The good news, if you are Mr. Steve Cohen: you were neither charged nor “mentioned by name” in the criminal complaint against your former employee, Mathew Martoma, who is alleged to have orchestrated “the most lucrative insider trading scheme ever.” The less good news: YOU ARE PORTFOLIO MANAGER A. YOU NEVER WANT TO BE PORTFOLIO MANAGER A!
U.S. officials for the first time Tuesday implicated Steven A. Cohen, the founder of SAC Capital Advisors LP, in an alleged insider-trading scheme they said was the most lucrative ever to be charged…Mr. Cohen…is referred to as “Portfolio Manager A” in an alleged $276 million insider-trading scheme in a civil complaint filed by the Securities and Exchange Commission, according to people familiar with the matter. Both civil and criminal complaints also refer to him as the “owner” of two hedge-fund affiliates involved in the alleged scheme, and depict him as integrally involved in the allegedly illicit transactions…According to the SEC complaint, Portfolio Manager A authorized many of the trades based on Mr. Martoma’s alleged inside information, and rejected the advice of other analysts at his firm that conflicted with Mr. Martoma’s positions. In particular, on July 20, 2008, after Mr. Martoma had learned negative information relating to two pharmaceutical stocks in which SAC and its affiliate had big positions, Mr. Martoma said it was “important” that he speak to Portfolio Manager A, and indicated he was no longer “comfortable” with their positions, according to the civil complaint.
The next day, Portfolio Manager A’s head trader began selling hundreds of millions of dollars of shares in the two companies, and the hedge funds later began executing negative bets against those two companies’ stocks, reaping big profits and saving large losses.