‘Remorseful’ SAC urges ap­proval of US in­sider trad­ing pact

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

SAC Cap­i­tal Ad­vi­sors LP urged a federal judge to ap­prove its record $1.8 bil­lion in­sider-trad­ing set­tle­ment with the govern­ment, say­ing the firm is "deeply remorseful" for the il­le­gal acts of its em­ploy­ees.

SAC lawyer Martin Klotz asked U.S. District Judge Laura Tay­lor Swain in a two-page let­ter yes­ter­day to sign off on the agree­ment, which also calls for the firm to close its in­vest­ment ad­vi­sory busi­ness. A sen­tenc­ing hear­ing be­fore Swain is sched­uled for April 10 in Man­hat­tan.

"The de­fen­dants are deeply remorseful for the mis­con­duct of each of the in­di­vid­u­als who broke the law while em­ployed by them," Klotz wrote. "Even one per­son cross­ing the line into il­le­gal be­hav­ior is un­ac­cept­able. The de­fen­dants are chas­tened by this ex­pe­ri­ence, but are de­ter­mined to learn from it."

Four SAC units were in­dicted last year, ac­cused of reap­ing hun­dreds of mil­lions of dol­lars in il­le­gal profit through in­sider trades by em­ploy­ees dat­ing to 1999. Steven A. Co­hen, 57, the firm's founder, faces an ad­min­is­tra­tive ac­tion by the Se­cu­ri­ties and Ex­change Com­mis­sion al­leg­ing he failed to su­per­vise the hedge fund's ac­tiv­i­ties. Eight cur­rent or for­mer SAC em­ploy­ees have been con­victed of in­sider trad­ing charges.

Man­hat­tan U.S. At­tor­ney Preet Bharara called SAC Cap­i­tal "a ver­i­ta­ble mag­net for mar­ket cheaters" when the in­dict­ment was filed in July. Co­hen has de­nied wrong­do­ing and isn't ac­cused of a crime.

"There can be no doubt that these and other penal­ties send a strong pub­lic mes­sage about the costs of the con­duct that have brought the de­fen­dants be­fore Your Honor," Klotz wrote in the let­ter.

In Novem­ber, SAC's gen­eral coun­sel, Peter Nuss­baum, en­tered guilty pleas on be­half of the firm to four counts of se­cu­ri­ties fraud and one count of wire fraud. At the time, Swain said she wanted to re­view a pre-sen­tence re­port and sen­tenc­ing sub­mis­sions from both sides be­fore de­cid­ing whether to ac­cept the agree­ment. U.S. District Judge Richard Sul­li­van in Novem­ber ap­proved the $900 mil­lion set­tle­ment of a civil money-laun­der­ing case by the govern­ment that is part of the over­all agree­ment. Swain will de­cide whether to agree to a fine of $900 mil­lion to re­solve the crim­i­nal case.

Un­der the set­tle­ment, SAC will be­come a firm man­ag­ing only Co­hen's per­sonal wealth. The firm, which is chang­ing its name to Point72 As­set Man­age­ment, said in Fe­bru­ary it shrunk its head­count to 850 people from 1,000.

Klotz told Swain that the pro­posed fine is more than the high­est range of $411 mil­lion to $823 mil­lion un­der the ad­vi­sory federal sen­tenc­ing guide­lines. In De­cem­ber, a federal jury in Man­hat­tan con­victed Michael Stein­berg, SAC's longest­serv­ing man­ager, in an in­sider-trad­ing scheme af­ter a five-week trial.

Mathew Mar­toma, a for­mer SAC fund man­ager, was found guilty by a dif­fer­ent Man­hat­tan jury in Fe­bru­ary of us­ing se­cret in­for­ma­tion about the clin­i­cal trial of an Alzheimer's drug to trade in shares of Elan Corp. and Wyeth. Stein­berg and Mar­toma haven't been sen­tenced. They were both con­victed of charges that carry max­i­mum sen­tences of 20 years in prison.

For­mer SAC em­ploy­ees Noah Free­man, Don­ald Longueuil, Wes­ley Wang, Richard Choo-Beng Lee, Jon Hor­vath and Richard Lee have all pleaded guilty to in­sider trad­ing.

Also yes­ter­day, a group of Elan and Wyeth in­vestors su­ing SAC over al­leged in­sider trades in those com­pa­nies filed a re­vised com­plaint claim­ing Co­hen traded on in­side in­for­ma­tion he got from Mar­toma. The in­vestors claim SAC made at least $555 mil­lion in prof­its and losses avoided on Elan and Wyeth trades on il­le­gal tips about the Alzheimer's drug, bap­ineuzumab.

The new com­plaint makes pub- lic for the first time in­vestor al­le­ga­tions in­volv­ing Co­hen that were pre­vi­ously filed with the court un­der seal. The claims in­clude that Mar­toma told Co­hen about the drug­mak­ers' con­fi­den­tial plan to put bap­ineuzumab into Phase 3 test­ing. When the plan was pub­licly dis­closed, Elan rose 12.6 per­cent and Wyeth gained 3.6 per­cent, the in­vestors claim.

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