Counterparties: SAC Capital punishment

May 21, 2013

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SAC Capital Advisors’ $616 million insider trading settlement back in March hasn’t settled much of anything.

On Friday, the hedge fund announced to investors it would quit cooperating with federal authorities, and it later came out that Cohen was subpoenaed by the Manhattan US attorney’s office last week to testify in front of a grand jury. Peter Henning runs down a list of reasons why it’s in SAC’s interest to stop cooperating with the authorities, and notes that while SAC can’t win a fight over subpoenas, it can make enough time-consuming challenges to them to force prosecutors to ask for fewer records. The clock is ticking, after all: the statute of limitations on this particular insider trading case will be up in July.

Matthew Goldstein pulls out two interesting takes on the Cohen subpoena. First, a former prosecutor tells him the move seems more theoretical than practical: “I think it’s purely an effort to cause him to assert his Fifth Amendment privilege and knowing that will get communicated to the media”. Second, the move likely means that Cohen himself is not the target, as it’s rare to subpoena the person who is directly under investigation.

This may even mean prosecutors are effectively admitting defeat: Columbia law professor John Coffee told Bloomberg they likely wouldn’t “regard a criminal prosecution against the company as a victory without a conviction against Cohen”.

Bloomberg reports that the recent legal developments might push Cohen to purge his hedge fund of outside investors and propose a deferred prosecution agreement, which would require SAC to admit wrongdoing, pay a fine, and agree to face prosecution if it broke the law in the future — but would save Cohen from indictment and allow him to continue managing his own billions.

Matt Levine says this sort of agreement would mean Cohen’s “two layers of deniability” management system worked as it was supposed to. In the end, this may be a best-case scenario for Cohen. It’s unclear how many outside investors SAC would be left after a grand jury investigation, anyway. — Shane Ferro

On to today’s links:

Transport by rail is reshaping the US energy industry – CME

Ireland does not want to be blamed for Apple’s tax avoidance – Reuters

New Normal
“We have to recognize that the face of American poverty is an increasingly suburban one” – NYT
Don’t forget the suburbs! – Architect Magazine
“Welcome to the new Wall Street, where back-office work trumps backslapping” – WSJ
Bloomberg chat is getting a new rival – WSJ

Jamie Dimon will keep his double chairman-CEO role – DealBook
Everything you need to know about JPMorgan today – Reuters

EU Mess
Spanish unemployment could hit 30% by 2014 – FT Alphaville
The failure to combat European youth unemployment “is a scandal beyond compare,” says former German Chancellor Helmut Schmidt – Der Spiegel
Mobile data is a luxury good in southern Europe – Quartz

“Washington has all but abandoned efforts to help the economy recover faster” – Washington Post
“Blame-shifting to amorphous systems and faceless ‘lobbyists’ weakens our understanding of what is really going on in financial reform” – American Prospect

Why pre-tax income inequality matters – Chris Dillow

Good Questions
How many users does Tumblr really have? – Peter Kafka

Billionaire Whimsy
The US is leading the recovery in the private jet industry – Bloomberg

Great Captions
“Well-being of two hypothetical poodles over time” – Worthwhile Canadian Initiative

And, of course, there are many more links at Counterparties.


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