| NEW YORK, July 24
NEW YORK, July 24 Federal prosecutors who have
investigated hedge fund titan Steven A. Cohen for years on
allegations of insider trading have decided they do not have
enough evidence to get him, so they are going after his company
The Manhattan U.S. Attorney's office is nearing a decision
about filing criminal charges against Cohen's $15 billion SAC
Capital Advisors hedge fund, said a person familiar with the
But there is no indication authorities will charge Cohen
with any criminal wrongdoing.
A spokeswoman for Manhattan U.S. Attorney Preet Bharara
declined to comment as did a spokesman for the Federal Bureau of
A spokesman for SAC Capital also declined to comment.
The Wall Street Journal reported that prosecutors are
planning to charge SAC Capital with criminal wrongdoing as soon
as this week.
Federal prosecutors have debated filing a criminal charge
against Cohen's 21-year-old hedge fund, one of the industry's
most successful, for many months. The fund is one of the largest
payers of commissions on Wall Street, generating more than $300
million a year in trading fees alone for Wall Street brokerages.
It is unclear exactly what the nature of the criminal
charges against SAC Capital would be and what illegal activities
authorities are focusing on.
Federal authorities have been investigating the fund and its
founder on and off for about a decade. But the bulk of the
investigation has centered around stock trading at SAC Capital
from 2006 through 2008.
The filing of a criminal charge against SAC Capital could be
a death-knell for the Stamford, Conn.-based firm that employs
nearly 1,000 people and made billions for the 57-year-old Cohen.
It is likely that Wall Street firms that lend money and trade
with SAC Capital would stop doing so after a criminal charge is
But several legal experts, including former federal
prosecutors, said the decision to charge the hedge fund, but not
Cohen, with wrongdoing would be a tacit admission that the
nearly seven-year investigation failed to find sufficient
evidence of trading on illicit inside information by Cohen.
Several legal experts said there are risks in charging SAC
Capital, but not its founder, as Cohen is so integral to its
day-to-day operations. In fact, more than $8 billion of the
money invested by SAC Capital belongs to Cohen and his
"It's part of an overall level of frustration about this
whole enterprise, and so they're trying to come at it from every
possible angle to destroy this guy's business," said C. Evan
Stewart, a defense lawyer and a partner Zuckerman Spaeder. "When
the government gets an individual or company in its sights and
decides that person's not worth doing business, it's going to
use every tool."
If prosecutors do criminally charge SAC Capital, it will
come after the U.S. Securities and Exchange Commission similarly
decided it did not have sufficient evidence to file civil fraud
charges against Cohen.
Instead, the SEC on July 19 filed an administrative order
against Cohen charging him with failing to supervise his
employees and spotting potential "red flags" involving
allegations of insider trading by two of his employees.
An SAC spokesman said on Friday Cohen will vigorously defend
the failure to supervise charge. A 46-page "white paper"
prepared by SAC Capital's lawyer says Cohen is often too busy to
read emails and never saw an email that regulators contend
included a reference to inside information about computer
company Dell Inc.'s earnings in summer 2008.
Federal authorities began looking into the possibility of
filing a criminal charge against SAC Capital after former
portfolio manager Jon Horvath pleaded guilty to passing on
inside information about Dell during the summer of 2008 to his
supervisor Michael Steinberg and traders at other hedge funds.
Earlier this year, prosecutors charged Steinberg with insider
trading involving shares of Dell. Steinberg has pleaded not
To date, nine former and current SAC Capital employees have
been implicated in wrongful trading while at the firm.
For now, Wall Street appears to be shrugging at news reports
that federal prosecutors are getting closer to filing criminal
charges against SAC Capital.
Wall Street firms are continuing to trade with the fund as
usual, according to several market sources.
A headhunter said in the past several weeks she had gotten
more resumes from employees of SAC Capital, but "not a flood" of