CNBC: Pequot To Perish

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Pequot Capital Management begins the several month-long wind-down.
Conspiracy Update: Related?
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Four of the 10 firms that it has severed ties with were listed, but not charged, in an indictment brought by Mr. Cuomo's office against two top associates to Alan Hevesi, the former comptroller, The Daily News reported. Those four are Consulting Services Group, HFV Management, Olympia Capital Management and Pequot Capital Management, it said.

The Wall Street Journal has it: "Pequot Capital to close amid an ongoing SEC-DOJ probe into possible insider trading."

"Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction," Mr. Samberg wrote in a letter that was sent to investors of his Pequot Capital Management Inc. late in the day on Wednesday. "With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business."

Letter from Samberg, via the Journal:

May 27, 2009
To Our Clients and Friends:
I am writing to you, our loyal clients and friends, to let you know that I have reached the painful conclusion that it is necessary to wind down Pequot's business.
In the coming months, we plan to liquidate the Core Funds and return cash to investors while spinning out Matawin under the leadership of Mike Corasaniti and Special Opportunities under the leadership of Rob Webster and Paul Mellinger.

As you know, my trading in 2001 on behalf of the Core Funds has been the subject of investigations by the SEC and US Attorney's Office. Those agencies closed their investigations in 2006 without bringing any charges, but Pequot nonetheless suffered from adverse publicity. In late 2008, the government reopened its investigation. Public disclosures about the continuing investigation have cast a cloud over the firm and have become a source of personal distraction. With the situation increasingly untenable for the firm and for me, I have concluded that Pequot can no longer stay in business as an investment advisor.
I am enormously proud of Pequot's long-term track record. A client who invested in the Pequot Partners Fund at inception earned a net annualized 16.8% return over 22 years vs. the S&P's 8.5% return during this period. More recently, the Pequot Partners Fund has generated net annualized returns of 10.1% over the past five years and 1.8% in 2009 through April 30 vs. the S&P's declines of 2.7% and 2.5%, respectively.
We intend to distribute to Core Fund investors a significant amount of cash by June 30, with the remainder substantially paid out over the next few months, pending completion of the year-end audit, liquidation of certain less liquid assets and payment of expenses. Details for each individual fund will be forthcoming. Pequot will retain the necessary infrastructure to support the wind down process.
The Matawin and Special Opportunities funds will become independent entities no later than year-end, and we will take steps to ensure a smooth transition. These funds will have a robust infrastructure and we believe they will be well positioned to deliver strong returns in the years to come. Investors in these funds will receive information about the process shortly.
I know this news may come as a surprise to you, but I am convinced it is the right decision for all concerned. I remain grateful to all who have contributed to Pequot's success over the years. This has been an extremely difficult decision for me, especially because of the impact it will have on our talented and dedicated employees. The Pequot team is the best of the best, and I thank them as I thank you for many years of loyalty and friendship.
Sincerely,
Arthur J. Samberg

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Art Samberg, Pequot Settle Insider Trading Charges for $28 Million

Like we told you several weeks ago, Art Samberg and Pequot Capital Management today agreed to settle insider trading charges with Securities and Exchange Commission for $28 million. The SEC Division of Enforcement's also brought a case against the alleged tipper, David Zilkha, a former Microsoft employee. That case will continue in an administrative proceeding before the Commission.