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.
And it seems like they will be: Read more »
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 »
Following yesterday’s resignation of PC’s most recent lawyer, Howard Foster, in her case against Steve Cohen, who she claims hid millions from her during their divorce 20+ years ago, the ex-wife that could has hired herself a third attorney. Read more »
Do you want to take on a man who would rather shave off his eyebrows than pay his ex-wife a dime? Do you relish the opportunity to oppose an army of highly-paid corporate lawyers with tens of thousands times the resources at their disposal? Are you not spooked by the prospect of serving as the third in a series of lawyers on a case? Then give Patricia Cohen a call. Read more »
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.
Former Diamondback Capital analyst and insider trader Jesse Tortora actually wrote this:
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 »
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 »
Of all the hedge funds affected by the government’s crackdown on insider trading, SAC Capital has topped the field in both fines paid and traders charged (can’t give you an exact figure at the moment but it’s “requires spreadsheets to keep track of all the cases” big). And while recognition of peerless achievement is always nice, Steve Cohen has gotten a little tired of waking up to find out another one of his employees chopped up evidence of wrongdoing and scattered it through Manhattan, or (allegedly!) sold stock based on material, non-public information passed on by friends in the medical profession.
Although one would have thought a simple “cool it with the securities fraud, you idiots” or a diagram of a foot in an ass would have sufficed re: sending a message that SAC has had it up to here with people trading in the sort of way the SEC frowns upon, apparently some hard and fast policy changes were necessary. They include:
1. Compensation clawbacks for employees “facing criminal or civil cases,” for whom the possibly of prison is not enough of a deterrent.
2. Requiring portfolio managers to get permission from compliance before taking calls with expert network analysts, after the first four freebies. Read more »
Hedge fund honcho Steve Cohen made the jump from Wall Street to Main Street this week when a character loosely based on him appeared on a CBS crime drama. In a story ripped from the headlines, Thursday night’s “Person of Interest” centered on a hedge fund’s insider-trading scandal gone awry. The show’s hedge fund was called VAC Capital. Cohen’s firm is SAC Capital. “I almost fell off the couch laughing,” one viewer told The Post about the show’s thinly veiled reference to Cohen’s $16 billion fund. There were more similarities. The show centered on a doctor who told a young trader at VAC that a drug trial he was overseeing was “about to fail.” The trader earned VAC $500 million on the insider tip, which he called “black edge.” SAC’s traders have also reportedly called such tips “black edge.” In the show, the doctor confronts the trader, who blames his boss, the head of VAC. “You don’t understand. The boss is on my ass 24/7. Either [I] get black edge or [I’m] out.” “Black edge?” the doctor asks. “Inside information that no one else has,” the trader replies. [NYP]
The ex-wife of hedge fund honcho Steve Cohen is turning up the heat in her bitter legal battle with her former husband. Patricia Cohen is talking with trial lawyers about taking on her case after a New York appeals court revived her lawsuit accusing her ex of cheating her out of millions during their divorce more than two decades ago, The Post has learned. No decisions have been made, but she is “evaluating how to go forward,” said a person close to the case…It’s unclear whether Patricia’s current lawyer, Howard Foster, who specializes in racketeering laws, will remain on the case if a trial lawyer is hired. He was given the option to stay on, a source said. Foster is Patricia’s third lawyer since she first kicked off the case in 2009. [NYP, related]