SAC Capital Advisors Likely to Be Indicted

The New York Times is reporting that sources are saying federal authorities are poised to indict SAC Capital Advisors on charges of insider trading. SAC is a hedge fund operated by billionaire Steven A. Cohen. The report says that Cohen will not be charged in the indictment. Previously, two SAC employees, Matthew Martoma and Michael Steinberg were charged criminally.

The indictment would charge the company with conspiracy to commit insider trading. There is a five year statute of limitations to any substantive fraud charge, such as insider trading, under federal law. Since most of the reputedly illicit trading, which took place in Dell computer securities, occurred more than five years ago, the conspiracy charge would allow the government to include older trades. Under federal law a conspiracy beginning more than five years before the date of indictment may be charged in its entirety if it has extended to a time within the five year statute of limitations. That is apparently what has happened in this case.

It is very rare for the government to indict a company. There are several reasons for this. First, a company acts through its employees and officials. Usually, the government prefers to charge the persons responsible rather than the inanimate company. Second, charging the company has significant side effects, usually involving innocent people. For instance, companies often fail after being indicted, thus leaving many innocent employees jobless.

In this case there is very serious question about whether SAC would survive an indictment. Because of the federal investigation, investors have already pulled about $5 billion out of SAC since the beginning of the year. An indictment could result in further investors removing their money and/or large institutional trading partners suspending business with SAC. Either could very well spell the end for the hedge fund.

Sources said that either an indictment or a plea agreement between SAC and the federal government could come in the next few days.

Please see The New York Times article for more information.

About Richard Serafini

Welcome to my blog. I am an attorney and practice in the area of corporate trial work. Areas of particular emphasis are white collar defense, securities litigation, health care litigation, internal investigations, RICO, and financial litigation. I will be posting interesting developments in my areas of interest. I hope that you find this blog helpful and informative.