Cohen's Ex-Wife Gets Her Lawsuit Back

Apr 3 2013 | 12:23pm ET

As if SAC Capital Advisors founder Steven Cohen was lacking for legal trouble, a federal appeals court has reinstated part of his ex-wife's explosive lawsuit accusing him of racketeering.

The U.S. Second Circuit Court of Appeals today reinstated part of Patricia Cohen's lawsuit against the hedge fund manager, ruling that the district court improperly dismissed it for failure to be filed in a timely manner. The decision means that Cohen will have to continue to fight his ex-wife's claims amidst a continuing probe into alleged insider-trading at his firm that has ensnared at least seven current or former SAC employees, including top trader Michael Steinberg. Cohen himself is thought to be a target of the probe; in an earlier lawsuit against him, Patricia Cohen accused him of insider-trading in the mid-1980s.

The Second Circuit returned the case to the District Court to consider whether there are other grounds for dismissal or whether the case should go to trial. The appellate panel made clear it was not ruling on the merits of Patricia Cohen's case, but only whether it should have been dismissed on the grounds in question.

"The question before us is limited to whether the allegations of the complaint are sufficient to go forward to be tested at trial," the court ruled.

Steven and Patricia Cohen divorced in 1991. But in her 2009 lawsuit against him, Patricia Cohen alleged that he had hidden $5.5 million from a real-estate settlement from her on his 1989 financial statement. Patricia Cohen said she did not learn of the omission until 2008, and has asked for $8.25 million in damages.

Lawyers for Cohen, whose firm recently agreed to pay $616 million to settle Securities and Exchange Commission insider-trading allegations, has said his wife's lawsuit is little more than an extortion attempt.

"These decades old allegations by Mr. Cohen's former spouse were patently false and entirely without merit," SAC spokesman Jonathan Gasthalter said.

The Second Circuit did dismiss one of Patricia Cohen's claims, but reinstated allegations that Steven Cohen violated the Racketeer Influenced and Corrupt Organizations Act, committed common-law fraud and breach of fiduciary duty.

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