The federal judge who will consider SAC Capital Advisors LP’s $900 million settlement of U.S. insider-trading charges asked lawyers if the payment takes into account “the activities of all culpable persons” and illegal profit made and losses avoided by the firm.
U.S. District Judge Laura Taylor Swain will decide whether to accept the plea, which includes what the U.S. says is the biggest insider trading fine ever, at a hearing tomorrow in Manhattan federal court. She asked both sides to address six questions in a one-page order yesterday.
The $900 million is half of an overall $1.8 billion resolution of government charges and civil claims against the Stamford, Connecticut, firm, which was founded by billionaire Steven A. Cohen.
Swain said she wants to know more about the government’s conclusion as to the net gains by SAC Capital and eight current and former SAC Capital employees who have been convicted or pleaded guilty to insider trading.
The judge also asked for information about whether the $900 million addresses profits made or losses avoided by other SAC Capital employees the U.S. is aware of after its investigation. Cohen, 57, who hasn’t been charged, faces an SEC civil proceeding claiming he failed to properly supervise trading at the firm. Cohen has denied all wrongdoing.
Manhattan U.S. Attorney Preet Bharara called the hedge fund “a veritable magnet for market cheaters” when the indictment was filed in July and said the company had “zero tolerance for low returns but seemingly tremendous tolerance for questionable conduct.”
Swain yesterday asked both sides to address the role of Bart Schwartz, a former U.S. prosecutor named as an independent compliance consultant to the firm. She also asked whether she should raise the sentence recommended under non-binding federal guidelines based on SAC Capital’s compliance and ethics program.
In urging Swain to approve the accord, prosecutors said the $1.8 billion is an amount that is several times larger than the illicit gains and avoided losses resulting from the insider trading alleged in the indictment.
SAC Capital changed its name this week to Point72 Asset Management LP. As part of the proposed settlement, the firm is withdrawing from managing money for institutions and wealthy individuals and will look after Cohen’s money.
The case is U.S. v. SAC Capital Advisors LP, 13-cr-00541, U.S. District Court, Southern District of New York (Manhattan).