James B. Stewart actually concludes his latest column by coming down in the same place I do, calling for Congress to step in and clarify insider trading law. But he makes so many errors along the way that it undermines his credibility. He writes:
Prosecutors had to dismiss the convictions and guilty pleas of seven people who'd participated in insider trading schemes, in some cases reaping millions in profit, including Michael S. Steinberg, one of Mr. Cohen's top lieutenants.
Steinberg never pleaded guilty. Even if the sentence read "convictions or guilty pleas," it would still be inaccurate, because Stewart is stating that Steinberg "participated in insider trading schemes," even though whatever he participated in expressly wasn't an "insider trading scheme" under the laws that applied at the time in the place that he participated in it.
Equally inaccurate is the column's treatment of Dr. Sidney Gilman. Mr. Stewart writes:
As Sheelah Kolhatkar, author of "Black Edge," a gripping account of the Martoma case and the Cohen investigation, told me this week: "One of Dr. Gilman's two sons committed suicide. He was estranged from the other. He was lonely."
Mr. Martoma, who had proven adept at charming older mentors throughout his career, over time insinuated himself into Dr. Gilman's life in what investigators described as an "intellectual seduction."
Then, after receiving the inside information he wanted, Mr. Martoma dropped him. "Hi, Mat. I haven't heard from you in a while," Dr. Gilman wrote after several months of silence. "I just wonder how you're faring." Dr. Gilman never saw him again.
At an emotional moment at Mr. Martoma's trial, Dr. Gilman testified that Mr. Martoma had come to remind him of the son he'd lost to suicide. "It was so sad to see this elderly, distinguished doctor who'd pleaded guilty and lost his career, his reputation, virtually everything, hunched over on the witness stand having to reveal all this," Ms. Kolhatkar recalled. "He was a tragic figure."
Contrary to the Times description of Dr. Gilman as having "pleaded guilty" and "lost virtually everything,' Dr. Gilman in fact entered into a "nonprosecution agreement" that the Times news columns described at the time as "far preferable to a guilty plea." It is one of the many oddities of this particular "insider trading case" that the actual "insider" (to the extent that even Gilman, who wasn't a corporate executive, just a contractor/consultant to a drug company, was an insider) got off with a nonprosecution agreement, while hedge fund managers several degrees removed from the insider faced criminal prosecution. And far from having "lost virtually everything," Dr. Gilman had to forfeit just $234,000 in a civil settlement with the SEC, far less than he seems to have earned over the years from a variety of other activities. (He earned at least $300,000 a year total in consulting fees from 2006 to 2010, drawn from more than a dozen pharmaceutical and financial companies, on top of the roughly $200,000 a year he was earning from the University of Michigan, according to the Martoma decision and other press reports.)
Finally, Stewart pretty much ignores Judge Rosemary Pooler's dissent, which warned of the Martoma standard's "vagueness and subjectivity" and of the danger that prosecutors would seize on it. She wrote that the decision "radically alters insider trading law for the worse." If you are interested in this topic, I highly recommend you read the Pooler dissent if you haven't already done so.