Looks like Cohen gets off
SAC Capital settled charges of insider trading Thursday, and sources close to the firm are saying that this is likely the end of the line for charges.
The Wall Street Journal story by Christopher M. Matthews led with the news that prosecutors are not likely to continue pursuing founder Steven Cohen:
After a decadelong probe into SAC Capital Advisors LP, federal prosecutors won approval of a $1.8 billion settlement with the hedge fund but appear to have all but given up efforts to charge its billionaire founder, Steven A. Cohen.
On Thursday, a federal judge approved a guilty plea entered on behalf of SAC and a landmark insider-trading settlement with the firm. Prosecutors and the Federal Bureau of Investigation have eyed Mr. Cohen for years, but haven’t been able to mount a criminal case against him personally. While prosecutors aren’t barred under terms of the settlement from indicting Mr. Cohen or other SAC traders, no new charges are imminent, according to a person familiar with the matter.
U.S. District Judge Laura Taylor Swain accepted the criminal settlement in federal court in Manhattan, calling the pact unprecedented. “The defendants’ crimes were striking in their magnitude and strikingly indicative of a lack of respect for the law,” Judge Swain said.
After years of denials, the hedge fund agreed to plead guilty to insider trading in November and pay a $1.8 billion penalty, marking a high point in the government’s yearslong clampdown on such illicit practices. Over the past two decades, SAC became one of the most successful hedge funds in the world, earning billions of dollars in profits for Mr. Cohen and his investors.
The New York Times pointed out all the recent changes at the firm, including a new name, in a story by Matthew Goldstein and Ben Protess:
Now the 57-year-old investor is hoping for a less litigious transition for his firm, as it becomes a so-called family office, rechristened Point72 Asset Management, that will manage about $9 billion of his own fortune.
Federal authorities, speaking on condition of anonymity, privately acknowledge that additional charges against SAC employees are unlikely unless new evidence surfaces. And the authorities, who still have a smattering of insider trading cases to file against other hedge funds, have seen a slight downtick in reports of suspicious trading.
But to shake fully its tainted past — and steer clear of the spotlight — Mr. Cohen’s firm will have to do more than plead guilty and change its name. And for Mr. Cohen, who has not been criminally charged despite spending the better part of a decade under investigation, a few legal hurdles remain before he can exhale.
Mr. Cohen still faces a civil action from the Securities and Exchange Commission, which during the course of the case could identify additional wrongdoing and permanently bar him from managing money for outside investors. The Federal Bureau of Investigation, authorities say, also continues to examine a handful of stocks for signs of insider trading at SAC, while several former employees who cooperated with the investigation have yet to be sentenced, a sign the case is not officially closed.
Patricia Hurtado’s story for Bloomberg offered this background on the investigation, which has been going on since 1999:
The alleged scheme involved more than 20 companies and went back as far as 1999. Indicted in July, the hedge fund agreed in November to plead guilty to four counts of securities fraud and one count of wire fraud, and to shutter its investment advisory business.
Cohen’s firm managed about $11.9 billion in assets as of Feb. 1, according to regulatory filings. Executives at the hedge fund had expected to start this year with only $9 billion after returning capital to investors.
The grand jury indictment of the fund outlined criminal conduct by at least eight former SAC Capital employees. Noah Freeman, Donald Longueuil, Wesley Wang, Richard Choo-Beng Lee, Richard Lee and Jon Horvath have all pleaded guilty. Two portfolio managers, Mathew Martoma and Michael Steinberg, were convicted separately after trials in Manhattan federal court.
The government said SAC Capital encouraged its employees to obtain an informational “edge” over competitors, and hired people specifically for their contacts with insiders at publicly traded companies.
Manhattan U.S. Attorney Preet Bharara, whose office has pursued SAC Capital and its employees for more than six years, described the hedge fund as a “firm with zero tolerance for low returns but seemingly tremendous tolerance for questionable conduct.”
The saga has been long and drawn out, but it does bring up the issue of, what’s the point of it all? Years of government time and effort, and the man responsible likely isn’t going to face criminal prosecution. While he may not be able to manage others money, his personal wealth is still more than the vast majority of hedge funds have in their coffers. It’s hard to see the punishment.