SAC Capital Advisors LP founder Steven A. Cohen won’t settle a suit brought by his ex-wife in which she claims the hedge fund is “the product of an ongoing racketeering scheme” that engaged in insider trading, his lawyer said.
Steven Cohen’s lawyer, Martin Klotz, told U.S. District Judge William Pauley yesterday at a hearing in federal court in Manhattan that his client would instead seek dismissal of the suit, which was reinstated in April by an appeals court.
“Any chance this case can be settled?” Pauley asked lawyers for both sides.
“We’re open to negotiation,” Patricia Cohen’s lawyer, Josh Dratel, responded.
“The defendant’s position is that the plaintiff’s suit is utterly bogus,” said Klotz. “There is utterly no claim here and we’re not prepared to spend money on such a made-up suit.”
Patricia Cohen’s 2010 amended complaint was dismissed by a district court judge in 2011 after he said she took too long to bring the case, which was first filed in 2009. The federal appeals court in Manhattan reinstated it, saying the suit was filed in a timely manner. The court also said she validly stated claims her ex-husband violated the Racketeer Influenced and Corrupt Organizations Act, as well as common law fraud and breach of fiduciary duty. A fourth claim was found by the panel to have been properly dismissed.
Cohen, whose $15 billion hedge fund is at the center of a multiyear federal insider-trading investigation, allegedly hid $5.5 million from his ex-wife during their 1990 divorce, her lawyer said at an appeals court hearing. Patricia Cohen seeks half that amount as part of her divorce settlement and asks that the sum be tripled as the RICO statute permits. She is seeking $8.25 million in damages.
Pauley, who took over the case from U.S. District Judge Richard Holwell after he left the bench, said he was concerned that the case has lingered for four years and cautioned Dratel about further delays. Dratel said Patricia Cohen is considering filing a third amended lawsuit.
“This is a case where the allegations span a generation,” Pauley said to Dratel.
“Twenty-five years, your honor,” Klotz said.
“Some of my clerks weren’t born when the underlying claims began here,” the judge said. “It reminds me of a Dickens novel and I guess there are going to be a few more chapters.”
Pauley said he was frustrated that the appeals court didn’t give him more guidance on how to proceed with the case now that it has been sent back. He said the appeals court took more than 14 months to issue its ruling.
“One thing I can promise you is that I’m not going to take 14 or 15 months,” Pauley said. “My job is to see that Cohen versus Cohen ends before the world does.”
The judge scheduled an Oct. 3 conference to hear Steve Cohen’s motion to dismiss the suit.
Patricia Cohen said in her lawsuit that SAC Capital was “the product of an ongoing racketeering scheme” that has engaged in insider trading, bank fraud, money laundering and other misconduct. In June 1986, Cohen, under oath, refused to answer regulators’ questions about alleged insider trading involving a General Electric acquisition, invoking his right not to incriminate himself, according to her complaint.
She also claimed she was entitled to at least half of his business, saying it expanded in part with $1 million that she earned from a real-estate business.
Steven Cohen said the couple had $17 million in marital assets in the divorce, and Patricia Cohen accepted a $3.5 million settlement, $2.5 million of which was an apartment, according to the complaint.
Both Klotz and Dratel declined to comment on the suit after the hearing. Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co. in New York, declined to comment on the hearing and lawsuit.
The case is Cohen v. Cohen, 11-1390, U.S. Court of Appeals for the Second Circuit (Manhattan), and 09-cv-10230, U.S. District Court, Southern District of New York (Manhattan).