Patricia Cohen, the ex-wife of SAC Capital Advisors LP founder Steven Cohen, said the indictment and enforcement action by the U.S. against the hedge fund are proof she’s a victim of his fraud and a reason why her suit against him shouldn’t be dismissed.
Patricia Cohen filed suit against her ex-husband in 2009, claiming he ran the Stamford, Connecticut-based SAC Capital as a racketeering enterprise. Patricia Cohen alleged the fund was engaged in insider trading, bank fraud, money laundering and other acts in violation of the Racketeer Influenced and Corrupt Organizations Act.
SAC Capital was indicted in July by Manhattan U.S. Attorney Preet Bharara, accused of perpetrating what prosecutors called an unprecedented insider-trading scheme that allowed the fund to reap hundreds of millions of dollars in illicit profits.
“Patricia was an early victim of Steven’s long-running schemes, but she was far from the only victim,” her lawyers said in court papers filed today in federal court in Manhattan. “This case represents the point along the measure of continuity of Steven’s wrongdoing, which stretches from 1985 to at least 2010.”
While Cohen wasn’t charged in the indictment, the U.S. alleged that “the fund owner” had “encouraged” the fund’s employees to traffic in inside information in an alleged scheme that went back as far as 1999. At least eight current or former SAC Capital employees have been charged with insider trading with six pleading guilty. The U.S. Securities and Exchange Commission has also filed a parallel civil action.
SAC has pleaded not guilty to the charges. SAC was told it would have to pay more than $1.2 billion and plead guilty to resolve the charges, people familiar with the matter said.
“When plaintiff’s allegations are read in the context of the government enforcement actions, it is clear that defendants engaged in anything but ‘garden-variety’ fraud,” Patricia Cohen’s lawyers, Kevin Roddy and Josh Dratel, wrote in court papers.
The government’s recent actions against SAC have transformed Patricia Cohen’s case, “from a mostly private affair to one that justifies the extraordinary legislative response RICO provides,” her lawyers said.
In September, a federal judge in New York granted a request by lawyers for Patricia Cohen to amend the suit for a third time, to add a claim against Steven Cohen’s brother, an accountant who is a defendant in the case, and to fix a paragraph in the complaint that refers to the court’s jurisdiction.
Martin Klotz, a lawyer for Cohen and his brother Donald, said in court papers that Patricia Cohen’s suit should be dismissed, arguing it was “legally defective” and said she had engaged in a “campaign of harassment and extortion against Steven Cohen.”
The suit was dismissed in 2011 by U.S. District Judge Richard Holwell, who said Patricia Cohen took too long to bring her claims. In April, the U.S. Court of Appeals in New York reinstated the suit, saying it was filed in time. Without ruling on the merits of her case, the court also said she had validly asserted claims that her ex-husband violated the racketeering law, committed fraud and breached his fiduciary duty.
While the case was on appeal, Holwell left the bench for private practice. The case was reassigned to U.S. District Judge William Pauley in April.
The case is Cohen v. Cohen, 09-cv-10230, U.S. District Court, Southern District of New York (Manhattan).
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