No deferred prosecution for SAC Capital

Tools

Ever since audit firm Arthur Andersen was dealt the death penalty by prosecutors for its role in the Enron scandal, a decision that was overturned on appeal, the government has been hypersensitive about criminally prosecuting companies. To the concern of many, the preferred route recently has been deferred prosecutions, which allow companies to remediate their wrongful ways and avoid criminal charges. Some see this as letting companies off with a wrist slap for significant crimes.

In the case of SAC Capital, the wrist-slap argument does not apply. There is no deferred prosecution in the works. The government has taken off the gloves and is going after the hedge fund firm criminally, aiming apparently to put it out of business. To be sure, the heavy drumbeat of enforcement action against the firm and its former employees has already taken a toll, as more limited partners defect.

The criminal indictment against the firm, expected soon, may be the final blow. It will certainly allow the firm to exist as a family office. But for Cohen as an investment advisor, it's lights out. The SEC is similarly seeking to end his career as an advisor with its civil administrative proceeding.

So should Cohen count his lucky stars that he has been spared a personal criminal indictment? Perhaps so. He's not going to jail. It seems that the government has finally bowed to the reality that unless it could flip Mathew Martoma or Michael Steinberg, it would have no case. That said, the Financial Times reports that there is chance that other individuals will be named in an indictment. Not a great time to be an executive at SAC Capital.  Recall that no fewer than 5 were called to provide testimony before a grand jury.

For more:
- here's an article from the Financial Times