By Emily Flitter and Katya Wachtel
NEW YORK, July 25 A former employee of SAC
Capital Advisors' Chicago office was once part of an "insider
trading group" at a rival hedge fund, according to an indictment
filed on Thursday against SAC.
A source familiar with the matter said the hedge fund was
Citadel. A Citadel spokeswoman said there was no such "insider
trading group" at the firm.
Charges filed in U.S. District Court in New York on Thursday
against prominent hedge fund manger Steven A. Cohen's SAC
Capital said his former employee, Richard Lee, moved from a
firm, identified only as "Hedge Fund A" to SAC, despite a
warning that Lee "was known for being part of Hedge Fund A's
'insider trading group.'"
The source familiar with the matter said "Hedge Fund A" is
Citadel, the Chicago-based firm founded by Kenneth Griffin.
Citadel managed roughly $13.3 billion at the end of 2012,
according to a regulatory filing. Citadel was one of several
hedge funds subpoenaed by federal authorities in 2010 as part of
the government's broader insider trading investigation.
Lee worked at Citadel from 2006 until he was fired in 2008,
according to a spokeswoman for the firm. The spokeswoman, Katie
Spring, said Lee worked as a team member in a merger arbitrage
group known as Principal Strategies, which was shuttered as a
result of the financial crisis.
"There is no insider trading group at Citadel," Spring said
in response to that characterization in court documents.
Spring said Lee's termination was for a violation of firm
policy as he was in transition to take over the Principal
Strategies team, but was "unrelated to anything about insider
Lee agreed this week to plead guilty to securities fraud
charges and to cooperate with government investigators.
A spokesman for SAC Capital was not immediately available to
comment on Thursday.
According to court papers filed in Lee's case, federal
investigators said he obtained inside information about several
stocks while at SAC including Yahoo, which he traded
ahead of the technology company's earnings release and the
announcement of a planned corporate partnership.
Citadel and SAC have engaged in a rivalry that has included
attempts to poach each others' best employees. SAC had a small
office in Chicago with four teams of portfolio managers and
analysts, but closed it at the end of 2012, citing cost-cutting
measures and poor performance.