The soon-to-be-$3.5 billion-lighter Steve Cohen, were he guilty of knowingly trading on insider information from Martoma, would seem to have a lot of good reasons to want to keep him happy. But he fired him. And, now, Bloomberg's Jonathan Weil has put two and two together.

Martoma has said he is innocent. He has refused to cooperate with the government. And if I had to make a wager on whether he is in a position to implicate Cohen, I would bet that he isn't….

Let's say, for argument's sake, that Cohen knew the whole time that Martoma's recommendations on Elan and Wyeth were based on inside information. In that case, Cohen would have been crazy to fire Martoma. (Or to let anyone else at SAC fire him.) When a supervisor conspires with an underling to commit a crime, the dumbest thing the boss can do is cast that person loose and risk angering him….

On the other hand, if Cohen had no reason to believe that Martoma's recommendations on Elan and Wyeth were based on inside information, then it would have made sense to can him for poor performance. The "one trick pony" tag would have been fitting.

Is it possible that Cohen could have been so dumb and so arrogant that he would fire and deliberately lose control over someone who was an eyewitness to his own criminal acts? I suppose it is, but I'm skeptical.

A Hedge-Fund Firing That Makes No Sense [Bloomberg The Ticker blog]
SAC Case Tests a Classic Dilemma [NYT]
SAC Sees Investors Pulling Out $3.5 Billion [WSJ]