U.S. District William Pauley in New York dismissed civil
racketeering claims against Steven Cohen, the founder of SAC Capital
Advisors, but said Patricia Cohen's claims of fraud and breach of
fiduciary duty would go forward.
In doing so, Pauley noted each side's "seemingly inexhaustible legal
resources" as one of the unusual circumstances that have transformed
what would otherwise be a mundane marital dispute into a years-long
The legal fight, which began with Patricia Cohen's request for
increased child support in 1991, has lasted more than twice as long
as the marriage, the judge noted.
"This is a case to restore faith in the old-fashioned idea that
divorce is something that lasts forever," Pauley wrote.
Joshua Dratel, a lawyer for Patricia Cohen, said in an email, "Ms.
Cohen is grateful for the court's ruling and looks forward to the
case moving forward."
A spokesman for Steven Cohen, Jonathan Gasthalter, said Cohen was
pleased that the judge dismissed the racketeering claims and added,
"We will continue to defend against her equally specious fraud and
breach of fiduciary duty claims."
The lawsuit, filed in 2009, has proceeded as prosecutors have
focused on the extent employees at Cohen's hedge fund had engaged in
insider trading. Six have pleaded guilty, while the seventh, former
portfolio manager Michael Steinberg, was convicted at trial in
Mathew Martoma, another former portfolio manager, is currently on
trial in New York, where prosecutors have accused him of using
inside information about a clinical trial for an Alzheimer's drug to
trade in Elan Corp Plc <ELNCF.PK> and Wyeth, now a unit of Pfizer
Cohen has not been charged criminally, though the U.S. Securities
and Exchange Commission is seeking to bar Cohen from the financial
industry for failing to supervise Martoma and another employee.
Cohen has denied any wrongdoing.
SAC Capital last year agreed to pay $1.8 billion in criminal and
civil settlements and plead guilty to fraud charges stemming from
The divorce case is centered on a $9 million real estate deal that
went sour. According to Patricia Cohen's lawsuit, Cohen recovered
$5.5 million of the money as part of a settlement and failed to
disclose it to her during negotiations.
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The lawsuit was previously thrown out in 2011 by U.S. District Judge
Richard Holwell, but the 2nd U.S. Circuit Court of Appeals last year
revived the claims, reversing Holwell's decision.
The case was reassigned to Pauley after Holwell left the bench for
Pauley's ruling did not address the merits of Patricia Cohen's
claims, only whether her allegations were sufficient to move
He said Patricia Cohen's claims under the Racketeer Influenced and
Corrupt Organizations statute, or RICO, could only survive legally
if she showed that the real estate deal may have been related to SAC
Capital's activities. He found that she had not done so.
"Patricia Cohen cannot take on the mantle of a private attorney
general just because her ex-husband is a public figure and SAC is in
prosecutors' cross-hairs," he wrote. "(T)hough treble damages are a
tempting way to spice things up, civil RICO and marriage do not go
together like a horse and carriage."
However, Pauley rejected Steven Cohen's bid to dismiss the fraud and
breach of fiduciary claims, saying Patricia Cohen had sufficiently
alleged that he owed a duty to inform her about the settlement money
and never did so.
He dismissed a breach of fiduciary duty claim against Donald Cohen,
Steven Cohen's brother, finding that he did not owe Patricia Cohen
any obligation when he helped Steven Cohen during the separation
negotiations, but let stand a fraud claim against him.
The case is Cohen v. Cohen, U.S. District Court for the Southern
District of New York, No. 09-10230.
(Reporting by Joseph Ax; editing by
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