SAC Civil Money-Laundering Settlement Approved by JudgeBob Van Voris
Steven A. Cohen’s SAC Capital Advisors LP won partial approval of its $1.8 billion settlement with the U.S. as a federal judge signed off on an agreement to resolve a civil money-laundering case against the hedge fund.
U.S. District Judge Richard Sullivan yesterday approved the agreement after quoting an appeals court’s instruction that a court’s authority to review such civil settlements with the government is “minimal, at best.” Sullivan approved the settlement in a 15-minute hearing in Manhattan federal court after questioning whether his acceptance is necessary.
SAC, which was indicted earlier this year, was accused of reaping hundreds of millions of dollars in illegal profit through insider trades by employees dating to 1999. Cohen, 57, wasn’t charged. He still faces an administrative action filed by the Securities and Exchange Commission alleging he failed to supervise his hedge fund’s activities.
Tomorrow, U.S. District Judge Laura Taylor Swain will consider whether to approve SAC’s guilty plea to securities-fraud and wire-fraud charges. SAC agreed Nov. 4 to plead guilty and pay $900 million in civil forfeiture and a $900 million criminal fine. The agreement credits SAC’s earlier $616 million settlement with the SEC against the forfeiture amount, reducing to $284 million the amount still to be paid.
SAC also agreed to end its role as an investment advisory.
“Whether I think $1.8 billion or $900 million or $284 million is a sufficient number is not really relevant today,” Sullivan said at the hearing.
Sullivan, in questioning the extent of his authority over the parties’ settlement, referred to a March order from a New York-based federal appeals court in an SEC case against Citigroup Inc.
In the Citigroup case, U.S. District Judge Jed Rakoff in 2011 rejected a $285 million resolution of SEC claims the bank misled investors in a $1 billion financial product backed by risky mortgages. The U.S. Court of Appeals in New York blocked the case from going forward while it considered the parties’ appeal.
“While we are not certain we would go so far as to hold that under no circumstances may courts review an agency decision to settle, the scope of a court’s authority to second-guess an agency’s discretionary and policy-based decision to settle is at best minimal,” the court said in its March ruling. The court is still considering the appeal.
SAC’s agreement with the government doesn’t prevent prosecutors from bringing criminal charges against individuals at SAC. Prosecutors claim Cohen, who isn’t charged, encouraged SAC employees to get information from company insiders while ignoring indications that it was illegal.
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).