SAC Capital Advisors, the hedge fund owned by the billionaire investor Steven A. Cohen, told its investors on Friday that it was no longer cooperating unconditionally with the government’s insider trading investigation. “In the past we have tried to be as transparent with you as possible about the state of the investigation while balancing our desire for transparency with the need to keep the details of a sensitive investigation confidential,” said the letter. “While we have in the past told you of our cooperation with the government’s investigation our cooperation is no longer unconditional and we do not intend to give updates in this area going forward.” [Dealbook]
SAC Capital Will No Longer Provide Investors With Updates On Its Unconditional Cooperation With The Government’s Investigation, Which Oh, By The Way, Ain’t So Unconditional AnymoreBy Bess Levin
For many people, prison is a terrible place that breaks their spirit and turns them into a shell of the person they once were. They grow bitter. They harden. Their looks take a hit. Two people for whom time in a correctional facility actually seems to have served them quite well? The currently incarcerated Raj Rajaratnam, who is said to be in quite “good spirits” and looking fantastic, to boot, and the recently released (early for good behavior) Danielle Chiesi, who looks GOOD and feels GREAT. Read more »
The Next Defendant To Chew Gum In U.S. District Judge Richard Sullivan’s Courtroom Gets An Extra 6 MonthsBy Bess Levin
Anthony Chiasson, the co-founder of the hedge fund Level Global Investors, was sentenced to 6.5 years in prison today for illegal trading in two tech stocks…Throughout the hearing, Chiasson sat surrounded by his lawyers, chewing gum furiously. “What I keep coming back to is this crime, these crimes, were committed over a long period of time, over a time when you were already fabulously wealthy,” said Judge Sullivan. “I don’t know if I’ve ever sentenced someone as wealthy as you.” He added: “It’s hard to understand why someone would risk something like that.” Chiasson’s lawyers, meanwhile, reviewed the many good deeds their client had done in life, his role as a family man with two small children and the fact that he was an altar boy when he was 8 years old. When it came time for Judge Sullivan to deliver the verdict, Chiasson, 39, stood up and shoved his hands deep into his pockets, his jaw chomping away the whole time. After informing Chiasson that he would be spending 78 months in prison, Sullivan said: “You conducted yourself with dignity—except for chewing gum.” [BusinessWeek]
Ringleader Of Insider-Trading “Fight Club” Didn’t Want Any Sarcastic Comments With His Inside InformationBy Matt Levine
I suppose in like 1985 there were people who worked on Wall Street and un-self-consciously ate cheeseburgers for breakfast, got shoeshines at their desks, went to strip clubs every night, and slammed down their phones hard enough to break them, but my assumption is that in 2013 any remaining “stereotypical Wall Street behavior” is mediated through popular culture. Some people go into finance with the goal of having a memoir that reads exactly like Liar’s Poker,1 and no one wears contrast-collar shirts because they look good. You wear them – if you do (do you?) – because you saw them in that movie.
In 2009, Tortora e-mailed a group that included Abbasi and Adondakis: “Rule number one about email list, there is no email list, fight club reference. Rule number two, only data points can be sent, no sarcastic comments. Enjoy. Your performance will now go up by 100 percent in 09 and your boss will love you. Game theory, look it up.”
Look it up, yo. That’s also from Bryan Burrough and Bethany McLean’s amazing Vanity Fair article on the endless pursuit of Steve Cohen, and while the fact that Tortora and his crew of cheeseballs called themselves “Fight Club” has been reported before, the fact that Tortora had to remind them of it BY SAYING “FIGHT CLUB REFERENCE” AFTER HIS FIGHT CLUB REFERENCES is new to me and makes me ashamed to be a human.
Why did these tools insider trade? Read more »
Before They Were Wearing Wires And Trying To Get Each Other To Make Incriminating Statements Re: Securities Fraud, SAC Capital Employees Were Using Threesomes As A Front For Insider TradingBy Bess Levin
Remember Noah Freeman and Donald Longueuil? Former SAC Capital portfolio managers and best buds, fired from SAC for performance and later confronted by the Feds, who divided and conquered the duo by convincing Freeman to record his conversations with Longueuil, which didn’t come of much until Noah got Don to give a step-by-step guide to destroying evidence of wrongdoing?
