'TxPm' pid='13052' datel Wrote:Let's be real does anyone honestly think Stevie Cohen is EVER going to be indicted much less charged? No way. Yet how much of that $275Mil profit you think went into Stevie's wallet? I'd be willing to guess at least 10%....$27.5 Mil not to shabby..

It’s Time for Obama to Bite the Hedge-Fund Sharks

There’s nothing like a good insider-dealing story, and this could be one of the biggest since Rudy Giuliani, then an aggressive young U.S. attorney on the make, took down Ivan Boesky twenty-five years ago. The man in the dock is Mathew Martoma, a little-known thirty-eight-year-old hedge-fund trader who stands accused of generating two hundred and seventy-six million dollars by trading in the stocks of two health-care companies on the basis of information supplied by a neurologist involved in a clinical trial of a new Alzheimer’s drug. But it is pretty clear that the prosecutors’ ultimate target is Martoma’s former boss: Steven A. Cohen, the founder and driving force of the eponymous S.A.C. Capital, one of the world’s most successful hedge funds.

Cohen, a secretive trader whose stock-picking acumen has turned him into a billionaire many times over, has long been associated with unsubstantiated rumors of insider trading, including some circulated by his former wife. An eager art collector, he keeps Damien Hirst’s famous tiger shark suspended in formaldehyde, which he reportedly bought for twelve million dollars, in his office in Stamford, Connecticut. Long known as one of Wall Street’s most effective predators, Cohen evidently thinks that is a good joke, as well as a good investment. But now he is the hunted one, and the sharks circling him are getting ever closer.

The principal one is Preet Bharara, Giuliani’s latest successor as U.S. attorney. Bharara’s long-running insider-trading investigation has already sent to jail some big names, including Rajat Rajaratnam, another hedge fund manager, and Rajat Gupta, a former head of McKinsey and member of the board at Goldman Sachs. (George Packer wrote about Rajaratnam’s trial for the magazine .) In the past couple of years, four people associated with S.A.C. have been charged with insider trading, and one has pleaded guilty. But this is the first case that involves Cohen directly.

There is no allegation in the Martoma charges—criminal and civil —that Cohen knew Martoma was trading on the basis of information obtained from Professor Sidney Gilman, a retired neurologist from the University of Michigan, who was helping oversee the clinical trials of the new drug being developed by Elan and Wyeth, two pharmaceuticals companies. However, the complaints do assert that Cohen, identified as “Portfolio Manager A,” personally authorized many of Martoma’s trades, and pocketed the bulk of the profits they generated. In a statement accompanying the indictment, Bharara was careful to state that S.A.C., and by extension Cohen, reaped enormous rewards from the criminal wrongdoing, even though they weren’t being charged. “By cultivating and corrupting a doctor with access to secret drug data, Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time,” Bharara said . And he went on: “As a result of the blatant corruption of both the drug research and securities markets alleged, the hedge fund made profits and avoided losses of a staggering $276 million, and Martoma himself walked away with a $9 million bonus for his efforts.”

The case against Boesky was one of the first big Wall Street stories I covered, and I will be watching this one closely to see how it develops. Will Cohen be called on to testify against Martoma? (According to reports, he has already been deposed in the case.) Will Martoma try to implicate his former boss? (If he had really damning evidence, he would presumably have used already it as the basis of a plea bargain. Still, as prosecutors like to tell people involved in big investigations, it’s never too late to sign on a coöperator.) What will Dr. Gilman, who wasn’t charged in the criminal case but does face civil charges, have to say? (He is coöperating with the government.) How strong is the feds’ case? Insider-trading cases are often hard to prove, and the events at the center of this one took place quite a while ago—in 2008.

Doubtless, the case will drag through the courts for months, or years. But it raises an immediate policy question, which has got a bit lost in all the talk about the fiscal cliff: What about eliminating the egregious tax break that hedge-fund managers like Cohen enjoy? While running for President in 2008, Obama promised to eliminate the so-called carried-interest deduction, which allows managers of hedge funds and private-equity funds to classify much of their income as capital gains, which are taxed at fifteen per cent, rather than as ordinary income, which faces a top rate of thirty-five per cent. But the deduction remains, unchanged. A combination of outright opposition from Republicans, foot-dragging on the part of Wall Street Democrats, and timidity on the part of the Administration allowed the proposed reform to die in Congress.

