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His name is on the door, but Steven A. Cohen was nowhere to be seen yesterday at the arraignment of SAC Capital Advisors, his $14 billion hedge fund empire.
Instead, SAC’s long-time general counsel, Peter Nussbaum, appeared in Manhattan federal court yesterday flanked by five defense lawyers to plead “not guilty” to insider trading charges on behalf of Cohen’s hedge fund firm and three of its affiliates.
“Not guilty, your honor,” the former Schulte Roth & Zabel attorney told Judge Laura Taylor Swain.
Throughout the hearing, the judge tweaked her normal line of questioning to reflect the fact that the firm is being charged, as opposed to individuals, including whether “the entity defendants understand their rights” to remain silent.
“Yes, your honor,” the bespectacled Nussbaum replied.
Federal prosecutors on Thursday charged SAC with a decade-long insider-trading scheme that was “substantial, pervasive and on a scale without known precedent.”
Cohen was not personally charged, but prosecutors said he created a corporate culture that made the firm a “veritable magnet of market cheaters,” resulting in the arrests of eight SAC employees.
The Stamford, Conn., firm has denied the charges and plans to “continue to operate as we work through these matters.”
Prosecutor Antonia Apps told the judge that the government plans to turn over “a rather tremendous volume” of evidence and other discovery to the defense, including court-ordered wiretaps, consensual recordings, email and other “electronic communications.”
Ted Wells, a criminal defense lawyer for SAC, told the judge that the firm is “most concerned” with getting its hands on statements former SAC employees made to the government.
The judge set a hearing for Sept. 24 to discuss the evidence.
Prosecutors cited the eight former SAC employees — who have been charged or have pleaded guilty to insider trading — as proof the firm “encouraged the widespread solicitation and use of illegal inside information” dating back to 1999.
FBI agents flipped one of the eight men named in the complaint, Richard Lee, just a few months ago, according a person familiar with the probe.
Lee, who left SAC in March, was hired by the trading behemoth in 2008 — despite objections from SAC’s legal department, the complaint said. The legal team objected because an employee with Lee’s former firm, Citadel, had warned Cohen that Lee was known for being part of the former firm’s “insider trading group,” according to the complaint.
Citadel spokeswoman Katie Spring said Lee was fired in 2008 for cause but not because of insider trading. She also denied the existence of an “insider trading group.”
Following Thursday’s indictment, Cohen signed forms to appoint Nussbaum and SAC president Tom Conheeney to represent the firm in the criminal case — a clear signal that the elusive billionaire won’t be the public face of the trial despite being repeatedly mentioned in the indictment.
Leaving the courtroom, a reporter jokingly asked Nussbaum if he will also post bail on behalf of the entities. He stared straight ahead and continued walking without responding.