SAC In The Crosshairs; Firm Says It Is 'Outraged' By Insider-Trading Charges

Feb 9 2011 | 1:02pm ET

With two former SAC Capital Advisors fund managers now officially charged with insider-trading—and one pleading guilty—the giant hedge fund seems ever more at the center of the case, even though neither it nor any current employee has been accused of wrongdoing.

Stamford, Conn.-based SAC said yesterday that it was "outraged by the alleged actions of two former employees, which required active circumvention of our compliance policies and are egregious violations of our ethical standards." But the complaints against former employees Donald Longueuil and Noah Freeman mark the second time that authorities have accused a hedge fund manager of trading on confidential information while working at SAC.

Freeman and Longueuil "were employed at SAC for a short time and were dismissed in January 2010 and June 2010, respectively, due to poor performance," SAC said in a statement. The firm said it is cooperating with the federal investigation.

But The Wall Street Journal reports that the feds have spent two years trying to find evidence of insider-trading at the firm, although it is unclear whether they are seeking evidence against any high-ranking executive at SAC. Authorities said that Freeman was providing "substantial assistance" in the ongoing investigation.

Longueuil and Freeman are not SAC's only links to the massive case. The firm itself has been subpoenaed, and two hedge funds managed by SAC alumni, Diamondback Capital Management and Level Global Investors, were raided by the Federal Bureau of Investigation in November. Diamondback founder Richard Schimel is also SAC founder Steven Cohen's brother-in-law.

Another SAC alum, Stratix Asset Management chief Richard Grodin, was also subpoenaed.

Much more troubling for SAC, however, are its links to several people charged with or linked to insider-trading. Richard Choo-Beng Lee, a former SAC fund manager who is a cooperating witness in the Galleon Group insider-trading case, admitted to trading on confidential information during his time at SAC. Another SAC alum, Joseph Skowron, was fired by FrontPoint Partners after it emerged that he allegedly traded on confidential information provided by a French doctor arrested last year. And Jonathan Hollander, a former analyst at SAC's CR Intrinsic Investors division, the same division that Longueuil worked for, has been linked to two insider trading cases.

Neither Skowron nor Hollander have been accused of any wrongdoing.

Authorities also tried to get at SAC through expert-network firm Broadbend Research, asking Broadbend founder John Kinnucan to record his calls with the hedge fund. And an FBI agent playing a big role in the current insider-trading probe, B.J. Kang, led an insider-trading investigation into SAC three years ago.

SAC last year was also the target of a Securities and Exchange Commission insider-trading probe, and Cohen was accused of insider-trading in the 1980s by his ex-wife. Also last year, an extortionist rabbi was convicted of targeting SAC by claiming a congregant had evidence of insider-trading at the firm.

Cohen told investors last month that the insider-trading investigation will have "no financial impact" on them.


In Depth

Q&A: Quad Advisors’ Borish Is Looking For Real Traders, Not Index Huggers

Aug 20 2014 | 1:43pm ET

Peter Borish, who served as founding partner and director of research at Tudor Investment...

Lifestyle

Nicky Hilton To Wed James Rothschild

Aug 20 2014 | 5:23am ET

When it comes to husband-material, socialite Nicky Hilton is sticking with finance...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

 

Futures Magazine

PREVIEW July/August 2014 Cover

Inside Futures' 500th Issue

The July/August 2014 issue is our largest in years—filled with the best trading strategies and stories from 43 years of being the primary publication for commodity, stock, options and forex traders.

The Alpha Pages

TAP July/August 2014 Cover

Real talk on alternative investments, business & finance

The Alpha Pages Editor's Note