Gerson Lehrman Group- Hedge Fund Matchmakers
By Steven Brill to Reuters
Gerson Lehrman Group introduced hedge fund SAC to an expert medical doctor who has admitted to selling an SAC analyst inside information.
At the center of the investigation into alleged insider trading by hedge funds, such as Steven Cohen’s SAC Capital, is a special breed of consultant who operates “expert networks” that link stock-pickers like Cohen and his team with industry experts. The most prominent of this network is run by Gerson Lehrman Group. The firm has not been accused of any wrongdoing in the SAC investigation, but it did introduce SAC to an expert medical doctor who has admitted to selling an SAC analyst inside information about the status of a new drug going through a testing and approval process.
At the time of the SAC analyst’s arrest last November on charges that he paid the doctor, the New York Times reported that “the transfer of information was made possible by Gerson Lehrman, which had played matchmaker. If this expert network did not exist, it is not clear that Mr. Martoma and Dr. Gilman would ever have found each other.”
Gerson Lehrman’s website says it provides “access to primary research for a wide range of companies: financial and investment institutions, life science companies, the Fortune 1000 and entrepreneurs around the globe.” That seems innocent enough. And to underscore the firm’s commitment to what it calls “best practices,” the website features a section on “Standards” that outlines a set of rules designed to make sure the paid members of its expert network, called “Council Members,” do not provide information on “subject matter that a Council Member cannot discuss.”
Still, the same Times article opined that “the expert network business model is inherently perilous,” citing the case of another expert network that closed its doors after being caught up in a different insider trading case.