SAC Capital Advisors’ potential $1.2 billion deal to resolve criminal insider-trading charges is coming under fire before it’s even done.
The lawyer for a class-action suit over SAC’s trading in drug company Elan has asked a federal judge to reject the potential settlement with Manhattan US Attorney Preet Bharara.
The lawyer, Ethan Wohl, lodged his objection to the deal, which has been under negotiation for several weeks, in a letter to Manhattan federal judge Laura Swain on Friday.
Wohl cited published reports that the settlement may not include a guilty plea specifically tied to SAC’s trading in Elan, which is at the center of his class-action case, or Wyeth, another drug company.
Illegal trading in those two stocks in 2008 helped SAC reap profits and avoid losses of $276 million, making it the biggest insider trading case in history, according to prosecutors.
“A plea on those terms, if tendered, should be rejected,” Wohl said in the letter, citing the size of the Elan trades along with a growing number of Wall Street settlements that have been rejected by judges for inadequate admissions of guilt.
Federal judges have started to balk at rubber-stamping settlements in which defendants neither admit nor deny wrongdoing. Most of the cases have involved the Securities and Exchange Commission.
SAC is expected to settle criminal charges brought by the US Attorney’s office as early as next week. The deal would require SAC to admit guilt, stop managing outside money and pay a $1.2 billion fine.
The plea deal, however, may not include an admission of wrongdoing in connection with the $276 million in allegedly illegal trading in Elan and Wyeth because the government hasn’t obtained any convictions in that case yet, the Wall Street Journal reported.
The main trader in that case, Mathew Martoma, is scheduled to go to trial in January. He stands accused of helping SAC dump its stakes in the drug giants ahead of a report on a botched clinical trial the two companies were working on in 2008.
Steve Cohen, the billionaire founder of the $14 billion SAC hedge fund, is unlikely to settle if the firm has to plead guilty to charges that will leave it exposed to a potentially expensive class-action suit, experts said.
“A guilty plea to that count and it’s game-over,” said Michael Bachner, a white collar defense lawyer and former prosecutor, referring to SAC’s ability to fight off the class action lawsuit.
A spokesman for SAC declined to comment as did a spokeswoman for the US Attorney’s office.