EX-SAC Fund Manager Who Aided Insider Probe Avoids PrisonPatricia Hurtado
The former SAC Capital Advisors LP fund manager who told investigators it was “understood” employees had to supply inside information to succeed at the firm was spared a prison term because he helped prosecutors.
Noah Freeman’s cooperation in the probe was “extraordinary,” said U.S. District Judge Jed Rakoff in Manhattan. His testimony helped prosecutors convict Winifred Jiau, a former expert-networking consultant with Primary Global Research LLC.
Rakoff called insider trading “a sophisticated form of cheating” and said the government couldn’t prosecute such cases without the aid of cooperators because traders go to great lengths to hide their crimes. Freeman, who pleaded guilty to securities fraud and conspiracy in February 2011, could have faced as long as 57 months in prison.
“The very nature of insider trading makes it impossible to prosecute without cooperators,” Rakoff said. “What ultimately tips the balance toward no jail time is the very substantive, if not extraordinary aid he has given.”
Freeman, who once managed a $300 million portfolio of technology stocks at the hedge fund founded by Steven Cohen, spoke at length with the FBI in late 2010, providing them with information on at least a dozen people who were doing illicit trading. He also admitted committing insider trading while working at Sonar Capital Management, where he worked prior to joining SAC.
Assistant U.S. Attorney Harry Chernnoff said Freeman helped the government build a case against SAC Capital and provided evidence to investigators that led to the convictions of six people.
Freeman also agreed to record conversations with Donald Longueuil, a former colleague at SAC and the best man at his wedding. Freeman provided information on another close friend, Samir Barai, a fund manager and founder of Barai Capital Management, the U.S. said. Barai and Longueiul pleaded guilty.
SAC pleaded guilty in 2013 and paid a record $1.8 billion fine to resolve U.S. claims over insider trading. It changed its name to Point72 Asset Management LP and agreed to manage only Cohen’s money. Cohen wasn’t charged with wrongdoing.
“At SAC Capital you were expected to provide your trading ideas to Cohen,” Freeman said, according to a Dec. 16, 2010, memo written by FBI Special Agent B.J. Kang. “Freeman and others at SAC Capital understood that providing Cohen with your best trading ideas involved providing Cohen with inside information.”
In the government’s case against the Stamford, Connecticut-based firm, the U.S. said Freeman was one of eight ex-SAC fund managers and analysts who prosecutors said relied on illegal tips.
During Jiau’s trial, Freeman said he, Longueuil and Barai paid her about $10,000 a month for tips and gave her gifts, including iPhones, Cheesecake Factory gift certificates and deliveries of live lobsters. Jiau used the gifts to bribe other technology company employees to give her information, the U.S. said.
Jiau was found guilty in 2011 of leaking tips about technology companies, helping Freeman and two other fund managers earn millions of dollars. She was sentenced to four years in prison.
As part of his sentence, Rakoff also ordered Freeman to forfeit $181,000. In 2011, the judge ordered Freeman to disgorge more than $833,000 to settle related SEC insider-trading allegations.
The case is U.S. v. Freeman, 11-cr-161, U.S. District Court, Southern District of New York (Manhattan).