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Business

SAC plea deal on ice as judge delays decision

By
Michelle Celarier
Published Nov. 8, 2013, 10:55 p.m. ET

Steve Cohen’s SAC Capital Advisors will have to sweat it out a while longer.

The hedge-fund giant pleaded guilty Friday to insider-trading charges and agreed to pay $900 million in criminal penalties to settle a long-running probe by the Justice Department.

But in a surprise move before a packed courtroom, Manhattan federal judge Laura Swain said she would hold off until March on whether to approve the plea deal.

Swain said she wanted to see pre-sentencing reports prepared by the probation department before allowing the landmark settlement to proceed.

SAC pleaded guilty to five counts of wire and securities fraud and agreed to pay $1.8 billion in criminal and civil penalties. On Wednesday, Manhattan federal judge Richard Sullivan approved the civil portion of the case.

Swain set the sentencing for March 14 — after two more insider trading trials involving former SAC money managers. Michael Steinberg goes on trial Nov. 18, while Mathew Martoma’s case is set for January.

Profits from Martoma’s alleged crime — illicit trading in drug stocks Elan and Wyeth — form the bulk of SAC’s alleged insider trading gains, and were part of the original indictment.

But that trade was not mentioned in the plea agreement — a point that drew criticism at the hearing from lawyer Ethan Wohl, who represents Elan shareholders who are suing SAC. Wohl urged Swain not to accept the plea.

Swain’s time-out was an anticlimactic end to the hour-long hearing in which SAC General Counsel Peter Nussbaum offered SAC’s guilty pleas one by one.

“Guilty, your honor,” Nussbaum said repeatedly, lowering his head as Swain asked him how he would plead on each of the charges.

Nussbaum also apologized to the court.

“On behalf of SAC, I want to express our deep remorse for the misconduct of each individual who broke the law while employed at SAC,” said a pale Nussbaum, who winced in visible pain from an injury he did not disclose. He asked to be allowed to make his statement while seated.

As part of the deal, SAC has also accepted a probationary period of five years and will pay for an independent compliance consultant.

But Nussbaum indicated that SAC was determined to come back.

“We have paid, and are paying a very steep price … in terms of the damage done to our business and the reputations of the good people that work at our firm. We are chastened by this experience, but we are determined to learn from it and emerge from this a better firm.”

SAC could withdraw its plea if the judge doesn’t endorse the deal cut with prosecutors.