NEW YORK (Reuters) - It was only two lines of text - an adjective here, a sentence there - but it almost disrupted the plea deal Steven A. Cohen’s embattled hedge fund had just struck with U.S. prosecutors over insider trading charges.
SAC agreed to plead guilty on Monday to four counts of securities fraud and one count of wire fraud, and pay $1.2 billion in fines and forfeitures as part of the deal.
Two sources familiar with the situation said that SAC’s lack of contrition in its initial public statement contrasted so much with its admission of guilt that prosecutors demanded a change.
One of the sources said government officials were so angry that they felt it could even jeopardize the deal. Prosecutors called senior SAC officials and demanded a new statement.
“We take responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability,” SAC’s initial statement said.
“The tiny fraction of wrongdoers does not represent the 3,000 honest men and women who have worked at the firm during the past 21 years. SAC has never encouraged, promoted or tolerated insider trading.”
Later on Monday, SAC issued a new statement, removing a reference to “the tiny fraction of wrongdoers” and adding a sentence expressing regret about illegal behavior.
“We take responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability. These wrongdoers do not represent the 3,000 honest men and women who have worked at the firm during the past 21 years,” SAC’s revised statement said.
“Even one person crossing the line into illegal behavior is too many and we greatly regret this conduct occurred,” it said.
SAC managed as much as $14 billion this year before investors began withdrawing money.
Editing by Stephen Coates