Longueuil is set to be released from prison in December and Freeman, who once ran around San Francisco in his underwear while tripping on ‘shrooms and shouting “I said buy, motherfucker” at no in particular, is awaiting sentencing. But before they put all this behind them and move on with their lives (Don is taking a three-week honeymoon in January; Noah has hundreds more cities to traipse through half-naked), how about one last trip down memory lane? This one is courtesy of Vanity Fair from a larger article about D&N’s boss, and involves the kind of cover for their illegal activities that’d make Ping Jiang curse the fact that their time at SAC didn’t overlap. Read more »
KPMG Is Going To Look Into Whether Or Not It Needs To Do A Better Job Stressing Company Policy That Frowns On Sharing Material Non-Public Information About Clients With One’s Golf BuddiesBy Bess Levin
Yesterday’s delightful insider trading settlement with Richard Moore, the CIBC banker who deduced the identity of a buyout target through sheer clingyness, is a good reminder that insider trading is weird. Nobody told Moore any material nonpublic information, but he got in trouble anyway.
It’s also a good reminder of this new-ish (March 2013) paper that I came across the other day, in which some academics went and interviewed sell-side research analysts about how they do their jobs. They don’t say anything all that surprising, though I guess if you’ve never met a sell-side analyst it’s sociologically interesting. But it’s a nice counterpoint Richard Moore: reading smoke signals and figuring out an acquisition is illegal insider trading, but having the company tell you stuff and then using it to make trading decisions isn’t. If you do it right.
Steve Cohen is just an appeals court ruling away from fulfilling his most deeply held desire: to pay $602 million to settle allegations of insider-trading whose veracity he does not accept. Read more »
To get in trouble for insider trading, the information you trade on has to be “inside” information in some sense. Just standing outside a company’s offices and seeing who walks in, and extrapolating from that, is probably not insider trading. Seeing where corporate jets land is mostly not insider trading, to the point that it was once a feature of Dealbreaker, though in general my advice to you is never to use “well Dealbreaker does it” as a rationale for anything. Certainly there are gray areas.
Here’s a delightful new SEC insider trading case. Richard Bruce Moore, a managing director in the private equity coverage group at CIBC’s investment bank, spent a lot of time with his buddy and client, a managing director and LBO deal manager at the Canada Pension Plan Investment Board. In addition to golf and such, “Moore contacted the CPPIB Managing Director at least once a month about deal opportunities and about the possibility of CIBC providing financing for those deals.” In early 2010 Moore noticed that his buddy was becoming less available, which set his sponsor-coverage-spidey-sense a-tingle, and so he did what any good coverage banker would do:
Sometime in March 2010, Moore asked how the CPPIB Managing Director’s other deals were going. The CPPIB Managing Director told Moore that he was working on something interesting and active. Moore then inquired about the possibility of assisting the CPPIB as an investment banker on the deal.
This got a soft ding – “The CPPIB Managing Director did not disclose the parties to the deal, but responded that, as far as CBIC participation, they would have to wait and see how it went” – and so he followed up a few days later with an email asking if CPPIB needed any debt on that deal. This got a little more information: Read more »
At trial, Mr. Nguyen testified that Ms. Jiau repeatedly pestered him with phone calls on his cellular phone and at home before Nvidia was set to report earnings in August 2008, seeking details about the company’s financials. Mr. Nguyen said he finally broke down and shared information about Nvidia’s current and future revenue, gross margins and other financial data after she interrupted him while he was bathing his young son. He pleaded guilty to criminal charges and avoided jail time after he cooperated with prosecutors. [WSJ]
KPMG Partner Assured Coconspirator Who Handed Him Bags Of Cash In Parking Lots That Insider Trading Wasn’t Really IllegalBy Matt Levine
I don’t want to give you legal advice, but on the other hand you could be getting it from a worse source. Scott London for instance:
[Insider trader Bryan] Shaw said that in approximately July 2012, he received a notice from Fidelity Brokerage Services that Fidelity was putting a hold on his investment account. Shaw said that he immediately called LONDON and expressed his concern that their insider trading had been discovered. Shaw said that LONDON reassured him that there was no reason for concern, and explained that insider trading was like counting cards at a casino in Las Vegas – if you were caught, they simply ask you to leave because they cannot prove it.
Oops! Six months later the FBI got to Shaw, inducing him to cooperate to save himself, and today they charged London with criminal insider trading.1 It’s tempting to conclude that the moral of this story is “never take legal advice from an accountant,” though realistically it’s more like “never take legal advice from your criminal co-conspirator.”
This case is very weird. I mean the actual case is pretty boring: London, as a KPMG audit partner on a bunch of West Coast accounts, got earnings information before it became public, and then he gave it to Shaw, and then Shaw bought stock and options and made money on it and then literally delivered literal bags filled with literal cash to London to thank him for the tips. After Shaw started cooperating he met with London, wearing a wire, and this happened:
In advance of the meeting, agents from the FBI provided Shaw with $5,000 in cash, which was placed into a manila envelope and then wrapped inside a black paper bag, which was consistent with how Shaw had described his concealing previous cash payments he had made to LONDON.
Oh you put the cash in an envelope inside a bag? They’ll never catch you! Read more »