Steven Cohen of SAC Is Fascinating to Investigators, Too

From the outside, there’s nothing particularly special about this address, 72 Cummings Point Road. But inside — well, everyone on Wall Street has heard the stories.

Some of them are even true.

We are, after all, talking about the man known on the Street as “Stevie” — hedge fund magnate, multibillionaire, prodigious art collector and, of late, person of intense interest to federal authorities. Inside his offices, vast fortunes are won and lost. Careers are made and unmade. Type-A egos are inflated and crushed, sometimes in the space of hours. And there, Mr. Cohen, a trader with an almost preternatural knack for reading fear and greed in the marketplace, prowls relentlessly for an edge over everyone else.

Mr. Cohen, 56, today sits at the center of more concentric circles of money and power and worry and suspicion than perhaps anyone else in the hedge fund game. Neither he nor the private investment firm that bears his initials, SAC Capital Advisors, has been accused of wrongdoing. But over the past half-decade, as a vast federal investigation into insider trading has unfolded in stunning detail, the questions have returned again and again. In soft-carpeted executive suites, on fervid trading floors, in Park Avenue co-ops and on Connecticut back lanes, the same subject keeps coming up: Just what is going on inside 72 Cummings Point Road?

It is, perhaps, understandable. On Wall Street, Mr. Cohen is envied and feared in equal measure. Hedge fund managers like him have helped redefine what it means to be rich, even if most ordinary people don’t quite understand what they do or how they do it.

For years, the investigations had swirled around SAC, but that was about all. Then, on the afternoon of Nov. 28, the word went out across Wall Street: the Securities and Exchange Commission was warning that it might go after SAC, too. Elsewhere in the investigations, prosecutors have turned up damning evidence through F.B.I. wiretaps and reached into the boardrooms of some of the mightiest corporations. Seventy-one people have been convicted in a sweep that dwarfs the 1980s-era Wall Street scandals involving Ivan Boesky and Michael Milken.

But there is also this undeniable fact: The government inquiry has linked six former SAC employees to insider trading while at the fund; three have pleaded guilty. On Friday, a grand jury indicted Mathew Martoma, a former employee who was arrested last month on charges that he used inside tips about a clinical drug trial to help SAC earn profits and avoid losses totaling $276 million.  (A lawyer for Mr. Martoma says his client is innocent.) In the Martoma case, prosecutors for the first time have tied Mr. Cohen to questionable trades.

And, of course, there are the stories. The mind-boggling investment returns. The office tantrums. The pressure-cooker environment inside SAC. The time that Mr. Cohen’s wife, Alexandra, gave him an A.T.M. for Christmas, because he kept borrowing cash from her. The time she gave him an Aston Martin sports car for his birthday, and he promptly sold it.

All of those are true.

But there are other stories, too, like the one about how Mr. Cohen engaged in insider trading back in the 1980s, before hedge funds like SAC burst onto the scene. That claim was made by Mr. Cohen’s former wife, in a 2009 lawsuit in which she sought $300 million. A judge dismissed her claims as little more than rumor and speculation.

And then there is the one about how Mr. Cohen and a cabal of other hedge fund managers waged a campaign of dirty tricks in the early 2000s to sink the share prices of several companies. Judges tossed out those cases, too. (SAC maintained that the various lawsuits were groundless, and one of the companies ended up issuing an apology.)

Mr. Cohen declined to be interviewed for this article. But a spokesman for SAC reiterated what the firm has been saying all along: SAC and Mr. Cohen acted appropriately.

Friends stand by Mr. Cohen. Several point to his charitable works.

Article source: http://www.nytimes.com/2012/12/23/business/steven-cohen-of-sac-is-fascinating-to-investigators-too.html?partner=rss&emc=rss