[Marxism] Greed is the real dementia

Louis Proyect lnp3 at panix.com
Sun Dec 16 10:34:48 MST 2012


NY Times December 15, 2012
Quiet Doctor, Lavish Insider: A Parallel Life
By NATHANIEL POPPER and BILL VLASIC

Speaking in front of a packed convention hall in Chicago, a top 
Alzheimer’s researcher, Sidney Gilman, presented the results of a drug 
trial that had the potential to change the fate of elderly patients 
everywhere.

But as he worked through the slides, it became clear to the audience on 
that day in July 2008 that the drug was not delivering and that its 
makers, Elan and Wyeth, could lose out on blockbuster profits. Along 
with other Wall Street analysts in the front rows, David Moskowitz 
zapped messages to clients to dump shares of the companies. “I can 
remember gasping” at the results, Mr. Moskowitz said.

Little did anyone in the room know that 12 days earlier, Dr. Gilman had 
e-mailed a draft of the presentation to a trader at an affiliate of one 
of the nation’s most prominent hedge funds, according to prosecutors, 
allowing the fund, SAC Capital, and its affiliate to sell over $700 
million of Elan and Wyeth stock before Dr. Gilman’s public talk.

Last month, the trader was arrested on insider trading charges after Dr. 
Gilman agreed to cooperate with prosecutors to avoid charges.

While he appeared a grandfatherly academic, Dr. Gilman, 80, was living a 
parallel life, one in which he regularly advised a wide network of Wall 
Street traders through a professional matchmaking system. Those 
relationships afforded him payments of $100,000 or more a year — on top 
of his $258,000 pay from the University of Michigan — and travels with 
limousines, luxury hotels and private jets.

The riddle for Dr. Gilman’s longtime friends and colleagues is why a 
nationally respected neurologist was pulled into the high-rolling life 
of a consultant to financiers and how he, by his own admission, crossed 
the line into criminal behavior.

“My first reaction was, ‘That can’t possibly be right,’ ” said Dawn 
Kleindorfer, a former student of Dr. Gilman’s at Michigan.

What is clear is that Dr. Gilman made a sharp shift in his late 60s, 
from a life dedicated to academic research to one in which he 
accumulated a growing list of financial firms willing to pay him $1,000 
an hour for his medical expertise, while he was overseeing drug trials 
for various pharmaceutical makers. Among the firms he was advising was 
another hedge fund that was also buying and selling Wyeth and Elan 
stock, though the authorities have given no sign they have questioned 
those trades.

His conversion to Wall Street consultant was not readily apparent in his 
lifestyle in Michigan and was a well-kept secret from colleagues. Public 
records show no second home, and no indication of financial distress. 
Nevertheless, he was willing to share a glimpse of his lifestyle with a 
17-year-old student whom he sat next to on a flight from New York to 
Michigan a few months ago, telling her how his Alzheimer’s research 
allowed him to enjoy fine hotels in New York and limousine rides to the 
airport.

“I wouldn’t say he was egotistical because he didn’t come across as 
obnoxious, but he definitely mentioned the kind of lifestyle that he 
had,” said the student, Anya Parampil, who had been upgraded to first class.

Dr. Gilman’s role in the case involving SAC Capital has largely been 
overshadowed by the possibility that investigators may be narrowing in 
on the firm’s billionaire founder, Steven A. Cohen. Mr. Cohen and his 
firm have not been accused of wrongdoing in acting on the insider 
information.

Colleagues now say Dr. Gilman’s story is a reminder of the corrupting 
influence of money. The University of Michigan, where he was a professor 
for decades, has erased any trace of him on its Web sites, and is now 
reviewing its consulting policy for employees, a spokesman said.

The case also turns the spotlight back onto the finance world’s expert 
networks, which match sources in academia and at publicly traded 
companies — like Dr. Gilman — with traders at hedge funds and financial 
firms.

The networks have been a central target of prosecutors in the sprawling 
insider trading investigations that have resulted in dozens of 
convictions in recent years.

Some networks have closed, and many are shifting their focus outside the 
financial world, hoping to make up revenue by consulting for corporate 
America.

Days after the charges were filed, Dr. Gilman retired and has gone into 
seclusion at his home on a wooded lot overlooking the Huron River on the 
outskirts of Ann Arbor, which is listed in public records as worth 
$400,000. He declined to open the door to a reporter last week, 
directing questions to his lawyer. “I can’t discuss it,” he said. “I’m 
sorry.”

In a one-paragraph statement, his lawyer, Marc Mukasey, said: “Dr. 
Gilman’s accomplishments in medicine, research and education speak for 
themselves. He moved the ball way down the field in helping to find a 
cure for those who suffer from Alzheimer’s disease.”

The University of Michigan has severed its ties to Dr. Gilman and a 
spokesman, Pete Barkey, said the case was “caused by a faculty member’s 
unethical and illegal behavior during the conduct of external activities.”

Dr. Gilman graduated with top honors from the University of California, 
Los Angeles, trained at Harvard Medical School and moved into a life of 
teaching. He married Carol Barbour, a psychoanalyst, in 1984. People who 
know him almost invariably mention his fatherly demeanor, and his gift 
for teaching.