Now the idea is back on the table. This summer, the Obama campaign criticized Mitt Romney for taking advantage of the carried-interest deduction to reduce his tax rate, calling it a “tax trick.” In 2010, $7.5 million of Romney’s income, about a third of the total, came in the form of carried interest from Bain Capital; in 2011, he earned $5.5 million in carried interest, about a quarter of his total income. The publicity about how Romney and other ultra-rich financiers exploit the loophole provoked widespread outrage. Even Rupert Murdoch called the carried-interest deduction a “racket ” and called for it to be axed.

With both parties focused on ways to raise tax revenues as part of a deal to avert the fiscal cliff, this is the time. If there was ever a way to raise revenues without doing any damage to the economy, eliminating the carried-interest deduction is it. Defenders of the loophole claim it stimulates risk taking, but that argument doesn’t bear inspection. Risk-taking involves investing your own capital and putting it at risk. The income covered by the carried-interest deduction is generated by the hefty management fees that investors pay to firms like S.A.C. and Bain Capital. It has nothing to do with the returns such firms receive on their own invested capital.

To be sure, relative to what is needed to reduce the budget deficit, the sums involved aren’t very large. According to the Joint Committee on Taxation, eliminating the carried-interest deduction would generate about fifteen billion dollars over five years. But there is an important principle involved. For far too long, politicians in both parties have enabled folks like Cohen to enjoy what amounts to a public subsidy for their lavish lifestyles. When the budget negotiations really get going after Thanksgiving, Obama should insist on eliminating this absurd and offensive giveaway as part of any agreement. The likes of Cohen and Romney don’t need a handout from regular taxpayers. And neither does Damien Hirst.

to firms like S.A.C. and Bain Capital. It has nothing to do with the returns such firms receive on their own invested capital.

To be sure, relative to what is needed to reduce the budget deficit, the sums involved aren’t very large. According to the Joint Committee on Taxation, eliminating the carried-interest deduction would generate about fifteen billion dollars over five years. But there is an important principle involved. For far too long, politicians in both parties have enabled folks like Cohen to enjoy what amounts to a public subsidy for their lavish lifestyles. When the budget negotiations really get going after Thanksgiving, Obama should insist on eliminating this absurd and offensive giveaway as part of any agreement. The likes of Cohen and Romney don’t need a handout from regular taxpayers. And neither does Damien Hirst.

'admin' pid='13208' datel Wrote:

It’s Time for Obama to Bite the Hedge-Fund Sharks

There’s nothing like a good insider-dealing story, and this could be one of the biggest since Rudy Giuliani, then an aggressive young U.S. attorney on the make, took down Ivan Boesky twenty-five years ago. The man in the dock is Mathew Martoma, a little-known thirty-eight-year-old hedge-fund trader who stands accused of generating two hundred and seventy-six million dollars by trading in the stocks of two health-care companies on the basis of information supplied by a neurologist involved in a clinical trial of a new Alzheimer’s drug. But it is pretty clear that the prosecutors’ ultimate target is Martoma’s former boss: Steven A. Cohen, the founder and driving force of the eponymous S.A.C. Capital, one of the world’s most successful hedge funds.

Cohen, a secretive trader whose stock-picking acumen has turned him into a billionaire many times over, has long been associated with unsubstantiated rumors of insider trading, including some circulated by his former wife. An eager art collector, he keeps Damien Hirst’s famous tiger shark suspended in formaldehyde, which he reportedly bought for twelve million dollars, in his office in Stamford, Connecticut. Long known as one of Wall Street’s most effective predators, Cohen evidently thinks that is a good joke, as well as a good investment. But now he is the hunted one, and the sharks circling him are getting ever closer.

The principal one is Preet Bharara, Giuliani’s latest successor as U.S. attorney. Bharara’s long-running insider-trading investigation has already sent to jail some big names, including Rajat Rajaratnam, another hedge fund manager, and Rajat Gupta, a former head of McKinsey and member of the board at Goldman Sachs. (George Packer wrote about Rajaratnam’s trial for the magazine .) In the past couple of years, four people associated with S.A.C. have been charged with insider trading, and one has pleaded guilty. But this is the first case that involves Cohen directly.

