NEW YORK: SAC Capital Advisers pleaded guilty to criminal fraud charges, satisfying a deal with the government that requires the Connecticut-based hedge fund to pay a record $1.8bn to settle charges that it allowed, if not encouraged, insider trading to occur for more than a decade.
The plea came in US District Court in Manhattan four days after the government announced that the once influential hedge fund owned by billionaire Steven A Cohen had reached the deal that also required it to shut down its operations to outside investors.
But Judge Laura Taylor Swain did not immediately accept the plea, saying she’d wait until a probation report is made and other papers are submitted for her review. She set a sentencing date for March 14, assuming she accepts it.
The plea was entered by Peter Nussbaum, SAC’s longtime general counsel, to a single count of wire fraud and four counts of securities fraud. It was made on behalf of SAC Capital LP, SAC Capital Advisors LLC, CR Intrinsic Investors LLC and Sigma Capital Management LLC.
In pleading guilty, Nussbaum said SAC Capital wanted to “express our deep remorse for the misconduct of each individual who broke the law while employed at SAC.”
“This happened on our watch, and we are responsible for that misconduct,” he said.
Nussbaum then described the crimes of six former SAC employees who had pleaded guilty to insider trading charges. “We at SAC regret terribly the misconduct of these individuals,” the lawyer said. “We have paid, and are paying, a very steep price for their actions.”
He expressed regret at the damage to the firm’s reputation and said it was “chastened by this experience.”
But a prosecutor, Arlo Devlin-Brown, insisted the crimes were “not limited to the conduct of these six individuals. Additional people engaged in insider trading.”
He cited “institutional failure,” saying the firm hired individuals with proven access to insiders at public companies and failed to effectively monitor its employees even when their actions should have served notice that they may be based on inside information.
Devlin-Brown said a tone was set by senior management at the company that allowed insider trading to occur and prosecutors would have proven so at trial through the use of witnesses, recorded conversations, trading records and other documents.
“Between 1999 and 2010, numerous portfolio managers and analysts engaged in insider trading in at least 20 public companies,” the assistant US attorney said. He also said the company encouraged its employees to “aggressively pursue” an edge in information, regardless of “whether that edge was lawfully obtained.”
Devlin-Brown also noted that the agreement bans the company from making any public statements for five years that would conflict with or disavow the plea.
AP
