Stevie Cohen Unplugged
By Jennifer Ablan
Steven A. Cohen, one of the world’s most successful and secretive billionaire hedge fund managers, shared some of his thinking on insider trading, something his worst critics have alleged SAC Capital knows a thing or two about.
Cohen in sworn deposition testimony earlier this year, an extended excerpt of which was obtained by my prolific colleague and partner-in-crime Matthew Goldstein, said: “The way I understand the rules on trading on inside information, it’s very vague.”
Cohen added: “It’s my belief that the idea of material nonpublic informing could be interpreted differently, depending on which side of the transaction you’re on.” At one point, the 55-old-trader loses his cool a bit with Fairfax’s lawyer, Michael Bowe, commenting: “Well, you know, we’re having this conversation for about three hours about what’s material and whatnot. It’s pretty clear that you and I have a different view on it.”
Cohen’s deposition testimony in February and April this year was part of a long-running civil lawsuit filed by Canadian insurer Fairfax Financial, which we reported on exclusively here.
The 600-plus pages of testimony makes for fascinating reading. Cohen goes on to define the term “edge” and provides a window into his web of contacts including DanielLoeb, the American hedge fund manager and founder of Third Point LLC.
Martin B. Klotz, a lawyer for Cohen and SAC Capital, also made a memorable appearance in the deposition when he objected to Bowe’s reference to Cohen as “Stevey.”
LAWYER V. LAWYER
BOWE: Okay. So the compliance manual — you have authority, Stevey Cohen, to ignore the compliance manual?
KLOTZ: Object to the form. And I particularly object to the obnoxious, deliberate use of “Stevey” in addressing Mr. Cohen.
BOWE: It wasn’t deliberate. It was a mistake.
KLOTZ: No, it was intentional.
BOWE: Knock it off. How do you know?
KLOTZ: Because I know.
BOWE: I know you’re trying to be a tough guy in front of your client, but why don’t you knock it off? I know you’re trying to be tough — defend your big client. I understand that. This was a mistake.
BOWE: I’m sorry I used the word “Stevey” if I offended you.
COHEN: “I’m not a big client.”
ON THE TERM “EDGE”
BOWE: Mr. Cohen, are you familiar with the term “edge”?
COHEN: “Yes, I am.”
BOWE: That’s a word that you use at S.A.C., correct?
COHEN “I hate that word.”
BOWE: What’s that word mean?
COHEN: “It just means that somebody believes that in a particular situation, stock, that the word suggests that somehow their expectations are different than either investors’ expectations or Wall Street’s expectations.”
BOWE: They think know something everyone else doesn’t, right?
COHEN: “You know, I think that’s an over — I think that’s an incorrect characterization of the word.”
ON HIS WEB OF CONTACTS:
BOWE: Okay. Well, back in 2002 through 2006, your group, at that point in time did you talk to other funds?
COHEN: “I talked to — I’ve always talked to very few funds.”
BOWE: Which funds then — which funds did you typically talk to?
COHEN: “I might talk to my friend, Jay Goldman, he’s someone I might talk to. I might talk to —
BOWE: What fund is he at?
COHEN: “Jay Goldman Associates. Who else do I talk to? I might talk to — I mean, I might — it’s not something I did a lot. I mean, very few funds. I talked to a friend of mine, Ken Ginsberg, who is an old friend from high school. And then very rarely would I talk to somebody in other firms, but it certainly happened.”
BOWE: Okay. Since it happened so rarely, can you tell me what funds?
COHEN: “Well, I mean, Adam Sender, I mean there were times in my career where I’ve spoken to him.”
BOWE: Okay, what other funds?
COHEN: “You know, there might have been a few communications with Dan Loeb in my career.” Certainly Kingdon, I can remember talking to somebody over there.”