Newspaper article International Herald Tribune

Hedge Fund Honcho in the Cross Hairs

Newspaper article International Herald Tribune

Hedge Fund Honcho in the Cross Hairs

Article excerpt

People close to Steven A. Cohen, head of SAC Capitol Advisors, note that the criminal and civil authorities are weighing several possibilities as they investigate it -- and him -- for insider trading.

Of the multiple threads the U.S. government has pursued in its long-running insider trading investigation into Steven A. Cohen and his hedge fund, SAC Capital Advisors, the case against Mathew Martoma had been seen as the most promising.

The federal authorities repeatedly sought the cooperation of Mr. Martoma, a former employee at SAC, in helping to build a case against Mr. Cohen related to suspicious trading in two drug stocks in July 2008.

Yet Mr. Martoma has persistently rebuffed the government's overtures, as recently as this spring, when the authorities met with his lawyers at a U.S. attorney's office in New York, a person briefed on the meeting said.

After Mr. Martoma declined to implicate his onetime boss, the authorities concluded that they lacked sufficient evidence to file a criminal case against Mr. Cohen related to the drug-stock trades before a five-year legal deadline expires in mid-July, according to people with direct knowledge of the investigation.

Mr. Cohen and SAC are hardly out of the woods, however. People close to Mr. Cohen, reluctant to declare victory, note that the criminal and civil authorities are still weighing several possibilities as they continue to press their case.

For one, federal prosecutors are considering criminal charges against SAC related to the drug-stock trades and other activity, the people with direct knowledge of the inquiry said. The Securities and Exchange Commission is contemplating a civil lawsuit against Mr. Cohen. And the F.B.I. -- which has agents in New York, Connecticut and Boston scrutinizing SAC -- continues to examine more recent trading at the fund.

The authorities, for example, have looked at SAC trading in the shares of Gymboree, a children's clothing store, the people said. They also face an August deadline to file charges related to trading in Dell shares, a case that produced two indictments of onetime SAC employees, one of whom pleaded guilty.

Prosecutors could even try to get around the five-year legal deadline in the drug-stock trades by including them as part of a broader criminal conspiracy case against Mr. Cohen. Including Mr. Martoma, nine former SAC employees have been tied to insider trading while at the firm; four have pleaded guilty to criminal charges.

Mr. Cohen, 57, has not been accused of any wrongdoing and has told his investors that he has behaved appropriately at all times.

The protracted investigation has angered Mr. Cohen, who has come to believe that the government is obsessed with trying to lock him up and shut down his business, people close to him say.

Based in Stamford, Connecticut, SAC is one of the world's largest and most influential hedge funds; it had about 1,000 employees and $15 billion in assets at the beginning of the year. It has one of the best investment track records on Wall Street, posting annual returns of nearly 30 percent, on average, over two decades.

While many consider Mr. Cohen a preternaturally gifted trader, skeptics have long questioned the legitimacy of his returns. Persistent whispers of insider trading within SAC have dogged the fund, and in recent years, as numerous employees and alumni have become ensnared in the government's insider trading crackdown, those whispers have grown louder.

Mr. Cohen, a native of Great Neck, New York, on Long Island, has also become a subject of fascination for his mammoth spending habits. He lives with his family in a 35,000-square-foot, or 3,250- square-meter, home in Greenwich, Connecticut. Last fall, he bought Picasso's painting "Le Reve" for $155 million, adding to an art collection that has included works by Andy Warhol and Van Gogh.

He also collects real estate. In March, Mr. Cohen reached a deal to pay $60 million for an oceanfront property in East Hampton on Long Island, down the road from one that he already owns. …

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