SAC Capital and Cohen haven’t been charged with any wrongdoing regarding the trades. Cohen has said he acted appropriately in selling his $700 million stakes in Wyeth LLC and Elan Corp.
The indictment of Martoma and the SEC complaint against him and CR Intrinsic contain only snippets from e-mails or instant messages to support government claims of insider trading. By contrast, the case against Raj Rajaratnam, co-founder of the Galleon Group LLC hedge fund, was based on detailed e-mails and transcripts of secretly recorded phone conversations.
Episodic Batches
In building their case against Martoma, prosecutors and investigators from the SEC received only episodic batches of instant SAC messages dated in the weeks and months before the trades under investigation, the first person familiar with the matter said.
Other SAC e-mails, which regulators relied on to support their case, were preserved because some of the recipients moved them out of their electronic mailboxes into personal folders, said another person briefed on the matter. Communications from the fall of 2008 and later were also obtained by prosecutors and regulators.
SAC turned over the electronic communications in response to subpoenas and voluntary document requests, the people said. There was no attempt by prosecutors to impound SAC computers to conduct a forensic search for deleted files, according to the two people familiar with the matter.
Seizing Computers
Seizing computers requires a search warrant and demands a higher degree of evidence of wrongdoing, said John Moscow, former deputy chief of investigations for the New York District Attorney’s Office and now in private practice with Baker Hostetler LLP in New York.
“You go with subpoenas when you can,” he said. “Generally a prosecutor needs reasonable cause to believe that property constitutes evidence of crime, that the property is located in a particular location, and that a crime was committed to obtain a search warrant.”
The SEC isn’t authorized to seize computers for civil litigation.