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Poll: Should Feds Settle with ‘Stevie Boy’ Cohen?

Posted by Larry Doyle on September 24, 2013 9:12 AM |

News breaks in the past 24 hours that one of Wall Street’s largest traders, “Stevie-boy” Cohen of SAC Capital, is now looking to cut a deal with the Feds. Is the heat in Stevie’s kitchen getting a little too hot?

As Bloomberg Businessweek reminds us:

After a multiyear investigation conducted by the U.S. Attorney’s Office, the FBI, and the Securities and Exchange Commission, a grand jury indicted SAC Capital on July 25, accusing the firm of fostering a culture where employees engaged in rampant securities fraud.

Now Stevie wants to play Let’s Make a Deal. 

The indictment said traders at SAC engaged in insider trading that was “substantial, pervasive, and on a scale without known precedent in the hedge fund industry.” Manhattan U.S. Attorney Preet Bharara described SAC as “a magnet for market cheaters.” Cohen has denied the charges and maintains that he and his firm behaved appropriately.

But now . . .   

Lawyers for hedge fund SAC Capital Advisors last week reached out to prosecutors in New York to say that SAC founder Steven Cohen is interested in settling the civil and criminal cases against him and his company, according to people familiar with the matter.

The settlement of the criminal case against the firm would likely involve a substantial fine, these people said; the current number being discussed is in the neighborhood of $1 billion.

Let’s take an unscientific poll. What do readers think should happen here?

Should the Feds look to settle? In doing so, do people believe that the Feds will have landed the biggest whale and brought him and his firm to justice?

Or does a settlement send a signal that a double standard persists and justice can be bought if you have the resources and the clout?

Or does a settlement land somewhere in between these opposite ends of the spectrum? Is SAC Capital too large a trading partner for the street and might the Feds create collateral damage if they fully pursue their case? Where is the line drawn in terms of who gets to purchase justice versus having justice served upon them?

All comments encouraged and appreciated.

Larry Doyle

Please pre-order a copy of my book, In Bed with Wall Street: The Conspiracy Crippling Our Global Economy, that will be published by Palgrave Macmillan on January 7, 2014.

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I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Atlas

    The government’s pursuit of Steve Cohen for insider trading has brought public attention to the use of cooperating witnesses-people who help the government convict their friends and colleagues, and thereby help themselves avoid prison.

    But former Monster COO James J. Treacy, whom cooperating witnesses helped send to prison, points out that the pressure on witnesses to back the prosecution can lead them to tell less than the whole truth-and shares what one such witness told him after he left prison.

    Attached and pasted below for publication is a 727-word commentary by James J. Treacy titled Cooperating Witnesses Undermine Justice.

    Cooperating Witnesses Undermine Justice

    by James J. Treacy

    September 24, 2013

    With their pursuit of investor Steven A. Cohen, federal prosecutors in New York have brought the government’s use of cooperating witnesses into the public spotlight. Especially after my own experience with cooperating witnesses, I find it quite odd that most of the commentary presumes that cooperators tell “the whole truth and nothing but the truth.”

    Recently, New York Times business columnist James Stewart wrote, “Government prosecutors, along with the judges who sentence those convicted, have created powerful inducements to cooperate.”

    Think about that for a moment. Why is a supposedly independent arbiter for justice aligned with the prosecution? Don’t you think that might “induce” a scared witness to sing the prosecutor’s tune, no matter the real truth?

    Stewart goes on to highlight Judge Jed S. Rakoff’s January 2013 sentencing of Wesley Wang, who worked forCohen’s company, as an example of the system at work. Wang, whom a Times blog profiled as a man with an “unremarkable career,” cooperated with authorities. For this, the admitted criminal, motivated to do and say anything under the government’s lash, was rewarded with no jail time. Therein lies the issue.

    Judge Rakoff, while explaining his sentence, noted international criticism. “Many countries of the world look with disfavor upon the American user of cooperators, especially if that cooperation results in no jail or a very significant lesser sentence.”

    Rakoff defended his treatment of Wang, saying prosecutors “could not achieve the marvelous successes they’ve had in sophisticated crimes, like insider trading, without asking judges to give a very substantial benefit to cooperators.” But the potential for injustice is obvious.

    I know of what I speak. I resigned as president and chief operating officer of Monster Worldwide in 2002. In 2009, I was tried before Judge Rakoff in a case that would no doubt fall under his definition of a “sophisticated crime.” The charges related to non-cash accounting, from 1996 to 2002, under meaningless and impossibly vague financial standards that were replaced in 2005. The case was built on two cooperating witnesses who somehow managed to remember tiny details, forget major issues, and avoid jail time or (in one case) even indictment.

    I was convicted.

    Then, nine months after I finished my time at Morgantown federal prison, one of the government’s key witnesses in my case approached me. We met for lunch in a Manhattan restaurant.

    The witness described the government’s intimidation tactics. Some were almost comical: broken chairs to sit in; investigators flashing their holstered guns; and long, miserable hours of “good cop, bad cop” routines, with few water or bathroom breaks.

