Analysis: SAC insider-trading probe could last years

Thu Jun 6, 2013 4:56pm EDT
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By Emily Flitter

NEW YORK (Reuters) - The conventional wisdom on Wall Street is the clock is running out for U.S. prosecutors to make a case against billionaire trader Steven A. Cohen and his hedge fund SAC Capital Advisors after years of investigation.

There is a legal prohibition against filing criminal charges based on an instance of insider trading more than five years old, and two of the sets of trades viewed by legal analysts as having the best chances of leading prosecutors to Cohen were made five years ago, in July and August of 2008.

But continuing investigations into allegations of insider trading in at least two other stocks, which were first reported by Reuters in December, could extend the deadline to file charges for three more years, according to people familiar with the SAC probe.

Cohen, whom prosecutors recently subpoenaed to testify before a grand jury, has never been charged with wrongdoing. A spokesman for SAC Capital declined to comment.

Based on the five-year statute of limitations on insider trading charges, probes into potentially improper trading in Weight Watchers International (WTW.N: Quote) in 2011 and InterMune ITMN.O in 2010 give prosecutors until 2016 to make a case.

So even if they take no action against Cohen or his firm because of improper trading in shares of Dell DELL.O in August of 2008 and Elan ELAN.UL in July of 2008, a legal cloud could continue to hang over the 56-year-old manager and his firm for some time, the sources said.

But given how little is known about the investigations into trading in Weight Watchers and InterMune, it is also possible they may end-up being dead-ends, as has happened with other insider trading probes.

Peter Donald, a spokesman for the FBI declined to comment. Ellen Davis, spokeswoman for U.S. Attorney Preet Bharara in the Southern District of New York, which has brought insider-trading cases against former and current SAC employees, declined to comment.   Continued...

Hedge fund manager Steven A. Cohen, founder and chairman of SAC Capital Advisors, responds to a question during a one-on-one interview session at the SkyBridge Alternatives (SALT) Conference in Las Vegas, Nevada May 11, 2011. REUTERS/Steve Marcus