press.

In a June blog post I wrote that, if I had had to make a wager, I would bet that Martoma didn’t have the goods on Cohen. SAC had fired him in 2010 for poor performance. On his way out the door, one SAC employee called Martoma a “one-trick pony with Elan,” according to the government’s original complaint against Martoma last year.

It didn’t make sense to me that Cohen would have let SAC fire someone who was in a position to finger him for criminal conduct. To paraphrase a line made famous by President Lyndon Johnson, you want someone like that on the inside of the tent pointing out, not the outside of the tent pointing in.

Cohen still faces an SEC administrative complaint filed in July that accuses him of failing to supervise the hedge fund’s employees, including Martoma. SAC Capital in November agreed to plead guilty to securities-fraud charges, including some related to its trading in Wyeth and Elan. Prosecutors didn’t file criminal charges against Cohen, however, and there may be a simple explanation for this: They lacked evidence. Perhaps Martoma didn’t have any to offer them.

(Jonathan Weil is a Bloomberg View columnist. Follow him on Twitter.)