    Other techniques were more serious. Prosecutors played the innuendo game, suggesting an indictment if the witness did not cooperate. They met with the witness on at least fifteen separate occasions, with the sessions revolving around what to say, how to say it, and what to omit.

    If you’re going to tell “the whole truth,” do you need to be coached on what to leave out?

    During our lunch, the witness recalled a key piece of evidence that never found its way into my trial, evidence that might have generated reasonable doubt. The witness also recalled a particular event around my late secretary’s exit from Monster, one that would have been helpful to my defense.

    “Why didn’t you say something?” I asked my lunch companion.

    The teary reply: “I didn’t lie. It’s how you answer the questions you’re asked.”

    The alliance among prosecutors, the people they threaten, and the presiding judges is dangerous. Prosecutors get to parlay their “marvelous successes” into seven-figure partnerships at major law firms, promotions within the Department of Justice, or platforms to run for office. Cooperating witnesses get to leave prison earlier, or stay out altogether. And scrapbooking judges get to wield power, which is the narcotic of public service in the same way that money is the narcotic of Wall Street. But browbeating witnesses-the stick-while offering them freedom from indictment or jail time-the carrot-distorts American justice.

    The integrity of the legal system requires that prosecutors and judges be committed to finding the truth, and that witnesses be free to tell the truth, with no incentives to lie or mislead. Using coerced and bribed witnesses, with a willing judge as paymaster, misses that mark.

    A legal system built on singing for one’s supper risks encouraging deception-and sending innocent men and women to prison.

    About James J. Treacy

    James J. Treacy was president and chief operating officer of Monster Worldwide before being prosecuted in the backdated options frenzy.

    The Business Rights Center of The Atlas Society is acting on Mr. Treacy’s behalf in circulating this op-ed for publication.

  • Peter Scannell

    Sour grapes Atlas?

    Cohen has lost his SAC, I here it happens to a lot of white collar criminals.

  • LD

    Federal prosecutors proposed settling a criminal insider-trading case against hedge fund SAC Capital Advisors LP for $1.5 billion to $2 billion, people familiar with the case said.

    Prosecutors Propose up to $2 Billion Settlement with SAC

    I would much prefer that we get the truth than the money.

  • Barry

    The prosecutor needs to be clever. Do not open the door for SAC’s attorneys to pursue a settlement.

    Rather, they should develop a case based upon the timeline of the improprieties and claw back the ill gotten gains.

    If he is prepared to settle for $1 billion, can you imagine the amount that is actually involved?

    • LD

      No doubt but it looks like the prosecutor countered by indicating the settlement should be between 1.5 and 2 billion.

      Big numbers but yes an indication that he gets to buy his own justice.

      • Barry


        What was JPM’s “whale settlement” $800 million?

        How much capital was involved at JPM and how much at SAC?

        That is an interesting metric of negotiated justice!

        • LD

          What does this tell us? The big banks are REALLY getting away with murder.

  • Frank

    SAC is a criminal enterprise. It deserves a big fine. Maybe jail time as well.

    The outrage is that SAC gets the same fine as JPM. JPM should be taken over, restructured & management fired.

    It has done far,far more damage than SAC.

    • LD

      No doubt about that either. Why do JPM and SAC do these things?

      Because they can. And why? Because the regulators and pols are for sale.

  • Buddy

    SAC: Settled And Concealed

    Like all the others

  • Russ

    I think the Feds are incompetent to prosecute this case.

    They should either settle it or turn it over to competent attorneys (private) to do their bidding.

  • James

    Settlement by Feds only if:

    Admission of guilt.

    Forfeit of more than 14% of wealth ($1 of 7 billion).

    Banned from industry for life.

    Agreement to provided testimony if feeder funds and/or Wall Street firms either knew of SAC insider trading or provided inside information to SAC.

    Some jail time.

    I would predict he wouldn’t agreed to one of those conditions.

  • Bruce Semingson

    No settlement. Feds should develop the case and settle it in a court of law. That is where we would be under similar circumstances

  • Rick

    At some point an accusation that isn’t clearly proven becomes a contrivance…..the milken conviction was that and so, I’m afraid , is this one

    Also believe that there is no such thing as insider trading as we perceive it

  • GGB

    Justice is not served by banks and financial firms buying their way out of cases with fines. Prosecute Cohen and others to the fullest extent to the law. Upon conviction petition the court to claw back take ill-gotten gains at sentencing.

  • Bud

    If “traders at SAC engaged in insider trading that was “substantial, pervasive, and on a scale without known precedent in the hedge fund industry”, is true, my vote is to throw the book at them, RICO style, with severe jail time for all participants.

  • Bill

    I don’t know about the guilt or innocence of Steven Cohen. What is obvious is there are special rules for special people, defined as wealthy people or those politically connected, often synonymous. Beyond that, I encourage the reading of the book Three Felonies a Day by Harvey Silverglate, detailing the ruthless use of the federal criminal system to target the innocent through application of ubiquitous and ambiguous federal criminal statutes.

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