There is no allegation in the Martoma charges—criminal and civil —that Cohen knew Martoma was trading on the basis of information obtained from Professor Sidney Gilman, a retired neurologist from the University of Michigan, who was helping oversee the clinical trials of the new drug being developed by Elan and Wyeth, two pharmaceuticals companies. However, the complaints do assert that Cohen, identified as “Portfolio Manager A,” personally authorized many of Martoma’s trades, and pocketed the bulk of the profits they generated. In a statement accompanying the indictment, Bharara was careful to state that S.A.C., and by extension Cohen, reaped enormous rewards from the criminal wrongdoing, even though they weren’t being charged. “By cultivating and corrupting a doctor with access to secret drug data, Mathew Martoma and his hedge fund benefited from what might be the most lucrative inside tip of all time,” Bharara said . And he went on: “As a result of the blatant corruption of both the drug research and securities markets alleged, the hedge fund made profits and avoided losses of a staggering $276 million, and Martoma himself walked away with a $9 million bonus for his efforts.”

The case against Boesky was one of the first big Wall Street stories I covered, and I will be watching this one closely to see how it develops. Will Cohen be called on to testify against Martoma? (According to reports, he has already been deposed in the case.) Will Martoma try to implicate his former boss? (If he had really damning evidence, he would presumably have used already it as the basis of a plea bargain. Still, as prosecutors like to tell people involved in big investigations, it’s never too late to sign on a coöperator.) What will Dr. Gilman, who wasn’t charged in the criminal case but does face civil charges, have to say? (He is coöperating with the government.) How strong is the feds’ case? Insider-trading cases are often hard to prove, and the events at the center of this one took place quite a while ago—in 2008.

Doubtless, the case will drag through the courts for months, or years. But it raises an immediate policy question, which has got a bit lost in all the talk about the fiscal cliff: What about eliminating the egregious tax break that hedge-fund managers like Cohen enjoy? While running for President in 2008, Obama promised to eliminate the so-called carried-interest deduction, which allows managers of hedge funds and private-equity funds to classify much of their income as capital gains, which are taxed at fifteen per cent, rather than as ordinary income, which faces a top rate of thirty-five per cent. But the deduction remains, unchanged. A combination of outright opposition from Republicans, foot-dragging on the part of Wall Street Democrats, and timidity on the part of the Administration allowed the proposed reform to die in Congress.

Now the idea is back on the table. This summer, the Obama campaign criticized Mitt Romney for taking advantage of the carried-interest deduction to reduce his tax rate, calling it a “tax trick.” In 2010, $7.5 million of Romney’s income, about a third of the total, came in the form of carried interest from Bain Capital; in 2011, he earned $5.5 million in carried interest, about a quarter of his total income. The publicity about how Romney and other ultra-rich financiers exploit the loophole provoked widespread outrage. Even Rupert Murdoch called the carried-interest deduction a “racket ” and called for it to be axed.

With both parties focused on ways to raise tax revenues as part of a deal to avert the fiscal cliff, this is the time. If there was ever a way to raise revenues without doing any damage to the economy, eliminating the carried-interest deduction is it. Defenders of the loophole claim it stimulates risk taking, but that argument doesn’t bear inspection. Risk-taking involves investing your own capital and putting it at risk. The income covered by the carried-interest deduction is generated by the hefty management fees that investors pay to firms like S.A.C. and Bain Capital. It has nothing to do with the returns such firms receive on their own invested capital.

To be sure, relative to what is needed to reduce the budget deficit, the sums involved aren’t very large. According to the Joint Committee on Taxation, eliminating the carried-interest deduction would generate about fifteen billion dollars over five years. But there is an important principle involved. For far too long, politicians in both parties have enabled folks like Cohen to enjoy what amounts to a public subsidy for their lavish lifestyles. When the budget negotiations really get going after Thanksgiving, Obama should insist on eliminating this absurd and offensive giveaway as part of any agreement. The likes of Cohen and Romney don’t need a handout from regular taxpayers. And neither does Damien Hirst.

to firms like S.A.C. and Bain Capital. It has nothing to do with the returns such firms receive on their own invested capital.

To be sure, relative to what is needed to reduce the budget deficit, the sums involved aren’t very large. According to the Joint Committee on Taxation, eliminating the carried-interest deduction would generate about fifteen billion dollars over five years. But there is an important principle involved. For far too long, politicians in both parties have enabled folks like Cohen to enjoy what amounts to a public subsidy for their lavish lifestyles. When the budget negotiations really get going after Thanksgiving, Obama should insist on eliminating this absurd and offensive giveaway as part of any agreement. The likes of Cohen and Romney don’t need a handout from regular taxpayers. And neither does Damien Hirst.

