Tuesday, March 19, 2013

Another Politically Connected Financial Predator Is Too Rich To Jail-- Steve Cohen Gets The Equivalent Of A Big Traffic Ticket


I have to admit I was surprised the other day to see a tweet from reactionary Southern California Congressman Darrell Issa quoting James Madison. It flew right in the face of the Grover Norquist-GOP nihilism that calls for shrinking government down to the size it can be drown in a bathtub: " If men were angels, no government would be necessary."

Ideologically, Republicans don't usually see government as part of the solution, but as part of the problem. Where Democrats expect government to help right the power imbalance between ravenous predators in the financial world out to enslave the rest of us, Republicans demand government get out of the way of businessmen whose greed will result in progress. (Watch the clip from Fox News above, where many of them feel there should be no government regulations.)

Steve Cohen is just that kind of greed-obsessed financial predator each party supposedly approaches from a different angle. Cohen, founder and CEO at hedge fund SAC Capital Investments, has spent hundreds of thousands of dollars bribing (legalistically) politicians on both sides of the aisle. One day he'll write a check for $28,500 to the Democratic Senatorial Campaign Committee and the next day he'll send max contributions to Eric Cantor, Miss McConnell, Dave Camp (Chairman of House Ways and Means), Pat Toomey and then top it off with $30,800 to the National Republican Campaign Committee. He finances corrupt conservatives on both sides of the aisle-- and with the kind of big bucks they pay attention to. He's ranked the 106th richest man in the world, with a net worth of around 9 billion dollars.

Last year, the New York Times reported that Cohen was over his head in criminal activities. (No one ever makes billions of dollars who isn't.)
Steven A. Cohen, SAC’s billionaire founder, had burnished his reputation as a market wizard by surrounding himself with hard-charging traders-- many of them former college jocks and frat boys who thrived in the fund’s competitive, testosterone-fueled environment.

But the brainy and unassuming Mr. Martoma, armed with a Stanford business degree and an expertise in biomedicine, was part of a wave of SAC hires in a crack new research unit. They were just as driven but had more distinguished pedigrees, hailing from top investment banks and elite schools. They were drawn to the firm, in part, by the lavish annual bonuses Mr. Cohen bestowed upon his top performers, sometimes reaching into the tens of millions of dollars.

When Mr. Martoma walks into Federal District Court in Manhattan on Monday morning, he will represent something else: the latest in a growing list of former SAC employees who find themselves accused of breaking the law.

The case against Mr. Martoma, made in a criminal complaint filed by the government last week, represents a watershed moment in its multiyear investigation of insider trading at SAC. For the first time, prosecutors have linked Mr. Cohen to trading activity that the government contends was illegal.

Mr. Martoma has rebuffed efforts by federal authorities to persuade him to plead guilty and cooperate, said a person briefed on the investigation who was not authorized to discuss the case. But if he were to “flip,” Mr. Martoma could help the government with its investigation of Mr. Cohen.
No waterboarding in this case-- and, predictably, in the end, Martoma has decided to protect Cohen, even though Cohen had personally signed off on the illegal trades. Five of his traders have been arrested and three have already plead guilty. The indictments never even mentioned Cohen by name. He's referred to as "Portfolio Manager A." When his first wife sued him 3 years ago for racketeering and insider trading. the government dismissed the case as speculation and rumor mongering.

Friday, the SEC announced Cohen's firm "has agreed to pay" $616 million to make the whole mess go away-- although they tried painting it in more heroic terms: "The settlement involving CR Intrinsic ranks as one of the largest ever assessed in an SEC action and exceeds the $400 million paid by Michael Milken to settle civil charges in 1990, including insider trading and stock manipulation."
The Securities and Exchange Commission announced Friday that CR Intrinsic Investors will pay $602 million, a record sum for an insider-trading case. The other affiliate, Sigma Capital Management, settled for nearly $14 million. Neither entity admitted nor denied wrongdoing, and their agreements await court approval.

For years the government has suspected SAC of profiting from illegal trading tips. At least five people have been accused of insider trading while they worked for the hedge fund. Federal authorities have never charged Cohen, but the government’s persistent scrutiny of his firm has sullied his mythical status in the hedge fund world.

The most damaging case was the one involving CR Intrinsic and one of its former portfolio managers, Matthew Martoma, who was charged by the government with running the most lucrative insider-trading scheme ever while working closely with Cohen.

In separate cases, federal prosecutors and the SEC accused Martoma of getting secret tips from a neurologist about the results of a clinical trial involving an Alzheimer’s drug. The tips allegedly enabled the hedge fund and others to make more than $276 million in illegal profits or avoided losses. Martoma denies the charges.
None of the politicians who have taken money from Cohen and his companies have given it back or contributed the amounts to charity or anything like that. In the past few years, the politicians who have benefited the most from Cohen's... generosity, were Eric Cantor (R-VA), Kelly Ayotte (R-NH), Dave Camp (R-MI) and Pat Toomey (R-PA), three sleazy characters with reputations for taking bribes from Wall Street crooks in return for furthering narrow special interests and personal agendas. He has also been a major financier to Eric Cantor's own PAC, Every Republican Is Crucial (EricPAC).

Ironically, Cohen, who lives in a 35,000 square on 14 acres in Greenwich, Connecticut, draws a billion dollars a year from his company as a personal salary, and is one of America's biggest private spenders on art and fake art (with his own personal art museum), is on the board of the Robin Hood Foundation.

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At 12:19 PM, Blogger TheDailyLmo said...

Doesn't SAC get to claim the fine as a tax deduction?

At 1:40 PM, Anonymous me said...

Only slightly OT:

Obama caves again

At 1:41 PM, Anonymous me said...

Lmo, it will more likely be a tax credit.


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