Matthew Goldstein

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Steve Cohen runs away from his Fairfax co-defendants

May 23, 2011

Steven Cohen wants a five-year-old stock manipulation lawsuit filed by Canadian insurer Fairfax Financial Holdings to go away.

Earlier this month, lawyers for Cohen’s SAC Capital Advisors filed a motion for summary judgment, claiming Fairfax has failed to produce any evidence his $13 billion hedge fund conspired with other traders to crush the insurers stock. SAC Capital’s lawyers write that even though Fairfax has “received millions of pages of documents from SAC, other defendants, and third parties…not a single scrap of evidence suggests that Mr. Cohen engaged in even one of these alleged acts.”

Fairfax, in the long-running lawsuit, contends that SAC Capital conspired with other big named hedge funds to spread negative information about Fairfax to drive down the stock’s price. The insurer contends the hedge funds were shorting–or betting against Fairfax’s stock.

But in the process of asking a New Jersey state judge to dismiss Fairfax’s claims against SAC Capital, Cohen appears willing to put some distance between himself and his hedge fund peers.

His lawyers write in the motion papers filed with the clerk’s office of the Morris County, N.J. Courthouse:

The likelihood of jury confusion is tremendous given the complexity of the issues, the number of defendants and the sheer volume of evidence, almost none of which actually involves SAC. This risk is particularly problematic given Plaintiff’s ample allegations of unsavory acts by others. Lumping SAC into such a situation is inappropriate and unfair.

Indeed, SAC Capital is the first of several hedge funds to file for summary judgment and to be dismissed from Fairfax’s lawsuit. Other hedge funds named as defendants in the alleged short-selling conspiracy include Dan Loeb’s Third Point, James Chanos’ Kynikos Advisors and Adam Sender’s Exis Capital.

Last month Reuters reported on some embarrassing emails penned by Loeb that have emerged during discover in the case. In the emails, Loeb used graphic and foul language to describe Fairfax’s CEO Prem Wata. Loeb, in other emails, also expressed disappointment that Fairfax’s stock had not fallen as much as he had hoped.

If the Fairfax case goes to trial, it would appear Cohen–whose fund already is caught-up in the federal governments ongoing insider trading probe–wants to separate himself from those kind of potentially incendiary headlines.