Question: “What happens after you’re kicked out of Harvard Law School for creating a phony transcript that inflates your grades?”

Answer: “You get an MBA from Stanford…and you get rich.”

Tragically, a real person, Mathew Martoma, lies at the center of that joke. He’s on trial for what the prosecution has called “the most lucrative insider trading scheme ever charged.”

When ethics is just a word

According to Bloomberg News, Martoma entered Harvard Law School in 1997 as Ajai Mathew Mariamdani Thomas. Born in Michigan and raised in Florida, he graduated from Duke University in 1995 with a degree in biomedicine, ethics, and public policy. Yes, ethics.

For the next two years, he worked at the National Human Genome’s Office of Genome Ethics in Bethseda, where he wrote three medical-ethics papers. Then he enrolled at Harvard Law, where he was a semifinalist in the school’s annual moot court competition, editor of the Journal of Law and Technology, and co-founder of the Society of Law and Ethics. Yes, ethics, ethics, and more ethics.

A bad turn

At Harvard, Thomas received “excellent grades,” but apparently not sufficiently excellent for him to show his parents (or so he later told a Harvard panel investigating his misconduct). So he created a phony transcript: Civil Procedure went from B to A; Contracts from B+ to A; and Criminal Law from B to A. He didn’t change his grades in Torts (B+), Negotiation (A-), or Property (A).

The fake transcript became the most important element in Thomas’ applications for a federal appellate court clerkship. A clerk for one of the judges thought something about the transcript seemed amiss and contacted Harvard’s registrar. The registrar confronted Thomas. According to the investigating panel’s subsequent report, Thomas told the registrar, “It was all a joke.”

Appearing before the Harvard panel, he dropped the “joke” defense. Instead, the panel noted that “Mr. Thomas was apparently under extreme parental pressure to excel academically.”

Thomas appealed the Harvard panel’s decision recommending his dismissal. According to the government’s motion in his current insider trading trial, he then fabricated a forensic report in support of his administrative appeal. The Harvard Law School faculty voted to expel him on September 17, 1999.

A fresh start

By 2001, Ajai Thomas had changed his name to Mathew Martoma and he was on his way to Stanford Business School. In 2003, he received an MBA and went to work for a Boston hedge fund. In 2006, he joined SAC Capital.

According to the NY Times, in January 2009 Martoma received a $9.4 million dollar bonus for his prior year’s performance in SAC’s healthcare group. During 2008, he’d made trades in Wyeth and Elan stock that netted his employer a lot of money, but also led to his current legal difficulties. Bloomberg reports that SAC fired him in September 2010 because, as one SAC executive allegedly put it, he was a “one-trick pony” whose trades in 2009 and 2010 lost money. A federal jury will decide his fate.

For your consideration

Wholly apart from whether Martoma is guilty of insider trading, his story provides an opportunity to contemplate issues that transcend him personally. For example, when should adult children stop blaming parents for their own misbehavior? Relying on that excuse blocks introspection that leads to personal improvement.

Likewise, did Martoma’s application to Stanford acknowledge his expulsion from Harvard? If so, how could Stanford have admitted him? If not, will Stanford rescind his MBA? The answers could have implications for the integrity of a world-class educational institution.

Finally, what insight into institutional behavior does Martoma’s experience provide? Harvard Law School gave him due process in a lengthy administrative hearing, deliberated carefully, and expelled him. The need to preserve the institution’s long-term values guided its conduct.

In contrast, SAC Capital apparently focused on short time horizons. A good year got Martoma big bucks; a bad year thereafter got him fired.

When it comes to their temporal mindsets, most big law firms today look more like SAC Capital than Harvard Law School. Following the business world’s approach — maximizing short-term results — has produced stunning equity partner profits. But sometimes, current profits have come at the expense of long-term values that don’t lend themselves to a simple metric. Those values include collegiality, loyalty, mentoring, institutional stability, and even client value.

