Leon Cooperman Seeks Dismissal of SEC’s Insider Trading Case

Updated on
  • Hedge fund CEO calls regulators’ allegations general, vague
  • Allegations linked to Atlas Pipeline Partner information

Leon Cooperman, the hedge-fund legend accused by the U.S. Securities and Exchange Commission of insider trading, asked for its lawsuit to be dismissed, saying the regulator had revised its allegations after his lawyers had argued that he wasn’t bound by a duty not to trade on an insider’s information about a deal.

The 73-year-old founder and chief executive of Omega Advisors Inc. was accused by the SEC in September of using his status as one of Atlas Pipeline Partners GP LLC’s largest shareholders to obtain confidential information from a company executive, who asked him not to use it. He earned about $4 million by buying securities in Atlas before the sale of a company asset in 2010, which caused shares to jump 31 percent, the SEC said.

Before the SEC filed its case, regulators told Cooperman’s lawyers that they believed a corporate executive gave him confidential information on July 19, 2010, after getting assurances from Cooperman that he wouldn’t use it, according to a filing by his lawyers Friday in Philadelphia federal court.

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In asking for the case to be dismissed, Cooperman said that his lawyers told regulators before the suit was filed that any alleged agreement made after such information was shared can’t give rise to a claim of insider trading and that he therefore had no duty not to trade on it.  After his lawyers made a submission to the SEC, Cooperman said the regulators then changed direction and filed a complaint dropping the specifics and “replaced them with general and vague allegations.”

‘Deliberately Obscured’

Cooperman said the SEC complaint also fails because it doesn’t specify the timing of the alleged conversations Cooperman had with the insider. He says regulators instead “deliberately obscured” the timing of the alleged conversations Cooperman had with the insider, saying Cooperman’s promise not to use the information was made during one of three conversations in 2010 that occurred on July 7, July 19 and July 20.

John Nester, a spokesman for the SEC, declined to comment.

“Because the SEC has failed to allege that an agreement (and thus a duty of trust and confidence) existed before information was allegedly shared with Mr. Cooperman, the SEC’s insider trading claim fails to state a claim and therefore, should be dismissed,” Cooperman’s lawyers Daniel Kramer, Ted Wells, and Richard Tarlowe said.

Cooperman said after the suit was filed that Omega would continue investing money for clients. He said in November that its assets have dropped to $4 billion. 

The firm oversaw $5.4 billion as of Aug. 31, according to its website. In early 2015, when Cooperman told investors that regulators had subpoenaed Omega for information about trading in certain securities, assets stood at $9.4 billion. He founded Omega in 1991 after 25 years at Goldman Sachs, where he headed the asset-management unit and rose to general partner, according to Omega’s website.

The case is SEC v. Cooperman, 16-cv-5043, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

— With assistance by Simone Foxman

(Updates with details of SEC allegations in fifth paragraph.)
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