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Witness: I helped Matthew Martoma with insider information

Mathew Martoma (L) walks with wife Rosemary and his lawyer outside Manhattan federal court on Jan. 3, 2013.
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Mathew Martoma (L) walks with wife Rosemary and his lawyer outside Manhattan federal court on Jan. 3, 2013.

A key witness testified Friday in Mathew Martoma's insider trading scandal that he provided Martoma with confidential information about an Alzheimer's drug trial.

Dr. Sidney Gilman, a former professor of neurology at the University of Michigan, took the stand Friday in the case in which Martoma, who worked with CR Intrinsic, an affiliate of Steven Cohen's SAC Capital, is charged with using illegally obtained information to trade shares of Elan and Wyeth.

Gilman, 81, the former chairman of the safety monitoring committee responsible for determining the safety of an experimental Elan and Wyeth Alzheimer's treatment drug, described in detail his role in phase 2 of the drug trial.

He was one of four total committee members who had access to, and reviewed quarterly, the "blinded' results" of the test—data on which of the 230 patients received the active drug and which received the placebo.

Gilman testified that he revealed progressively over time the adverse side effects the experimental drug had on patients to Martoma, despite signing a strict confidentiality agreement with Elan and Wyeth.

Martoma, 39, has been charged with two counts securities fraud and one count of conspiracy to commit securities fraud. He faces up to 45 years in prison if convicted on all counts—20 years for each securities fraud count and five years for the conspiracy charge.

A somewhat frail-looking Gilman was having some issues hearing the questions asked by lead prosecutor, Arlo Devlin-Brown. When asked to identify Martoma, Gilman took a few moments to scan the courtroom before saying he needed his "distant glasses." He was then able to identify the defendant.

Gilman has a non-prosecution agreement with the government in exchange for his testimony against Martoma. He retired in November 2012 from his prominent career at the University of Michigan Medical Center, where he worked for 35 years, rather than being fired, after disclosing he revealed nonpublic results of the drug trial.

The government alleges that Mathew Martoma, 39, used the nonpublic information he obtained from Gilman, to makes trades between 2006 and July 2008 that resulted in $276 million in profits and avoided losses for SAC Capital.

Martoma also allegedly received a $9.3 million bonus for the trades.