SAC Will Plead Guilty to End Insider-Trading Case

Your next video will start in

Recommended Videos

  • Info

  • Comments


Nov. 4 (Bloomberg) -- Billionaire Steven Cohen’s SAC Capital Advisors LP, the hedge fund firm accused of fostering a culture of rampant insider trading, has agreed to plead guilty to a federal indictment and pay $1.8 billion, the U.S. said. (Source: Bloomberg)

Three months later, we are here to announce a resolution that is matching in its magnitude.

All of the charged sac companies have agreed to plead guilty.

All agreed to wind down and close their businesses and all have agreed to pay total fines and penalties in the record amount of $1.8 billion.

If approved, this would result two cases brought by the government in july, both the criminal indictment and the separate civil forfeiture and money laundering aspect as well.

Both agreements were sent to the district court judges presiding over the cases for their review and approval.

The plea agreement announced today is solely between this office and the sac companies and involves no individuals.

It does not include please of guilt by any individuals, nor does it provide any criminal protection or immunity or any individuals going forward.

Let me also stretch that -- let me also stress individuals awaiting trial are presumed to be innocent and the plea agreement announced today does not affect that presumption in any way.

Before i discuss the agreement in more detail, let me introduce our partners in this investigation and prosecution.

I am joined, as i am so often in cases of this magnitude, and importance of the fbi here in new york.

The fbi is represented by april brookes, the representative in charge of the criminal division.

I want to thank george and april for their dedication and the dedication of their teams of agents come in notably the supervisors and matthew callahan and others.

We would not be here but for their dedication and hard work.

I also want to thank the staff attorneys at the securities and exchange commission.

We worked so closely on sony aspects of this investigation and coordinated nicely with them as we always do.

I especially want to thank and acknowledge the debt hated career prosecutors to my right who have made today possible.

Handling the prosecution on the criminal side and their chiefs, and the work on the forfeiture aspects of the case as well as their chief of asset forfeiture.

Let me take just a couple of minutes to go through and talk about the particulars of today's agreement with the sac capital companies.

Let me first make clear what we are announcing today is that the government and defendants have a read -- have reached an agreement with one another.

It's now for the courts to independently consider those agreements and the agreement between the parties have no effect unless and until the courts grant approval.

The main features of the agreement are straightforward and summarized in the chart to my right.

As you know from the indictment that was filed on july 20, there are five counts -- [audio difficulties] the total penalties are $1.8 billion and are divided as follows.

A $900 million fine with respect to the criminal case.

A $900 million fine with respect to the criminal case.

-- an agreement was reached with respect to sac capital to the tune of 660 million dollars based on conduct overlapping with some of the conduct we alleged in our civil money- laundering complaint.

If you subtract that out, according to the agreement, they get a credit for that and the total additional payment beyond what has been agreed to is one point 180 $4 billion.

Other key terms to the agreement are the entities agreed to wind down their investment advisory business in a way and timetable to be approved by the sec.

They have agreed to accept the maximum term of probation after pleading guilty to five years and have agreed to retain a compliance consultant so that person can make sure everything is going as it should go at the entities during the time of their wind down.

There is another key point worth noting -- the financial penalty.

Its burden will not fall on third-party investors.

The sac companies have made clear no outside investor money will be used to pay the $1.8 billion penalty.

The settlement terms provided for an orderly wind down in payment schedule of this record penalty to minimize any market disruption.

I should also stress neither sac nor any person paying any portion of the $1.8 billion penalty will be permitted to claim any tax deduction or tax benefit in connection with this payment.

That is what is in the agreement.

Often as is the case here, in addition to describing what in the agreement, it's just as important to note what is not in the agreement.

There is no immunity from criminal prosecution for any person.

In fact, this agreement does not have any effect on any individuals at all either charged or uncharged.

While the agreement may and the governments prosecution of the sac capital companies with respect to individuals, either at this hedge fund or the countless other financial institutions that buy and sell securities, we will continue to pursue insider trading investigations and follow them where they lead.

The investigation of the criminal side remains ongoing.

As i said just about four years ago at time of our first major insider trading arrest him a greed sometimes is not good.

There are at least 75 convicted insider trading defendants who would likely agree.

But individual guilt is not the whole of our mission.

Sometimes, blame where the institutions need to be held accountable to.

No institution should rest easy in the belief that it's too big to jail.

That's a moral hazard that a just society can't allow forward.

-- ken l afford.

We should not shy away from holding institutions responsible when it's justified and necessary for both deterrence and accountability.

Whether the misbehaving corporation is a hedge fund or commercial bank or manufacture of a popular product, because sometimes institutional punishment is essential to serve justice and to deter misconduct.

Today, one of the world's largest and most powerful hedge funds agreed to plead guilty, shut down its outside investment agreement, and pay the largest fine in history for insider- trading offenses very that is a just and appropriate price in our view for the pervasive and unprecedented institutional misconduct that occurred here.

Let me call to the podium april brooks, our partner from the fbi.

Good afternoon.

In 2006, with new information about unbridled insider trading at hedge funds, the fbi went to work.

After examining trading anomalies, poring over documents, conducting surveillance is, and making the first approach to a key target, that individual began cooperating with the government.

What started with a key cooperator led to thousands of hours of relentless investigative work by a team of fbi agents uncovering an extensive network trafficking in insider information about the hedge fund industry.

A network that has been chronicled by many of you.

The result in part brought today's plea and is the latest step in the largest insider- trading investigation in history.

None of this would have been possible without dedicated prosecutors willing to bring charges in the southern district . led by the u.s. attorney and deputy, i would like to recognize the assistant united states attorneys and their chiefs.

I would also like to recognize the team from my office, the fbi special agents.

I also want to emphasize today's announcement has no effect on any individual awaiting trial.

Those defendants are presumed innocent until proven otherwise.

What sac capital possibly demonstrates is that cheating and breaking the law were not only permitted, but allowed to persist.

Sac focused on hiring the best talent, talent and equipped with extensive networks to circumvent traditional lines of communication, talent who would be prepared to get confidential information to fuel their illicit trade.

Sac did not just break the law, there is legal activity resulted in insider trading that was substantial, pervasive, and on a scale without known precedent according to the july indictment.

It was nothing short of institutional failure.

Today's agreement, sac capital will plead guilty to all five counts.

Result is $1.8 billion in fines and forfeiture, the largest penalty in an insider trading investigation ever.

Most importantly, sac capital will terminate operations as an investment advisor and be required to have real for genuine compliance overseen by an independent expert.

In layman's terms, sac will no longer be able to invest anyone's money but their own.

As today's the illustrates, sac institutionalize their practices by cultivating a culture of corporate corruption.

To those on the street who venerate reichel douglas ross character of gordon gekko, understand this -- went to polls just as important as your profit.

The problem with insider trading israel and for companies that willfully turn a blind eye, be on notice grade how your employees make their money is just as important as how much they make.

Today is not the end.

The fbi's investigating into insider trading on wall street, main street tom and hedge funds and expert networking firms and anywhere else continues.

We will relentlessly -- relentlessly pursue this criminal behavior until every portfolio manager, every trading desk, every hedge fund owner stops trading on insider information.

Thank you.

I'm happy to take your

This text has been automatically generated. It may not be 100% accurate.


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change