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.
Fabrizio Costantini for The New York Times
Dr. Gilman’s lifestyle was a well-kept secret among colleagues at the University of Michigan medical school.
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.”
Sidney Gilman’s Shift Led to Insider Trading Case
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