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.