The federal government Thursday charged Connecticut hedge fund SAC Capital
Advisors with allowing numerous employees to break insider trading laws.
The indictment filed in United States District Court in the Southern District of New York blames "the corporate entities responsible for the management of a major hedge fund with criminal responsibility for insider trading offenses committed by numerous employees."
Prosecutors said the insider trading at the firm was "made possible by institutional practices that encouraged the widespread solicitation and use of illegal inside information."
SAC, run by billionaire investor Steven A. Cohen, displayed an "institutional indifference to that unlawful conduct," which allowed insider trading "on a scale without known precedent in the hedge fund industry," prosecutors said.
No charges were filed against Cohen personally. The Securities and Exchange Commission, however, charged Cohen with neglecting his responsibilities as a hedge fund manager, after a years-long investigation that has resulted in four SAC employees pleading guilty to insider trading and two others being charged.
Prosecutors said at its peak, SAC, which was founded in 1992, handled $15 billion in assets.
The charges claim SAC money managers used insider trading to make decisions about numerous technology companies, including Dell Inc., Cirrus, QLogic, Cisco Systems, Broadcom, eBay and Cypress.
The five-count indictment also cites numerous emails and taped phone calls in which discussions of connections at numerous companies come up in the communication.
Court papers also say that the firm's compliance department was ineffective, conducting one in-house investigation that was described as "generally weak."
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