Ruinous Restitution
Michael Shapiro, the co-chair of the white-collar defense practice at Carter Ledyard & Milburn in New York, said a conviction of SAC may lead to “enormous fines and potentially ruinous amounts of restitution” from the firm.
Prosecutors may seek billions of dollars from Cohen’s personal fortune by claiming in the criminal case and their civil forfeiture lawsuit that he “co-mingled” illegal profits from insider trading with other assets he legitimately earned, Shapiro said.
“His house, his art -- they can go after that,” Shapiro said.
Cohen is one of the world’s biggest art collectors, with works by Van Gogh, Manet, de Kooning, Picasso, Cezanne, Warhol, Johns and Richter.
Determining whether Cohen’s own assets include proceeds of SAC’s insider trading will be “a battle for the forensic accountants” that may take years, said Jacob Frenkel, a former SEC lawyer now with Shulman Rogers Gandal Pordy & Ecker PA in Potomac, Maryland.
Bharara Success
The government has presented a case that it’s likely to win, given the success rate Manhattan U.S. Attorney Preet Bharara’s office has had against insider traders. The office has won convictions at trial or in guilty pleas in 100 percent of the cases brought. That could herald the demise of Cohen’s fund, which has about $13.9 billion under management, of which about $7.5 billion is part of Cohen’s own $9 billion fortune.
“This is effectively a death knell” for SAC, Carney said. “Clearly, the Justice Department must have made the determination that there were so many corrupt employees that they outweighed the other honest employees.”
Today’s charges aren’t the first time Bharara has sought charges against a business. In February 2012, his office charged Wegelin & Co., Switzerland’s oldest private bank, for helping U.S. taxpayers hide assets from the Internal Revenue Service. Wegelin pleaded guilty and was ordered to pay almost $58 million.