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US charges SAC Capital with insider trading

SAC Capital Advisors portfolio manager Michael Steinberg walks out of a New York courthouse on March 29, 2013
SAC Capital Advisors portfolio manager Michael Steinberg walks out of a New York courthouse after being charged by US prosecutors with engaging in insider trading in New York City on March 29, 2013. The Justice Department filed criminal charges against he

The Justice Department Thursday filed criminal charges against hedge-fund giant SAC Capital for insider trading, sending a strong sign to Wall Street of intolerance for insider trading.

The indictment follows a multi-year probe into SAC that has previously netted several employees and forced the financial giant to pay more than $614 million in a civil settlement.

The case centers on a series of trades of technology, pharmaceutical and other companies based on allegedly insider information that the government says allowed SAC to net hundreds of millions of dollars in illegal profits and avoid losses "at the expense of members of the investing public."

The fraud was engineered by "numerous" employees and enabled by "institutional" practices that encouraged illegal insider trading, the indictment said.

The resulting scale of the fraud was "substantial, pervasive and on a scale without known precedent in the hedge fund industry," according to the government.

An SAC spokesman did not respond to a request for comment.

"SAC Capital and its management fostered a culture of permissiveness," FBI Assistant Director George Venizelos said at a news conference, according to the prepared statement.

"To be blunt, SAC - through the actions and inactions of its management - not only tolerated cheating, it encouraged it."

Venizelos described SAC's compliance program in terms of the expression "See no evil. Hear no evil. Speak no evil."

It excused warning signs of insider trading and was "woefully inadequate" to the job.

The criminal indictment does not name SAC's prominent founder and chief, Steven Cohen.

However, in a separate action, the Securities and Exchange Commission last week announced that it was seeking to bar Cohen from overseeing investor funds after charging him with poor oversight of employees who engaged in alleged insider trading. An SAC spokesman said Cohen would "vigorously" fight the SEC charge.

As news of the likely criminal indictment against SAC spread on Wall Street in recent days, several analysts have pointed out that previous criminal cases against accounting firm Arthur Andersen and others have often spelled the death-knell for those firms.