SAC Comment
Jonathan Gasthalter, a spokesman for SAC at Sard Verbinnen & Co., declined to comment. Peter Donald, a spokesman for the Federal Bureau of Investigation in New York, didn’t respond to e-mail requests for comment. Jennifer Queliz, a spokeswoman for Manhattan U.S. Attorney Preet Bharara, whose office has been overseeing the probe, declined to comment.
Federal prosecutors in New York have charged 83 people and won 73 convictions of those accused of using inside information to trade. Nine former or current SAC employees have been linked to insider trading. Cohen hasn’t been charged in a crackdown that became public with the arrest of Galleon Group LLC co- founder Raj Rajaratnam in October 2009.
Self-Incrimination
Cohen, who refused to testify before a U.S. grand jury investigating SAC trades, has denied wrongdoing since prosecutors in November arrested Martoma in what they called the biggest insider-trading scheme ever. He and his fund have been investigated by the FBI since at least 2007 and haven’t been accused of wrongdoing, court records show.
According to prosecutors, SAC, following a July 20, 2008, 20-minute phone call from Martoma to Cohen, sold shares in Elan Corp. and Wyeth LLC, now a unit of Pfizer Inc. Martoma allegedly got an illegal tip about disappointing results in a clinical trial for a drug to treat Alzheimer’s disease that both companies were developing. SAC paid a record $602 million to settle a Securities and Exchange Commission case over the trades, without admitting or denying wrongdoing.
Martoma, who has pleaded not guilty, is scheduled to go on trial in Manhattan federal court in November. As part of their probe into SAC, prosecutors have interviewed Tom Conheeney, SAC’s president; Steve Kessler, head of compliance; Phillipp Villhauer, head trader; and Chief Operating Officer Solomon Kumin, according to second person familiar with the matter.
Plan B
Without some Martoma turnabout in the next two weeks, prosecutors and the FBI will have to focus on other SAC transactions in their effort to charge Cohen.
In one pending criminal case, prosecutors said SAC e-mails show trader Michael Steinberg, 41, traded on inside tips funneled from his analyst Jon Horvath, which were obtained from a Dell employee about negative financial results reported in late August 2008. Prosecutors claim that shortly after, SAC units netted almost $4 million by betting against shares in the computer maker. One 2008 e-mail shows Cohen was consulted about the trades after his portfolio managers disagreed about Dell’s probable earnings.