SAC Says Suing Insurer Met With Cohen Ex Prior To Insider-Trading Lawsuit

May 17 2011 | 1:58am ET

SAC Capital Advisors has alleged that a legal nemesis may have been behind the explosive racketeering lawsuit filed against founder Steven Cohen last year.

The Stamford, Conn.-based hedge fund giant in a March court filing alleged that Patricia Cohen met with lawyers for Canadian insurer Fairfax Financial Holdings, which has accused SAC and other hedge funds of insider-trading and conspiring to drive down its share price. Fairfax is seeking some $6 billion from those firms, which also include Third Point and Kynikos Associates.

In her lawsuit, which originally sought at least $100 million and “a substantial, if not controlling stake” in SAC, Patricia Cohen accused her ex-husband of hiding assets from her and the court during their 1990 divorce. She also used the opportunity to accuse the SAC founder of insider-trading, allegations that Cohen’s lawyers dismissed as an extortion attempt.

Patricia Cohen’s lawsuit was thrown out of court in March. But that lawsuit may not have been entirely her own doing, the hedge fund says.

“SAC has learned from reliable sources that Patricia Cohen in fact met with counsel for Fairfax prior to filing that lawsuit,” SAC said in the March 2 filing, unsealed last week. The hedge fund asked for permission to depose both Patricia Cohen and a Fairfax representative; both of those requests were denied by court-appointed discovery master Stephen Orlofsky. SAC is appealing his decision.

“Neither Fairfax nor its lawyers had anything to do with Patricia Cohen’s lawsuit, and only learned about it from news reports,” Michael Bowe, Fairfax’s lawyer, told Bloomberg News. “Suggestions otherwise sound paranoid.”

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