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NEW YORK -- The government's five-year war to root out illegalinsider trading on Wall Street displayed fresh firepower Tuesday whenprosecutors charged a former money manager at a unit affiliated withhedge fund titan Steven Cohen's SAC Capital Advisors in what they'recalling the "most lucrative insider-trading scheme" ever.

Thiscase is stunning because of the sheer size of the allegedly ill-gottengains, which federal prosecutors say are around a quarter of a billiondollars.

Also, the "evidence trail" appears to be edging to thebillionaire founder of SAC, says Thomas George, partner at law firmDorsey Whitney and former senior counsel at the Securities and ExchangeCommission's division of enforcement. "This is a very high-profile casedue to the size of the ill-gotten gains and where the case might go," hesays. "Stay tuned for the next chapter."

To be perfectly clear, Cohen and SAC Capital were not charged or even mentioned in the 21-page complaint USA v. Mathew Martoma.The 38-year-old former portfolio manager at SAC affiliate CR IntrinsicInvestors, Mathew Martoma, was arrested Tuesday. He was the only onecharged with allegedly helping the hedge fund make $276 million inillegal profits and avoided losses on shares of drugmakers ElanPharmaceuticals and Wyeth in July 2008, after getting illegal insidetips related to clinical trial results of an Alzheimer's drug the twocompanies were developing - and trading on the information before it wasmade public, which is illegal.

SAC did not return a call from USA TODAY or provide a statement. An SAC spokesman e-mailed TheWall Street Journalthat "Mr. Cohen and SAC are confident that they have actedappropriately and will continue to cooperate with the government'sinquiry."

The government has stepped up its scrutiny of SACCapital in recent years. Four former employees of the hedge fund firm orits affiliates have already pleaded guilty to criminal charges duringthe government's most recent push to weed out illegal insider trading.Last year, Congress probed the firm's trades in the options market.

Prosecutorsallege that Martoma got "sneak peeks at drug data" before otherinvestors via phone calls, e-mails and PowerPoint presentations from an80-year-old neurology professor at the University of Michigan MedicalSchool who was overseeing the drug's clinical trial, as well asproviding consulting services to the hedge fund via a so-called expertnetworking firm, where he "moonlighted" for $1,000 an hour.

Inannouncing the criminal charges, Preet Bharara, the U.S. Attorney forthe Southern District of New York, said Martoma and his hedge fundbenefited from "what might be the most lucrative inside tip of alltime." Also Tuesday, the SEC filed a parallel civil complaint, chargingMartoma, CR Intrinsic and the neurologist, Dr. Sidney Gilman, who iscooperating with prosecutors.

The complaint references Martomaspeaking to the "hedge fund owner where he was employed" about his"recommendation" to sell shares of Elan and Wyeth after receiving theillegal inside information on July 17, 2008, that the Phase II trial ofthe drug did not go as well as Wall Street was expecting. The complaintalleges that on July 21, 2008, both Martoma and the "hedge fund owner"instructed a trader at the firm to sell its entire positions of Elan andWyeth before the public dissemination of the trial results, scheduledfor release on July 29, 2008.

The hedge fund ended up selling 10.5million shares of Elan and 7 million shares of Wyeth. The hedge firmalso placed a big trade that would allow it to profit if the stock fellin value once the bad news on the drug trial findings went public. Andthat's what happened. Shares of Elan plunged 42% and Wyeth fell 12% inthe first trading day after the drug's poor trial results were madepublic.

The evidence trail pointing toward Cohen includes themention of Martoma speaking to the "hedge fund owner" about the illegalstock trades.

It also includes the fact that CR IntrinsicInvestors is an affiliate of SAC and was named as a defendant in the SECcase. Intrinsic also shares the same address with SAC, adds JackSylvia, co-chair of the securities litigation practice at Mintz Levin.

While,Sylvia notes, "there is nothing in the complaint that states that theperson Martoma is alleged to have provided the information to was awarethe information was non-public or aware of the source of theinformation, ... the fact that Steven Cohen owns SAC (leads to the)inference that Cohen is the hedge fund owner referenced" in thecomplaint.

Adds Jacob Frenkel, head of the securitiesenforcement practice at Shulman Rogers, "The wording of the chargessuggests strongly that there still are other targets inside the hedgefunds and expert networks whom the government has not charged yet."

FBIspecial agent-in-charge April Brooks said Tuesday's moves are thelatest offensive in the FBI's "five-year campaign to root out insidertrading at hedge funds and expert networking firms."

Since thecrackdown on insider trading began, there have been more than 70arrests, says Brooks. The biggest hedge fund titan to be ensnared in themultiyear probe was Raj Rajaratnam, head of hedge fund group Galleon,who was found guilty in October 2011 and was sentenced to 11 years inprison.

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