Cohen Ignored Warning Lee Had Insider-Trading Reputation

In the summer of 2008, Steven A. Cohen was warned by an employee at Citadel LLC that a portfolio manager he was about to hire, Richard S. Lee, had a reputation for insider trading.

Cohen ignored the red flag as well as objections from his own legal department and hired him the following year, according to an indictment yesterday that accused Cohen’s SAC Capital Advisors LP of securities fraud and wire fraud. The government said SAC created an environment in which employees were encouraged to use illicit information and the compliance office identified only one example of suspected insider trading in its history.