Prosecutors Looking Into Steve Cohen's Book O' Trades

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Last February two former SAC Capital employees, Noah Freeman and Donald Longueuil, were charged with insider trading, with Longueuil pleading guilty in April and Freeman doing so from the get-go, having chosen to cooperate with the FBI (cooperation that included wearing a wire while having conversations with his ex-best friend, Longueuil, in which he got Don to vividly describe destroying evidence with two pairs of pliers and a North Face fleece). At the time of the accusations, SAC said that they were "outraged" by the actions of the duo, who'd been fired in 2010 for "poor performance." That should have been the end of it, but now the Feds are taking a look-see at whether or not these punks got their stink on The Cohen Account AKA The Big Book.

The Big Book would be the $3 billion portfolio overseen by the Big Guy (described as The Cohen Account in court filings), where many of the trades come from "high-conviction" ideas suggested by portfolio managers to SC, successful ones earning them a few extra zeros at the end of the year and/or a brand new all-fleece wardrobe. According to the Journal, prosecutors are checking out the suggestions made by Longueuil and Freeman to Cohen (which a) may have been legitimate ideas they came up with on their own, sans material non-public info or b) based on tainted info that SC didn't know was dirty), among other things.

The filings don't say that the trades suggested by Messrs. Freeman and Longueuil were based on inside information, nor that Mr. Cohen had any knowledge of the portfolio managers' rationale for recommending the trades. The documents filed in court don't include specific details about the trades or the timing of them.

The SAC documents under scrutiny by the government were referenced in communications between the Manhattan U.S. Attorney's office and lawyers for Mr. Longueuil and a co-defendant, in which prosecutors described evidence they were turning over in the case. The defense lawyers attached the prosecutors' letters to filings in a New York federal court last month, before Mr. Longueuil pleaded guilty.

The court filings indicate that prosecutors are examining the compensation SAC paid to Messrs. Freeman and Longueuil. Among documents gathered by prosecutors are the two fund managers' pay stubs and tax forms, as well as information on SAC's net rate of return, management fees and incentive fees, according to the filings.

Neither Cohen nor SAC have been accused of any wrongdoing. And, it sounds as though prosecutors don't currently have anything beyond the fact that these two guys once worked at the firm and occasionally came in contact with Steve. Still, for dragging him into this in the slightest, Longueuil and Freeman are advised to get out of town** and certainly not consider putting SC down as a job reference or so much as entertaining the though of asking for comped*** season tickets.****

US Examining Trades By Hedge Fund Titan [WSJ]

**Actually, maybe think about the protection that comes with jail time.
***Freeman strikes us as having the pair to do this.
****The only seat you'll have in that stadium is 5 feet underneath second base.

Related

The Feds Are Struggling To Understand Why Mathew Martoma Won't Just Turn On Steve Cohen Already, God Damn It

"We have been remarkably successful in convincing persons to cooperate with the government, and provide evidence to us, and in court of law," SEC director of enforcement Robert Khuzami said during a press conference the day the government went public with its charges of insider trading against former SAC Capital employee Mathew Martoma. To the untrained ear, Khuzami probably appeared to be speaking to no one in particular, just sending a general message to any would-be criminals out there that once the government got to their co-conspirators, it'd be all over. No one wants to do time, and everybody flips. To those who've been following Operations Perfect Hedge, though, and have watched the Feds' relentless pursuit of Steven A. Cohen,  it was obvious they were sending a clear message to the Big Guy: "We got ya boy, and ya goin' down." And since its track record of getting people to turn on their colleagues and in some cases, their best friends (see: Noah Freeman/Donald Longueuil, and these guys, and these guys, and this guy) really has been "remarkably successful," and since Martoma has a wife and two young kids and his whole life ahead of him, Khuzami and Co. probably assumed they had this one in the bag. But not so.