Business

Judge’s question deals tough hand to Cohen

When it comes to criminal fines, Steve Cohen’s SAC Capital is getting the wholesale rate.

Lawyers for the once highflying hedge fund are scheduled to walk into Manhattan federal court Thursday morning ready to pay a $900 million fine after getting caught carrying out a 14-year-long scheme of illegal market manipulation.

Judge Laura Taylor Swain will decide whether to accept the financial settlement — part of a total $1.8 billion in criminal and civil penalties — and close the book on the probe of one of Wall Street’s most successful hedge funds.

If accepted, the $900 million payout by Cohen is likely to be the last criminal penalty his firm will face because the government, in court papers, said that in determining the fine, “the criminal conduct included (but is not limited to)” the actions of those already convicted.”

So while the criminal probe continues into SAC Capital, which this week changed its name to Point72 Asset Management to reflect its new role as a family office managing only Cohen’s vast fortune, the billionaire investor will not be on the hook for additional fines even if more traders at the Stamford, Conn., office get indicted and convicted in the future.

That wholesale criminal-penalty position seems to differ from the terms last November. At that time, when SAC general counsel Peter Nussbaum pleaded guilty for the firm, he said the pleas were based on the conduct of the six employees who had earlier pleaded guilty.

Since then, two former SAC employees, Michael Steinberg and Mathew Martoma, were convicted at trial.

Judge Swain appeared to be thinking about the wholesale penalty when an order she filed Wednesday asked both the government and SAC to explain whether the amounts SAC earned by insider trading takes into account all “culpable” persons involved at the firm or only that of the eight employees who have been convicted.

While the deal appears to set a limit on what SAC itself might have to pay, it still doesn’t put the 57-year old Cohen, among the most successful traders ever on Wall Street, in the clear.

The feds have not charged him with any criminal wrongdoing, although testimony in court identified him as the primary target of the years-long and ongoing probe by US Attorney Preet Bharara.

Cohen and SAC also are targets of a lawsuit filed by shareholders of Elan and Wyeth, the companies where Martoma received illegal tips. Those shareholders oppose Thursday’s proposed deal because SAC has not admitted to engaging in insider trading in the two drug stocks.

Shareholders also have uncovered new evidence, detailed in court papers made public on March 27, saying Cohen met with Elan Chief Executive Kelly Martin and Martoma at a private dinner at Cohen’s home in Greenwich, Conn., before the release of the results of its secret drug trials.