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 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 said.
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.
"DIFFICULT PERIOD"
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.
Had Swain rejected the deal, SAC Capital would have had the right to
withdraw its guilty plea.
The Stamford, Connecticut-based firm rebranded 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 February 1, the 800-employee firm, which Cohen started in 1992
with $25 million, oversaw $11.9 billion, according to regulatory
filings.
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.
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BROAD CRACKDOWN
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 October 2009.
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 said.
SENTENCING
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 Perrigo Co.
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 and Emily Flitter in New York;
additional
reporting by Joseph Ax, Jonathan Stempel and Svea Herbst-Bayliss;
editing by David Gregorio, Andrew Hay and Lisa Shumaker)
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