(Adds quotes from SAC letter to employees)
By Nate Raymond
NEW YORK, April 10 SAC Capital Advisors' $1.2
billion criminal settlement for insider trading received final
court approval on Thursday, as a U.S. judge accepted a guilty
plea from the hedge fund firm run by billionaire Steven A.
At a hearing in Manhattan federal court, U.S. District Judge
Laura Taylor Swain accepted SAC Capital's guilty plea to fraud
charges and payment of a $900 million fine.
In total, SAC Capital has agreed to pay $1.8 billion to
resolve criminal and civil probes into insider trading. The U.S.
Department of Justice said that payout is the largest insider
trading settlement in history.
"These crimes clearly were motivated by greed, and these
breaches of the public trust require serious penalties," Swain
SAC Capital also agreed to be placed on probation for five
years, and employ a compliance consultant, former federal
prosecutor Bart Schwartz.
The sentencing marks the end of an era for SAC Capital,
which last year had $15 billion of assets under management,
according to court documents.
An indictment in July alleged systemic insider trading took
place at SAC Capital involving the stocks of more than 20
publicly-traded companies from 1999 through 2010.
Eight employees have pleaded guilty or been convicted at
trial. SAC Capital agreed in November to plead guilty to four
counts of securities fraud and one count of wire fraud.
"Today marks the day of reckoning for a fund that was
riddled with criminal conduct," Manhattan U.S. Attorney Preet
Bharara said in a statement.
The $900 million fine comes on top of a $900 million
judgment approved in November by U.S. District Judge Richard
Sullivan in a related civil forfeiture case.
That judgment gave SAC Capital credit for $616 million in
earlier insider trading settlements with the U.S. Securities and
Exchange Commission, resulting in SAC Capital paying an
additional $1.2 billion as part of the criminal accord.
The Stamford, Connecticut-based firm renamed itself Point72
Asset Management on Monday, and is becoming a family office that
will primarily manage Cohen's personal fortune, most recently
estimated by Forbes magazine at $11.1 billion.
Three of the four SAC Capital entities that pleaded guilty
no longer manage investments, while the fourth may need 1-1/2
years to shed a "limited number of hard to liquidate assets,"
Martin Klotz, a lawyer for SAC Capital, said Thursday.
As of Feb. 1, the 800-employee firm, which Cohen started in
1992 with $25 million, oversaw $11.9 billion, according to
In a letter to employees Thursday, Tom Conheeney, the firm's
president, said the judge's approval "brings to a close the
government's proceedings against our firm and a difficult period
for us all."
"We will do whatever we can to make sure this doesn't happen
again," he said.
The settlement came amid a crackdown on insider trading on
Wall Street by Bharara's office that has resulted in 80
individuals being convicted at trial or pleading guilty since
They include Michael Steinberg and Mathew Martoma, two SAC
Capital portfolio managers who were found guilty in separate
criminal trials in December and February. Both deny wrongdoing
and are expected to appeal.
Cohen, 57, has not been criminally charged. But in July, the
SEC launched an administrative action to bar him from the
securities industry for failing to supervise Martoma and
Steinberg and prevent insider trading.
Cohen has denied the SEC allegations, but has been in
contact with the regulator regarding a possible settlement, a
person familiar with the matter has said.
Among the sticking points are whether the SEC should impose
a lifetime industry ban on Cohen, or prevent employees from
managing outside money, another person familiar with the case
Cohen did not appear at Thursday's hearing, and his firm was
represented by Peter Nussbaum, SAC Capital's general counsel.
"We accept responsibility for the misconduct of our
employees brought before your honor," Nussbaum said.
Swain had also been expected Thursday to weigh a request for
more than $1.5 million in restitution from SAC Capital by Elan
Corp, a company at the heart of Martoma's case and now owned by
SAC Capital had objected to the request but settled with
Elan before the hearing, said Terence Healy, a lawyer for Elan.
Asked by Swain during the hearing about the scope of
Schwartz's consultant role, Antonia Apps, an assistant U.S.
attorney, said he would have a "broad mandate" to evaluate and
review SAC's compliance procedures and identify deficiencies.
"While they may have had compliance policies on paper, they
were clearly deficient in deferring insider trading," Apps said.
The case is U.S. v. SAC Capital Advisors LP, U.S. District
Court, Southern District of New York, No. 13-cr-00541.
(Reporting by Nate Raymond in New York; Additional reporting by
Joseph Ax; Editing by David Gregorio and Andrew Hay)