Investors in Elan Corp. and Wyeth asked to be heard in court to oppose SAC Capital Advisors LP’s criminal plea agreement, saying the deal should be rejected unless it holds the hedge fund accountable for illegal insider trading of their stocks.
SAC, based in Stamford, Connecticut, agreed to plead guilty to securities fraud and wire fraud and pay $1.8 billion in civil and criminal penalties to resolve allegations of running an insider-trading conspiracy stretching back to 1999. A hearing for approval of the accord is set for tomorrow in federal court in Manhattan.
Shareholders in drugmakers Elan and Wyeth, who sued SAC and founder Steven A. Cohen over alleged insider trading, say the plea deal should include an admission of guilt for the claims at issue in their case.
“The court should reject the plea agreement because it allows SAC to plead guilty without admitting that it is guilty of the principal criminal conduct charged in the indictment -- insider trading in the securities of Elan Corporation Plc and Wyeth,” the investors said in a memorandum filed today with U.S. District Judge Laura Taylor Swain.
Prosecutors have separately charged former SAC money manager Mathew Martoma with using illegal tips about an Alzheimer’s drug trial to help the hedge fund make profits and avoid losses totaling $276 million by trading in Elan and Wyeth, now a unit a Pfizer Inc.
While gains from the Alzheimer’s drug-related trades were used in calculating a fine for SAC,“SAC is free to avoid any admission in its allocution that its employees, officers, or owner engaged in insider trading in either Elan or Wyeth” under the plea agreement, investors said in the filing.
The civil portion of SAC’s settlement with the government was approved by U.S. District Judge Richard Sullivan yesterday in a 15-minute hearing.
SAC agreed to pay a $900 million criminal fine and $900 million civil forfeiture, which is to be reduced to $284 million to account for an earlier settlement by the hedge fund with the U.S. Securities and Exchange Commission.
Cohen, 57, wasn’t charged by prosecutors. He still faces an administrative action filed by the SEC alleging he failed to supervise his hedge fund’s activities.
The criminal case is U.S. v. SAC Capital Advisors LP, 13-CR-00541, U.S. District Court, Southern District of New York (Manhattan). The civil case is U.S. v. SAC Capital Advisors LP, 1:13-cv-5182, U.S. District Court, Southern District of New York (Manhattan).