Did Steve Cohen Buy Off the U.S. Government?
Seriously. If the SEC is settling for a payment of $616 million dollars, with no admission of wrongdoing, when the case against for insider trading is very strong, and it is a a f%$#ing slam dunk on Sarbanes-Oxley violation.
He got to walk because he’s rich and powerful:
Most scandals involving the cozy relationship between Wall Street and its regulators play out behind closed doors. Others happen in plain view, and this is one of the latter. In a Manhattan courtroom Thursday, a federal judge held a hearing on whether to approve a legal settlement in which Steven A. Cohen, one of the richest and most publicity-shy men in the country, appears to be buying off the U.S. government, which for years has been investigating wrongdoing in and around his hedge fund, SAC Capital Advisers.
Unless the judge, Victor Marrero, rejects the settlement between the Securities and Exchange Commission and SAC, which was announced a couple of weeks ago, Cohen will be free to go about his business, which has long been clouded by suspicions of insider trading, once he writes a check of six hundred and sixteen million dollars to the Securities and Exchange Commission. There will be no further sanctions and no admission of wrongdoing. And in fact, Cohen already appears to be celebrating. ………
To his credit, Judge Marrero has, at least for now, refused to go along with this travesty. Reserving judgement on the case, he asked why the settlement didn’t include an admission of wrongdoing on the part of SAC and Cohen. “There is something counterintuitive and incongruous about settling for six hundred million dollars if it truly did nothing wrong,” the judge said. ………
Exactly how Cohen pulled off this feat is something of a mystery. The details of the dealings between his lawyers and the government haven’t been revealed, and most likely won’t be. What we do know is this: until the settlement with the S.E.C. was announced, things were looking increasingly grim for Cohen and his firm, which is based in Greenwich, Connecticut.
During the past several years, investigators from the S.E.C. and the U.S. Attorney’s office in Manhattan have been carrying on a wide-ranging investigation of SAC, which manages about fifteen billion dollars in assets. As a result of this probe, no fewer than nine current or former employees of SAC have been tied to insider dealing while working at the firm, and four of them have pleaded guilty. The investigation started out with lowly former employees. Over time, though, it moved closer and closer to Cohen, the firm’s founder, until, finally, it enveloped him.
Last November, Preet Bharara, the U.S. Attorney for the Southern District of New York, held a press conference to announce the indictment of Matthew Martoma, a former SAC trader, for what Bharara said was “the most lucrative insider-trading scheme ever charged.” According to the complaint, the 2008 trades at the center of the case involved Cohen directly. After receiving at tip-off from an inside informant about a drug trial that had turned out badly, Martoma spoke for twenty minutes with Cohen—identified as “Portfolio Manager A”—and then started unloading shares that SAC owned in the two drug companies involved, Elan and Wyeth, the complaint said. Once the results of the drug trial became public, the stock prices of the drug companies fell sharply. The government said that Martoma’s trades netted SAC as much as two hundred and seventy-six million dollars.
It’s a farce, and it’s not getting any funnier. The SAC settlement marks the first time, to my knowledge, that the S.E.C. has accorded such deference to a hedge fund, and it also raises the question of whether the Justice Department is now ducking bringing criminal charges against Cohen himself. Some folks who know how the system works from the inside think that that’s what it looks like. “I read the Martoma complaint,” Bradley Simon, a prominent white-collar criminal defense attorney and former federal prosecutor, told me. “It seems like there’s evidence there for them to charge Cohen, but they don’t want to do it.
A second possibility is that, despite the Martoma complaint, there simply isn’t sufficient evidence to convict Cohen, and the prosecutors have reluctantly accepted this fact. Insider-trading cases are tricky. We don’t know what Cohen said to Martoma during their conversation, or whether Martoma would be willing to testify against him. In the insider-trading cases of Raj Rajaratnam, who ran the Galleon hedge fund, and Rajat Gupta, the former head of McKinsey, the government relied heavily on wiretap evidence. According to the Wall Street Journal, the government obtained a warrant to tap Cohen’s home phone in 2008, but it isn’t known what, if anything, these intercepts yielded.
They have f%$#ing wiretaps, and they are doing nothing.
Even if they don’t they have a slam dunk on the insider training, they do have a prima facie case that he violated SarBox when he certified that his company had sufficient internal controls, which would get him banned from management of a publicly traded company for life.
This is bullsh%$, and I am pining for Mmme. la Guillotine.