Published November 06, 2013
A federal judge said he will approve part of a $1.2 billion settlement with Steven A. Cohen's SAC Capital Advisors on Wednesday, putting the U.S. government a step closer to finalizing the insider trading agreement.
At a hearing in Manhattan on Wednesday, U.S. District Judge Richard Sullivan said he would sign off on a $900 million judgment in a civil forfeiture action filed earlier this year against SAC Capital.
An order by Sullivan a day earlier raised questions about whether he would approve the judgment, after the judge cited recent judicial "debate" about how courts are to review regulatory settlements.
But Sullivan on Wednesday questioned whether he was even needed for the process. To the extent his signature was required, the judge said he thought it was clear the ability of the court to scrutinize the civil end of the settlement was "minimal."
"I think the inquiry here is a limited one," Sullivan said.
Under the judgment that Sullivan said he would sign, SAC Capital would get credit for $616 million it already agreed to pay to the U.S. Securities and Exchange Commission to resolve related insider trading charges.
A separate part of the deal announced on Monday calls for $900 million in criminal penalties and would have to be approved by U.S. District Judge Laura Taylor Swain.
SAC Capital has agreed to plead guilty to five fraud counts in connection with a wide-ranging insider trading scheme prosecutors said spanned more than a decade. A plea hearing was set for Friday before Swain.
The plea would end years of investigations and mark a high point for the government in its crackdown on insider trading. Since October 2009, 75 people have been convicted as part of the effort.
That tally is expected to climb. According to court records, a plea hearing has been scheduled for Friday for Sandeep Aggarwal, a securities analyst accused of leaking details in 2009 about a potential partnership between Yahoo Inc and Microsoft Corp to an SAC Capital manager.
Aggarwal's lawyer did not immediately respond to a request for comment.
In his order on Tuesday, Sullivan noted recent disputes among judges about how much discretion they must give federal agencies seeking to settle enforcement actions.
The 2nd U.S. Circuit Court of Appeals is weighing whether to uphold or reverse the 2011 rejection by U.S. District Judge Jed Rakoff of a $285 million civil fraud settlement between Citigroup Inc and the SEC.
In his decision Rakoff said he was not given enough facts to determine if the Citi deal was fair or in the public interest.
A judge overseeing one of SAC Capital's settlements with the SEC in April conditioned final approval on the outcome of the Citigroup appeal.
At Wednesday's hearing, Sullivan indicated he disagreed with Rakoff's approach. He also questioned whether his signature was "necessary at all" in the SAC Capital case, noting the government and SAC could have simply stipulated to the settlement.
Sharon Cohen Levin, a lawyer for the government, said in court that while Sullivan was correct, the U.S. Marshals Service required a court order to process the $284 million that SAC Capital will pay.
"Even if it's that big of a check?" Sullivan asked, to laughs in the courtroom.
As part of the overall settlement, SAC Capital agreed to stop managing money from outside investors.
Steven Cohen, who has not been personally charged with any crime, is expected to continue managing about $9 billion of his own money via a so-called family office.
Representatives for SAC Capital and Manhattan U.S. Attorney Preet Bharara declined comment.
The civil case is U.S. v. SAC Capital Advisors LP, et al, U.S. District Court, Southern District of New York, No. 13-05182.