U.S. prosecutor warns Wall Street about repeat violations

NEW YORK Wed Jul 17, 2013 3:23pm EDT

Preet Bharara, United States Attorney for the Southern District of New York, describes charges against Costa Rica-based Liberty Reserve, one of the worlds largest digital currency companies and seven of it's principals and employees for allegedly running a $6 billion money laundering scheme at a news conference in New York, May 28, 2013. REUTERS/Mike Segar

Preet Bharara, United States Attorney for the Southern District of New York, describes charges against Costa Rica-based Liberty Reserve, one of the worlds largest digital currency companies and seven of it's principals and employees for allegedly running a $6 billion money laundering scheme at a news conference in New York, May 28, 2013.

Credit: Reuters/Mike Segar

NEW YORK (Reuters) - Manhattan U.S. Attorney Preet Bharara said investment firms that repeatedly violate the law should be concerned that they will eventually be held accountable.

"People should be afraid that bad actions they have committed in the past" will catch up with them, Bharara said at the CNBC Institutional Investor Delivering Alpha Conference.

But Bharara refused to bite when asked several times by the CNBC host, Jim Cramer, about the insider trading investigation into hedge fund SAC Capital Advisors and its founder, Steven A. Cohen. Both have been the subjects for years of federal investigations of insider trading.

Even as firms in the $2.25 trillion hedge fund industry put in compliance programs aimed at rooting out malfeasance, Bharara said some companies' compliance programs clearly just offer lip service. He said his office is as committed as ever to crack down on how some hedge funds may use illegally obtained information to get an edge.

He said that at some point, institutions that have had multiple violations must be held accountable.

The long-running investigation of insider trading at hedge funds and specifically at SAC Capital has been one of the high priorities of Bharara's tenure as U.S. attorney.

Reuters and other news organizations have reported that prosecutors are considering bringing a racketeering charge against SAC and Cohen in light of a number of guilty pleas some former SAC employees have made to using illegally obtained information.

A spokesman for SAC declined to comment.

Bharara, who joked at last year's conference that he has enough subpoenas for everyone in the audience, said on Wednesday that his office is weighing whether to bring actions against firms for violations that have not been made public.

Bharara also said investors should not feel safe from legal scrutiny if they use certain kinds of communication. He made his comment in response to a question from Cramer about whether prosecutors are monitoring things like Snapchat, a messaging system in which communications disappear within seconds after being sent. The messaging system is said to be gaining favor with some on Wall Street.

Bharara seemed puzzled at first, saying he was not aware of it but then said no communication system should be presumed to be safe from potential government monitoring if people are using it for the wrong purposes.

He said the press can serve an important role, but warned that "armchair prosecutors," including some in the media, are often wrong.

As the investigations move ahead, Bharara also said his office could file charges against a company. Although it would be a "rare use of power," he acknowledged that this is something his office could do.

He made it clear that his office was not responsible for leaks to the media about investigations. If he found one of his prosecutors disclosing information to journalists, he said that employee would be punished.

(Editing by Matthew Goldstein, Gerry McCormick, Jan Paschal and David Gregorio)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (9)
tmc wrote:
I’ll bet they’re shaking in their boots. LMFAO!

Jul 17, 2013 12:40pm EDT  --  Report as abuse
JL4 wrote:
“Repeat” violations? A “warning”? Really? Wall Street can break laws repeatedly but not get prosecuted until…..When?

@tmc, I’m right there with you, only I’m “ROF”while LMFAO.

Jul 17, 2013 1:24pm EDT  --  Report as abuse
EdNYC wrote:
So, let me see, if I REPEATEDLY rob a mini mart I should be concerned that I will eventually be held responsible???

How many bites out of the apple does white collar criminals get over the other type of outright theft?

Equal justice for all.. yea.. right.

Jul 17, 2013 1:32pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.