SAC Reopens To Investors As Investigators Lament Lost E-Mails

Feb 13 2013 | 1:39pm ET

SAC Capital Advisors has reopened its flagship hedge fund to new investment as its next redemption deadline looms and amidst fresh news of the government's struggle to build a case against the firm and its founder, Steven Cohen.

SAC is not actively marketing its wares. But it has begun to accept money from new investors for the first time since July 2011, Fox Business Network reports.

The move comes as SAC, which has $14 billion in assets under management, braces for about $1 billion in redemption notices tomorrow, the deadline. The firm is enmeshed in an insider-trading scandal, with a former portfolio manager arrested, a Securities and Exchange Commission lawsuit likely and Cohen widely seen as being in the crosshairs.

SAC has expressed confidence that neither it nor Cohen has done anything wrong, and has sought to assure clients that, at worst, it faces a large fine. Recent reports indicate it may be right: Earlier this month, The New York Times reported that SAC's trades in two pharmaceutical stocks—companies about which the indicted former manager, Mathew Martoma, allegedly received insider information—were not as clear-cut as the government described when it arrested Martoma. Now, it appears, the probe into SAC is being hindered by the hedge fund's e-mail deletion policy at the time of the trades in 2008.

Until the fall of that year, SAC deleted e-mails from employee inboxes every 30 or 60 days, according to a deposition given by SAC's general counsel in a lawsuit filed by Canadian insurer Fairfax Financial Holdings which was dismissed. Hedge funds were not required to retain e-mails until last year, and SAC changed its policy later in 2008.

The government does not believe that SAC destroyed the e-mails to cover up the insider-trading, Bloomberg News reports. SAC's policy was in place prior to the beginning of the investigation.

Still, the fact remains that the majority of electronic communications relating to the trades in question are gone. SAC has turned over those that were saved, by employees moving them from their mailboxes into personal folders, as well as those from after the e-mail retention policy took effect, in response to subpoenas and voluntary document requests.

Neither the SEC nor criminal authorities have sought to seize SAC's computers to attempt to forensically retrieve the deleted e-mails.

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