March 28 (Bloomberg) -- SAC Capital Advisors LP urged a federal judge to approve its record $1.8 billion insider-trading settlement with the government, saying the firm is “deeply remorseful” for the illegal acts of its employees.
SAC lawyer Martin Klotz asked U.S. District Judge Laura Taylor Swain in a two-page letter yesterday to sign off on the agreement, which also calls for the firm to close its investment advisory business. A sentencing hearing before Swain is scheduled for April 10 in Manhattan.
“The defendants are deeply remorseful for the misconduct of each of the individuals who broke the law while employed by them,” Klotz wrote. “Even one person crossing the line into illegal behavior is unacceptable. The defendants are chastened by this experience, but are determined to learn from it.”
Four SAC units were indicted last year, accused of reaping hundreds of millions of dollars in illegal profit through insider trades by employees dating to 1999. Steven A. Cohen, 57, the firm’s founder, faces an administrative action by the Securities and Exchange Commission alleging he failed to supervise the hedge fund’s activities. Eight current or former SAC employees have been convicted of insider trading charges.
Manhattan U.S. Attorney Preet Bharara called SAC Capital “a veritable magnet for market cheaters” when the indictment was filed in July. Cohen has denied wrongdoing and isn’t accused of a crime.
“There can be no doubt that these and other penalties send a strong public message about the costs of the conduct that have brought the defendants before Your Honor,” Klotz wrote in the letter.
In November, SAC’s general counsel, Peter Nussbaum, entered guilty pleas on behalf of the firm to four counts of securities fraud and one count of wire fraud. At the time, Swain said she wanted to review a pre-sentence report and sentencing submissions from both sides before deciding whether to accept the agreement.
U.S. District Judge Richard Sullivan in November approved the $900 million settlement of a civil money-laundering case by the government that is part of the overall agreement. Swain will decide whether to agree to a fine of $900 million to resolve the criminal case.
Under the settlement, SAC will become a firm managing only Cohen’s personal wealth. The firm, which is changing its name to Point72 Asset Management, said in February it shrunk its headcount to 850 people from 1,000.
Klotz told Swain that the proposed fine is more than the highest range of $411 million to $823 million under the advisory federal sentencing guidelines.
In December, a federal jury in Manhattan convicted Michael Steinberg, SAC’s longest-serving manager, in an insider-trading scheme after a five-week trial.
Mathew Martoma, a former SAC fund manager, was found guilty by a different Manhattan jury in February of using secret information about the clinical trial of an Alzheimer’s drug to trade in shares of Elan Corp. and Wyeth.
Steinberg and Martoma haven’t been sentenced. They were both convicted of charges that carry maximum sentences of 20 years in prison.
Former SAC employees Noah Freeman, Donald Longueuil, Wesley Wang, Richard Choo-Beng Lee, Jon Horvath and Richard Lee have all pleaded guilty to insider trading.
Also yesterday, a group of Elan and Wyeth investors suing SAC over alleged insider trades in those companies filed a revised complaint claiming Cohen traded on inside information he got from Martoma. The investors claim SAC made at least $555 million in profits and losses avoided on Elan and Wyeth trades on illegal tips about the Alzheimer’s drug, bapineuzumab.
The new complaint makes public for the first time investor allegations involving Cohen that were previously filed with the court under seal. The claims include that Martoma told Cohen about the drugmakers’ confidential plan to put bapineuzumab into Phase 3 testing. When the plan was publicly disclosed, Elan rose 12.6 percent and Wyeth gained 3.6 percent, the investors claim.
The investors also said that Cohen adopted policies to give the firm access to inside information, hiring employees with access to company insiders and paying higher trading commissions than other hedge funds to win access to nonpublic information.
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). The investor suit is Kaplan v. SAC Capital Advisors LP, 12-cv-09350, U.S. District Court, Southern District of New York (Manhattan).
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