Prosecutors consider using racketeering law against SAC: source

Tue May 21, 2013 7:50pm EDT
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By Emily Flitter

NEW YORK (Reuters) - Prosecutors are considering charging Steven A. Cohen's SAC Capital Advisors as a criminal enterprise engaged in a long pattern of insider trading in stocks, according to a person familiar with the matter.

Prosecutors may use the Racketeer Influenced and Corrupt Organizations Act, most commonly associated with prosecutions against the mafia, to move against Cohen's $15 billion hedge fund company, said the person, who spoke on condition of anonymity.

While this is one option under consideration, no final decision has been made, the source added. Indeed, the approach carries its own set of risks and would require approval from top Department of Justice officials, legal experts said.

A spokeswoman for Manhattan U.S. Attorney Preet Bharara declined to comment, as did a spokesman for the Justice Department.

SAC Capital has previously denied any wrongdoing and a spokesman for the $15 billion firm declined to comment on the potential use of RICO against it.

Federal prosecutors have used the 40-year-old RICO statute to go after white collar crimes before. In 1989, junk bond king Michael Milken was indicted under RICO, with prosecutors claiming his firm Drexel Burnham Lambert routinely broke securities laws. Milken, who pleaded guilty to lesser charges, was sentenced to two years in jail and paid $1.1 billion in fines and settlement fees.

So far, prosecutors have charged or implicated nine current or former SAC employees in insider trading schemes, including former portfolio manager Mathew Martoma, who was charged last November, and Michael Steinberg, a top Cohen deputy who was arrested and charged in late March. Both Martoma and Steinberg have pleaded not guilty.

Some legal experts say that if prosecutors had enough evidence to charge Cohen with a specific insider trading violation, they would have done so by now. The government has been investigating SAC for about six years.   Continued...

An exterior view of the headquarters of SAC Capital Advisors, L.P. in Stamford, Connecticut, in this picture taken December 13, 2010. REUTERS/Mike Segar