Criminal case against SAC is strong: lawyers

Thu Jul 25, 2013 6:07pm EDT
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By Michael Erman and Emily Flitter

NEW YORK (Reuters) - The decision by federal prosecutors to bring criminal charges against hedge fund SAC Capital Advisors LP, rather than its billionaire owner, Steven A. Cohen, makes it more likely that the government will be able to secure a guilty verdict, lawyers say.

Attorneys who are following the case said they believe prosecutors have met the standard for convicting a corporation under federal law.

A corporation is liable for the criminal misdeeds of its employees if they are acting within the actual or apparent scope of their employment and if the intent of their actions - even in part - is to benefit the corporation, said Solomon Wisenberg, co-chair of the white collar crime defense practice group at law firm Barnes & Thornburg.

"It's going to be a virtual slam dunk for the prosecution ... You've got four guys that have already pleaded guilty. They're employees. End of story - they're going down," Wisenberg said.

The U.S. Department of Justice indicted the financial firm on Thursday, accusing Cohen of presiding over a broken business where employees were encouraged to push the envelope to get that extra investing edge, with little regard for whether they were acting honestly and within the law.

The result was "insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry," the government said.

Prosecutors built their case against SAC with help from several former employees who pleaded guilty to charges of criminal insider trading. Authorities allege the guilty pleas by the employees and other evidence establish a long-standing pattern of insider trading at the firm.

SAC has denied the charges, saying that the firm "has never encouraged, promoted or tolerated insider trading and takes its compliance and management obligations seriously." The firm plans to fight the charges and will continue operating as it deals with the indictment.   Continued...