'jft310' pid='13073' datel Wrote:Maybe IOC will sell out????? Then these shorts would have to cover. And where does the buying of over 9 million shares take the PPS???????Can we assume higher????I think so.

'trans' pid='13212' datel Wrote:What is discussed here for SAC is a minute tip of the iceberg. He paid top commissions to brokers to get the "first phone call" on tips. imo, he's trashed a bundle of undeserving companies thru the years .. He also makes sure of confidentiality agreements with his employees and big bucks to them

New Trading Case Casts a Deeper Shadow on a Hedge Fund Mogul

James Estrin/The New York Times and Steve Marcus/ReutersPreet Bharara, left, United States attorney in New York, is trying to build a case against Steven A. Cohen of SAC Capital.

In 2010, the billionaire hedge fund manager Steven A. Cohen gave a rare interview to Vanity Fair. He said that he wanted to combat persistent rumors that his firm, SAC Capital Advisors, routinely violated securities laws by trading on confidential information.

“In some respects I feel like Don Quixote fighting windmills,” Mr. Cohen said at the time. “There’s a perception, and I’m trying to fight that perception.”

Federal prosecutors only heightened that perception on Tuesday, bringing a criminal case against a former SAC employee in what Preet Bharara, the United States attorney in Manhattan, who brought the charges in Federal District Court in Manhattan, called the most lucrative insider trading scheme ever charged.

And for the first time, the evidence suggests that Mr. Cohen participated in trades that the government says illegally used insider information — though prosecutors have not said that Mr. Cohen himself knew the information was confidential, and he has not been charged.

Any prosecution of Mr. Cohen would most likely hinge on the cooperation of Mathew Martoma, the former SAC employee charged in the case. Mr. Bharara said in the charges that Mr. Martoma obtained secret data from a doctor about clinical trials for an Alzheimer’s drug being developed by the companies Elan and Wyeth. The information enabled SAC to avoid losses of almost $194 million on the stocks, which it sold and then bet against, reaping $83 million in profit — a total benefit to the firm of more than $276 million. SAC executed the trades shortly after Mr. Martoma e-mailed Mr. Cohen and said he needed to discuss something important.

As to Mr. Cohen’s potential culpability in the case, the crucial issue is what Mr. Martoma told Mr. Cohen that led SAC to quickly dump $700 million worth of stock. Did he provide his boss details on why he had turned sour on Wyeth and Elan? Specifically, did he share the leak about the drug trial’s negative results and identify the source of the secret information? Through a spokesman, he said he was confident he had acted appropriately.

It appears, for now, that Mr. Martoma will fight the charges. But the crucial question, as it relates to Mr. Cohen, is whether at some point Mr. Martoma will reverse course, admit to insider trading and agree to help the government build a case against his former boss. Without Mr. Martoma’s cooperation, it is unlikely that the prosecutors have enough evidence to charge Mr. Cohen.

“This has all the markings of a case where the government goes after the smaller fish and then pressures them to flip so they can get the whale,” said Bradley D. Simon, a criminal defense lawyer and former federal prosecutor in New York.

The government has several weapons for its effort to persuade Mr. Martoma to agree to a plea, including the stiff sentences for insider trading. Under the federal sentencing guidelines, Mr. Martoma could receive more than 15 years in prison, a term that could be reduced — or avoided altogether — if he agreed to testify against Mr. Cohen.

F.B.I. agents arrested Mr. Martoma, 38, early Tuesday morning at his home in Boca Raton, Fla., a nearly 8,000-square-foot Mediterranean-style mansion on the grounds of the elite Royal Palm Yacht and Country Club. He lives there with his wife, a pediatrician, and three children. A graduate of Duke University and Stanford University’s business school, Mr. Martoma is expected to make an appearance in Federal District Court in Manhattan Monday morning.

Described by a former colleague as low-key and cerebral, Mr. Martoma is one of scores of traders who have earned millions of dollars working under Mr. Cohen and feeding him their best investment ideas. He joined SAC in 2006. In 2008, the year he participated in the alleged illegal trade, the firm paid Mr. Martoma a $9.3 million bonus. But SAC fired him in 2010 after two years of subpar performance.

Charles A. Stillman, a lawyer for Mr. Martoma, said on the day of his arrest, “What happened today is only the beginning of a process that we are confident will lead to Mr. Martoma’s full exoneration.”

