Tags: Vanity | Fair | McLean | SAC

Vanity Fair's McLean: SAC Chief to Avoid Jail Time

Monday, 29 Jul 2013 08:54 PM

By Bill Hoffmann

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Embattled hedge fund billionaire Steve Cohen will dodge jail in the criminal case filed against his $14 billion SAC Capital Advisors group, according to Bethany McLean, a contributing editor at Vanity Fair.

"It is not looking likely," McLean told David Nelson, guest host of "The Steve Malzberg Show" on Newsmax TV.

"Before the Justice Department brought these charges … the Securities and Exchange Commission brought a civil case against Steve Cohen personally, and they charged him with failure to supervise two employees who have been accused of insider trading. Failure to supervise is a pretty weak charge.

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"That basically means … civil authorities did not have enough ammunition to bring an insider trading case against Steve Cohen."

Last Friday, SAC Capital entered a not-guilty plea to a five-count criminal indictment involving insider trading.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

The government alleged that SAC Capital committed securities fraud and wire fraud charges, engaging in a pattern of "systematic insider trading" that raked in hundreds of millions of dollars in illicit profits.

"The burden of proof in civil cases is lower than it is in criminal cases," McLean said.

"So if the civil authorities didn't have enough evidence to bring an insider case directly against Steve Cohen, then the criminal authorities definitely didn't," McLean said.

She said she doesn't expect a run by institutions to pull their funds from SAC Capital, because many have already done so.

"SAC is down some $5 billion in capital so far this year … but most of the money in SAC is Cohen's own fortune," she said.

"Secondly, SAC invested in highly liquid stocks, so this is not a highly-leveraged hedge fund that's ingested in long-dated illiquid instruments. This is moderately-leveraged hedge fund that could sell its investments tomorrow because they're all stocks."

McLean spoke about the notion that individual investors can compete with big institutions in the stock market.

"There's no question it's not a level playing field, and I get a little bit annoyed when I hear authorities bringing insider-trading charges and saying we want to make the playing field level for everybody. It's not level. It never has been and it never will be," she said.

Editor’s Note: Put the World’s Top Financial Minds to Work for You

"It's somewhat of a crime … in the moral sense, not in the legalistic sense, to pretend there is a level playing field when you look at the access to information that institutional investors, and particularly hedge funds, have."

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