So the next time someone says that the law is just another business, ask yourself if that’s a good thing. Consider whether some aspects of the law as a profession are worth preserving. And think about the unfortunate journey of Mathew Martoma.

9 thoughts on “SPECTACULAR LIES

  1. I agree lawyers should be held to a high standard. But I disagree with the implication that outright fraud might somehow make “law as a business” less acceptable. Is there empirical evidence that lawyers are more ethical than others? I’m not asking theory and rules – I’m asking for hard data. Along these lines, I don’t see that fraud would be more acceptable to non-lawyer owners of law firms to to partner owners. Perhaps if law firms were forced to disclose more, partners would actually behave better.

    • Thanks for the comment. For me, the overriding issue is short-termism and the behavior it encourages. I’m not sure what the “empirical evidence” or “hard data” measuring comparative group ethics would be. But before Nitin Nohria became dean of the Harvard Business School in 2010, he looked to the law for an alternative ethic that would refocus business away from short-termism that had brought the financial system to its knees. “I believe that management education has been overly focused on the principles of management,” he said. (I wrote more about the subject here.)

      James Ellis, dean of USC’s Marshall School of Business, echoed similar concerns: “We taught our students how to look for cracks in the economy and we taught them how to exploit those cracks.” Structural incentives (and their accompanying metrics) encouraged behavior that maximized short-term results at the expense of a longer view. Since then, several top business schools have adopted a lawyer-type MBA oath.

      Lawyers aren’t necessarily any better (or more ethical) than business people. The question is whether structural incentives associated with maximizing short-term business-type metics create a myopia that ignores long-term values. Unfortunately, most big law firms are now guilty of that, too.

    • THE NEW YORK TIMES (11/25/2012): “A summa cum laude graduate of Duke with a degree in biomedicine, ethics and public policy, Mr. Martoma graduated from business school at Stanford before pursuing a career as a health care analyst on Wall Street.”

      BLOOMERG NEWS (1/10/2014): “Martoma graduated in December 1995 with a degree in biomedicine, ethics and public policy, according to the registrar.”

      FROM DUKE.CHECK (“A Blog About Duke University”): “Martoma was born Ajai Mathew Mariamdani Thomas, and had that name in 1995 when he graduated from Duke summa cum laude. This explains our inability to trace him last week. The information about his name change is conflicting: it happened sometime between 2001 and 2004. He studied biomedicine, ethics and public policy.”

      • You are doing the same cut and paste. Go to the university site and check if a degree in ethics is offered. The answer is no.

      • Nonsense. Relying on three different, credible news organizations in my opinion piece is not “cut and paste.” Frankly, whether Duke today offers an undergraduate major in ethics is irrelevant. Thomas/Martoma graduated in 1995. The NY Times, Bloomberg, and even the Duke-specific “DukeCheck.com” reported his undergraduate study. Bloomberg even referenced the Duke registrar as its source. Maybe Thomas/Martoma designed his own major; maybe Duke no longer offers whatever program he pursued in the 1990s; maybe you should ask the NY Times, Bloomberg, and DukeCheck.com for a correction and see what they have to say.

  2. At Duke, you can design your own major under what is known as Program II. Also, it’s possible Duke offered a certificate program in “biomedicine, ethics and public policy” at the time. However, certificate programs are not majors. They are more like minors that are interdisciplinary.

  3. So, a simple google search for ..biomedicine, ethics and public policy duke.. turned up the following as the first result:


    and that reveals the following Program II approved program of study:

    Grad year: 1995
    Title: Biological/Medical Ethics & Public Policy

    Always fun when someone on the internet can be proved wrong by the first google result of the most obvious search phrase.

    • Per my earlier comment, I knew that commenter John McShane (if that’s his real name) had analyzed the issue incorrectly. He was focusing on Duke current majors rather than permissible courses of study in 1995. Commenter Russell’s about Program II suggestion turned out be be right as to Martoma’s major — as was the NYTimes, Bloomberg News, and Duke’s registrar. And McShane’s assumption was incorrect. What a surprise…

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