It is no secret that the government has been circling Mr. Cohen since the middle of last decade, when it began its crackdown on insider trading, an investigation that has resulted in more than 70 criminal charges. Prosecutors have already linked five former SAC employees to insider trading while at the fund — securing three convictions — though none of those cases connected Mr. Cohen to any illicit activity. But the complaint filed on Tuesday puts Mr. Cohen at the center of the supposed improper conduct.

Mr. Cohen, 56, is a legend on Wall Street, having amassed a multibillion-dollar fortune by posting phenomenal investment returns averaging about 30 percent over the last two decades. Starting with a $25 million grubstake, SAC now manages about $13 billion and has 900 employees across the globe. Mr. Cohen has also emerged as a major force in the art world, owning an eclectic collection that includes works by Picasso, Warhol and Cézanne.

Prosecutors have constructed their case against Mr. Martoma, and increased the pressure on him, by securing the cooperation of Dr. Sidney Gilman, the doctor who supposedly leaked to him the Alzheimer’s drug’s trial data. The case against Mr. Martoma will depend largely on Dr. Gilman’s credibility as a witness.

Dr. Gilman, 80, a neurologist at the University of Michigan medical school, was hired by Elan and Wyeth to monitor the trial’s safety, which gave him access to secret information about the results. SAC retained Dr. Gilman as a consultant and paid him about $108,000.

At first, Dr. Gilman’s reports on the trial’s progress were positive, and SAC built a position in the two drug makers worth approximately $700 million, according to prosecutors. But then, on July 17, 2008, Dr. Gilman told Mr. Martoma that there were problems with the drug, the government said.

A few days later, Mr. Martoma e-mailed Mr. Cohen that he needed to discuss something “important,” and the two then spoke for 20 minutes, according to court filings. Over the next four days, at Mr. Cohen’s direction, SAC Capital jettisoned its entire position in the two stocks and then placed a big negative bet on the drug makers, the government said.

On July 30, after disclosure of the poor trial results, shares of Elan and Wyeth sank. According to the prosecutors’ calculations, SAC would have lost about $194 million had it kept the stock; taking a short position instead generated profits of about $83 million.

Dr. Gilman and the Justice Department have entered into a nonprosecution agreement under which he will cooperate in exchange for not being criminally charged.

Thus far, any potential evidence against Mr. Cohen is entirely circumstantial. The government’s complaint includes e-mails about secretly selling the Elan and Wyeth shares through esoteric methods like algorithms and dark pools. But that is common practice among large, sophisticated funds that do not want to alert competitors or move the stock too much. Moreover, while SAC dumped its large positions in the two stocks quickly — raising the question of what prompted it to do so — Mr. Cohen is known for a rapid-fire trading style. He frequently moves aggressively in and out of stocks while processing gobs of information fed to him by his underlings.

It would be difficult for a jury to infer anything incriminating just from the way these trades were executed.

The government in this case also lacks the powerful wiretap evidence that it has used to convict dozens others, including Raj Rajaratnam, the head of the Galleon Group. Federal agents did wiretap Mr. Cohen’s home telephone for a short period in 2008, according to a person with direct knowledge of the investigation who spoke only on the condition of anonymity. But it is unclear whether the eavesdropping, which was first reported by The Wall Street Journal, yielded any fruit.

Even without incriminating wiretap evidence, the government has brought cases that rely almost entirely on witnesses testifying against their bosses.

One of those cases is now under way in federal court in Manhattan. Prosecutors are currently trying the former hedge fund portfolio managers Anthony Chiasson of Level Global Investors and Todd Newman of Diamondback Capital Management. Prosecutors say that the two were part of a conspiracy that made about $68 million illegally trading technology stocks.

The outcome of that trial is expected to depend largely on whether the jury believes the testimony of two cooperating witnesses who admitted to the conspiracy — Spyridon Adondakis and Jesse Tortora, former junior analysts at Level Global and Diamondback. The two say they shared secret information with the defendants. Defense lawyers have attacked the witnesses’ credibility, accusing them of lying to avoid prison.

That case, too, has strong ties to SAC. Mr. Chiasson and his co-founder were star traders under Mr. Cohen before starting the now-defunct Level Global. And the owners of Diamondback are both former SAC employees; one is Mr. Cohen’s brother-in-law, Richard Schimel. Diamondback, which continues to operate, has not been accused of wrongdoing.

“SAC’s extraordinary profits have always been something of a market mystery,” said Sebastian Mallaby, the author of “More Money Than God,” a book on the history of hedge funds. “As more and more lawsuits implicate former SAC traders, we may at last understand where SAC’s profits came from.”