Brett Kissela, a resident under Dr. Gilman in the late 1990s, remembered 
him as “a little bit formal” but warm and generous. When faculty members 
had to sign up for an undesirable task, Dr. Gilman would start by 
signing up himself, Dr. Kissela remembered.

Dr. Gilman helped turn Michigan into a national center for research in 
dementia, and eventually the university’s neurology lecture series was 
named after him.

He was well-known for shaping trials for Alzheimer’s drugs and served on 
Food and Drug Administration drug advisory panels. J. Timothy 
Greenamyre, who has known Dr. Gilman for about 30 years, remembered 
turning to him for help with ethical issues after succeeding him at a 
top industry journal, Neurobiology of Disease.

“He always gave me rock-solid advice and counseled me to maintain 
transparency so as to avoid even the appearance of a conflict of 
interest,” Dr. Greenamyre said.

For most of his career, almost the only work Dr. Gilman did outside 
Michigan was in national advisory positions and academic journals that 
provided almost no compensation, according to his 43-page résumé. But in 
2000, as he scaled back his academic and editing duties, colleagues 
said, Dr. Gilman’s desire for recognition remained and he began 
consulting for two pharmaceutical companies.

He was soon contacted by one of the first expert network firms, Gerson 
Lehrman, which began in 1998 by enlisting academics in health care and 
connecting them with financial firms. Experts on drug development, and 
especially those involved in drug trials, are sought by investors 
because the fortunes of a pharmaceutical company can rise or fall with 
the fate of a single treatment.

Dr. Gilman quickly became a popular consultant, working with more than 
40 clients and participating in 50 to 100 meetings a year, people with 
knowledge of his work said. Each meeting paid around $1,000.

In 2006, the SAC Capital trader, Mathew Martoma, asked Gerson Lehrman to 
find an expert who knew about an Alzheimer’s drug under development, 
bapineuzumab, according to the affidavit filed by the F.B.I. agent in 
the case. Dr. Gilman was chairman of the board monitoring trials of the 
drug. Gerson Lehrman connected the men, but told Dr. Gilman not to 
discuss the drug, according to the criminal complaint in the case.

Within weeks, Dr. Gilman was speaking with Mr. Martoma shortly after 
confidential meetings about the drug trials, the complaint said.

To avoid arousing suspicion at Gerson Lehrman, Dr. Gilman began asking 
Mr. Martoma to falsely request meetings on other topics, the complaint 
said. Ultimately the men had 42 meetings. Gerson Lehrman declined to 
comment on the relationship.

At first, Mr. Martoma’s fund, CR Intrinsic, bought shares of the firms 
developing the Alzheimer’s drug, Wyeth and Elan, and encouraged SAC’s 
founder, Mr. Cohen, to do the same, prosecutors say. When Dr. Gilman 
told Mr. Martoma that the trial results were not as good as expected, 
the funds sold all their shares, netting gains and avoiding losses 
totaling $276 million, the complaint said.

Kenneth Fischbeck, a neurologist who has known Dr. Gilman for years, 
said that it might have been the same urge that led him to be such a 
good teacher — a desire to share information — that also led him into 
trouble.

“It’s a cautionary lesson for all of us in academic medicine,” Dr. 
Fischbeck said. “I think it could happen to anybody if they’re not 
careful.” The complaint said that Dr. Gilman eventually came to view Mr. 
Martoma “as a friend and a pupil.”

Besides contracting with expert networks, Dr. Gilman was hired to serve 
on scientific advisory boards of financial firms including Pequot 
Capital. His connection to Pequot has rarely been mentioned, but that 
fund built up its own $25 million position in Wyeth stock and a stake of 
around $20 million in Elan, according to Pequot’s public filings, at the 
same time Dr. Gilman was overseeing drug trials for the two companies.

While the records don’t reveal the exact dates of trades, Pequot sold 
its Wyeth position in the quarter before both drug companies’ shares 
fell in 2007, and it sold its Elan position at some point during the 
quarter when it dropped, the filings show. Pequot went out of business 
in 2010 after admitting its own insider trading scandal involving 
Microsoft stock.

Neither Dr. Gilman’s lawyer, Mr. Mukasey, nor prosecutors would say 
whether investigators are questioning Dr. Gilman about his other 
relationships. In exchange for prosecutors’ not charging Dr. Gilman, he 
has agreed to share information about “any matters” they want to ask him 
about. Dr. Gilman stopped meeting with Mr. Martoma in 2008, the 
complaint said, but continued to consult for Gerson Lehrman until this 
year, people familiar with his work said.

Dr. Gilman’s life changed starkly on Nov. 20, when Mr. Martoma was 
arrested. Dr. Gilman agreed to pay federal authorities $234,000 of the 
money he had earned from Wyeth and Gerson Lehrman. He has been 
ostracized by the university, and the consequences are broader still as 
a debate over the propriety of professors’ receiving payments from 
financial firms has been rekindled.

“What is the argument for sanctioning your full-time faculty, using your 
brand name, to advise the financial sector?” said Dr. Garret A. 
FitzGerald, a cardiovascular researcher at the University of 
Pennsylvania, who has been outspoken about conflicts of interest. 
“What’s the public good there?”

Stephanie Steinberg contributed reporting.




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