The Joplin Globe, Joplin, MO

Business

July 26, 2013

Hedge fund pleads not guilty to US fraud charges

NEW YORK — A not guilty plea was entered Friday on behalf of a Connecticut-based hedge fund charged in a criminal indictment with letting insider trading flourish over a 10-year period as it grew into an investing giant and made hundreds of millions of dollars illegally.

The plea in Manhattan federal court was made by Peter Nussbaum, longtime general counsel for SAC Capital Advisors, a day after the company was charged with wire and securities fraud. Federal prosecutors described a culture at SAC that permitted, if not encouraged, insider trading.

Assistant U.S. Attorney Antonia Apps told U.S. District Judge Laura Taylor Swain that the evidence was “voluminous” and included emails and the results of wiretaps.

Prosecutors said the victims were large companies whose inside information was stolen and traded upon. The next hearing was set for Sept. 24.

Outside court after the hearing, lawyers for the company including Nussbaum declined to comment and paced up and down a sidewalk looking for their cars as the media followed.

Stamford, Conn.-based SAC said in a statement after the charges were announced Thursday that it will continue normal operations. It said it “has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously.”

The company is owned by embattled billionaire Steven A. Cohen. He has not been charged and was not in court Friday.

Cohen is referenced in court papers only as the “SAC owner” who “enabled and promoted” insider trading practices.

At a news conference Thursday, U.S. Attorney Preet Bharara said SAC “trafficked in inside information on a scale without any known precedent in the history of hedge funds.”

“When so many people from a single hedge fund have engaged in insider trading, it is not a coincidence,” the prosecutor said. “It is, instead, the predictable product of substantial and pervasive institutional failure.”

He declined to comment on whether Cohen would be charged, saying: “I’m not going to say what tomorrow may or may not bring.”

From 1999 to 2010, the company earned hundreds of millions of dollars illegally as its portfolio managers and analysts traded on inside information from at least 20 public companies, Bharara said.

The possibility that the criminal case could topple the firm, which once managed $15 billion in assets, led the prosecutor to note that the government was not seeking to freeze SAC’s assets. Bharara added that prosecutors were “mindful to minimize risk to third-party investors.”

Still, the government in one lawsuit sought SAC’s forfeiture of “any and all” assets.

The charges came less than a week after federal regulators accused Cohen in a related civil case of failing to prevent insider trading at the firm. While the Justice Department’s action targets SAC but not Cohen directly, the civil case brought by the Securities and Exchange Commission seeks to effectively shut him down by barring him from managing investor funds.

 

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