Matthew Goldstein and Alexandra Stevenson have an extensive article in Dealbook on why it’s been difficult for the U.S. government to go after Steve Cohen, a.k.a. “The Big Guy.”
It’s widely believed on Wall Street that Cohen, the founder of once $US14 billion Stanford, Conn-based SAC Capital Advisors, is the ultimate target in the government’s crackdown on insider trading.
Still, the government hasn’t been able to accuse him of any wrongdoing. They might not ever be able to either.
For starters, Cohen is incredibly careful, according to Dealbook. He had SAC’s offices checked for listening devices before the government’s insider trading investigation was revealed. He also suspected that phone calls were being taped, too, the report said citing unnamed sources.
Getting at what Mr. Cohen knew is devilishly difficult. After all, this is a man known for caution and secrecy. Generally, the firm did not save most internal emails and instant-message communications before 2009. Even before the investigation became public in October 2009, Mr. Cohen would periodically have SAC offices checked for listening devices, said two people familiar with the matter. In the past, he would even buy up rights from photographers who took his picture, and, to this day, there are few publicly available photos of him.
Moreover, Mr. Cohen suspected that the government was listening in. He called a friend in the summer of 2009 to alert him to the possibility that a former associate of both men was surreptitiously taping phone calls in connection with an insider trading probe. That probably made him very careful about what he said. And a government wiretap placed on Mr. Cohen’s home phone that summer turned up no evidence of any wrongdoing, said people briefed on the matter but not authorised to speak publicly.
Since August 2009, U.S. Attorney Preet Bharara has successfully convicted 79 people, including a handful of SAC Capital alums, on insider trading charges.
In the case against former SAC portfolio manager Mathew Martoma, Cohen was identified as “Portfolio Manager A.” It was also revealed at Cohen and Martoma had a 20 minute conversation on the phone on a Sunday before the fund exited its positions in drug companies Elan and Wyeth.
It’s unclear what was said during that conversation. We may never know what was said either. Martoma refused to cooperate with the prosecution.
Cohen, who was absent during Martoma’s trial, has not been charged with any wrongdoing. In fact, Cohen may never be charged at all. He has also said he is confident he acted appropriately.
Since then, two of SAC’s former traders Michael Steinberg and Mathew Martoma were found guilty recently in separate insider trading cases.
In the future, SAC Capital will no longer manage outside capital. Instead, it will operate as a family office fund managing about $US9 billion of Cohen’s personal wealth and the money of other employees.