SAC Capital Advisors founded Steven Cohen never read the crucial e-mail that is the cornerstone of the Securities and Exchange Commission's allegations against him, the firm said yesterday.
The SEC sued Cohen last week, accusing him of failing to supervise two employees allegedly involved in insider-trading. The regulator, which voted unanimously Friday morning to pursue the charges, is seeking to ban the hedge fund manager from the industry.
SAC and Cohen have repeatedly denied any wrongdoing in the matter, and last week took issue with the SEC's allegations. Now, in a 46-page report, it goes further, alleging that Cohen never read a 2008 e-mail that indicated "the clear possibility" that SAC was getting insider information about Dell Inc.'s earnings.
While the SEC notes that the e-mail was forwarded to two of Cohen's e-mail addresses, SAC lawyers point out that he gets about 1,000 such communications per day and "could not" read the "vast majority." Indeed, according to the report, Cohen opens just 11% of the e-mail he receives, and was on the phone when the apparently damning e-mail arrived. And Cohen would have had mere "seconds" to review the e-mail—which he "did not even read"—before making the trades cited by the SEC.
What's more, there is "no evidence" that Cohen read the "second-hand" e-mail or spoke to anybody about it.
SAC also took issue at the other alleged instance of insider-trading, in the shares of pharmaceutical companies Wyeth LLC and Elan Corp. Prosecutors have charged a former SAC portfolio manager with making those trades based on tips provided by a doctor involved in drug trials, but SAC argues that "most knowledgeable observers believed" the two companies had little additional short-term upside, and that SAC's sales "at a time of volatile and declining general market trends, were perfectly reasonable."
In addition, there's nothing fishy about Martoma's $9.3 million 2008 bonus, which SAC said should "not be cause for special notice." The hedge fund acknowledges that it "is an enormous sum of money for any individual to make in a single years," but one that wasn't even a record at SAC. "Numerous SAC portfolio managers have earned more."