“You don’t get much better than Stevie Cohen,” said Ed Butowsky, founder of Chapwood Investments, a private wealth management firm based in Dallas with client money invested in SAC. If Butowsky had his druthers, he would steer more investment assets to Cohen’s hedge fund, which he said has delivered three times the return as the “Oracle of Omaha” Warren Buffett with a third of the risk since 1994. “The very thought that people want to trash Stevie Cohen, who is one of the great legends in portfolio management, because of some allegations, shame on them,” Butowsky said. “If it was me and I had to live through this stuff the last three years, I would tell everybody to go jump off a boat.” [Greenwich Time, earlier]
If Area Man Were Steve Cohen, He’d Tell His Detractors To Take A Long Walk Off A Short Pier, Based On The Hopeful Assumption That They Don’t Know How To Swim Or Even Tread WaterBy Bess Levin
Redemption Watch ’13. Read more »
Attention New York Area Real Estate Brokers, Auction Houses: Steve Cohen’s Stress-Shopping Spree May Have Years Left To RunBy Bess Levin
The conventional wisdom on Wall Street is the clock is running out for U.S. prosecutors to make a case against billionaire trader Steven A. Cohen and his hedge fund SAC Capital Advisors after years of investigation…But continuing investigations into allegations of insider trading in at least two other stocks, which were first reported by Reuters in December, could extend the deadline to file charges for three more years, according to people familiar with the SAC probe. [Reuters, earlier, earlier]
SAC Capital Advisors LP told employees that it has no plans to become a family office after significant redemptions from clients for the second quarter, according to a person with knowledge of the matter. SAC President Tom Conheeney, in a June 4 e-mail to employees, said the firm doesn’t plan to release a number for the redemptions, said the person, who asked not to be identified because the communication is private. SAC doesn’t plan significant staff reductions and still has a stable capital base, Conheeney wrote, according to the person. [Bloomberg]
SAC executives have discussed the possibility that it might make sense to return investors’ money if more than half the outside capital was withdrawn, according to people close to the firm. Contingency plans that have been discussed include closing SAC offices outside its Stamford headquarters not deemed crucial to its investment operations, the people say. People close to the firm also say SAC executives estimate they could save millions of dollars a year on compliance and marketing costs if they weren’t catering to external clients. Earlier this year, SAC executives discussed putting the brakes on a project to expand the firm’s cafeteria and gym at its headquarters in Stamford, according to people familiar with the matter. The facilities had been seen as crowded, the people said. The discussions—which took place after employees were aware of the project—stirred speculation inside SAC that more bad news could be coming, the people said. A person close to the firm said the construction is under way. [WSJ]
Area Man Can’t For The Life Of Him Fathom Why Investors Would Want To Take Their Money And Run From SACBy Bess Levin
As you may have heard, SAC Capital is facing some legal trouble at the moment. In addition to the nine current or former employees who have “been linked to insider trading while working at the firm, including four who have pleaded guilty to crimes,” it’s apparently not out of the realm of possibility that the feds will go after founder Steve Cohen on RICO charges. In light of all that, it’s not so shocking to hear that some clients are contemplating submitting redemption requests for the June 3 deadline, on top of the $1.7 billion investors requested to pull earlier in the year. Then you have Ed Butowsky, who is 1. Thinks now more than ever is the time to double down on the Big Guy and 2. Can’t wrap his mind around the notion that investors would look at SAC and see anything but a surefire win. Read more »
Earlier today, the Wall Street Journal reported that federal prosecutors are considering charging SAC Capital as “a criminal enterprise, using a powerful legal tool employed against the mafia and drug gangs,” i.e. the Racketeer Influenced and Corrupt Organizations Act. The use of RICO would give the government considerably more time to make a case against SAC, as it means prosecutors could “file charges in connection with crimes committed over the past decade, as long as any act that is part of the alleged enterprise occurred within the past five years,” whereas this July marks the deadline for bringing securities fraud charges involving July 2008 trading in Elan and Wyeth by the fund.
The best part of this story, naturally, involves Charlie Gasparino, first to report the RICO angle yesterday, despite, he says, the denials of a SAC representative, whose legs CG is currently threatening to break, via Twitter. Read more »
What is the point of prosecuting a company? Sometimes they pay fines, that’s something. A criminal conviction against a company may keep that company from doing bad things in the future. As a prosecutor, you get to say “this prosecution proves that no company is too big to jail,” despite the fact that a company is the exact and literal embodiment of a thing that is too big (and too abstract) to jail. So, there’s some stuff.
The point of prosecuting a human is to punish that human for doing bad stuff and deter other humans from doing similar bad stuff in the future, and prosecuting companies doesn’t do a great job of that. Prosecuting companies tends to both over-deter and under-deter: “if I commit a crime in my corporate capacity, my company will disappear and I’ll be out of a job” doesn’t have quite the same sting as “… and I’ll go to prison,” though it does have exactly the same sting as “if someone else at this company commits a crime in his corporate capacity, my company will disappear and I’ll be out of a job.”
Is (or was) SAC Capital organized to encourage individual analysts and portfolio managers to get inside information while shielding Steve Cohen from direct knowledge of that information? Meh, I don’t know, but man do a lot of people think so.1
Was that kind of what its investors wanted? Even today you can read about how investors are voluntarily fleeing SAC, or planning to, because “[e]ven Cohen’s legendary 25 pct annual returns at some point aren’t worth the risk,” but still: what risk? “At least nine current or former SAC employees have been linked to insider trading while working at the firm, including four who have pleaded guilty to crimes, according to Bloomberg News’s tally.” I submit to you that if you don’t want to be associated with insider trading, six cases would be enough. If nine isn’t enough, ten won’t be either. It seems like at least some investors are only going to be dragged away from SAC by force.
After five years under investigation for insider trading, Steven Cohen is considering proposing a deal to prosecutors that would shut his $15 billion hedge-fund firm to outside investors, according to a person familiar with his thinking. Cohen has discussed an agreement under which his SAC Capital Advisors LP would admit wrongdoing but wouldn’t be prosecuted unless it broke the law again, said the person, who asked not to be named because the talks are private. As part of the deal, known as a deferred prosecution agreement, Cohen would close the Stamford, Connecticut-based firm to outside investors and make it a family office that manages his personal fortune. SAC Capital probably would also pay fine. [Bloomberg]
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
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]
As you may have heard, last night at Christie’s, a painting of Bea Arthur entitled “Bea Arthur Topless” was purchased for $1.9 million. Was this buy the latest pick-me-up in Steve Cohen’s quest to make himself feel better about the Feds riding his ass like Zorro, not to mention, the reemergence of his worst nightmare? That the portrait was reportedly purchased by an “anonymous bidder over the phone” suggests that it’s certainly possibility.
Other clues that lead us to believe Steve was the mystery caller include: Read more »