Unlike the case involving Rajat Gupta and Rajarathinam, has SAC, one of the world’s most successful hedge fund companies, got away with a settlement even though it was running a vast insider-trading racket?
Stephen Cohen-promoted hedge fund giant SAC Capital Advisors on Monday pleaded guilty to criminal charges of engaging in insider trading. The agreement imposes a $1.8 billion financial penalty on the SAC companies—the largest insider trading penalty in history—split between a $900 million fine in the criminal case and a $900 million forfeiture judgment in a civil money laundering and forfeiture action filed by the US government simultaneously with the criminal charges.
However, according to John Cassidy of New Yorker, even the fine of $1.8 billion could be a sweet deal for Cohen, who set shop 20 years ago with just $25 million under management. "Far from being treated like a mobster, Cohen was hit solely in the pocketbook. He wasn’t even mentioned in the US Attorney’s press release about today’s settlement, or in a letter and legal stipulation about the settlement that Bharara’s office filed in US District Court. Rather than naming names, the documents contain repeated references to dozens of corporate entities and investment funds connected to SAC—the 'SAC Entity Defendants'. From Cohen’s perspective, that’s got to be encouraging. He’s not quite in the clear yet. But with about seven billion dollars in his back pocket even after he’s paid off all his fines, he’ll be feeling better about things," wrote John Cassidy in his blog post.
Under the agreement, announced by Preet Bharara, the US attorney for the Southern District of New York (who pursued Rajat Gupta and Raj Rajarathinam), and George Venizelos, assistant director in charge of the New York Office of the Federal Bureau of Investigation (FBI), four companies—SAC Capital Advisors LP, SAC Capital Advisors LLC, CR Intrinsic Investors LLC, and Sigma Capital Management LLC together SAC companies, will plead guilty to each count in which they are charged of an indictment unsealed in July of this year with securities fraud and wire fraud in connection with a large-scale insider trading scheme.
Bharara said, “Individual guilt is not the whole of our mission. Sometimes, blameworthy institutions need to be held accountable too. No institution should rest easy in the belief that it is too big to jail. That is a moral hazard that a just society can ill afford. Today, SAC Capital, one of the world’s largest and most powerful hedge funds, agreed to plead guilty, shut down its outside investment business, and pay the largest fine in history for insider trading offences. That is the just and appropriate price for the pervasive and unprecedented institutional misconduct that occurred here.”
As alleged in the indictment, from 1999 through at least 2010, numerous employees of the SAC companies obtained and traded on material, non-public information that they were not permitted to have inside information, or recommended trades based on such information to SAC portfolio managers (SAC PMs) or the SAC owner. Specifically, the indictment charges the SAC companies with insider trading offences committed by numerous employees, occurring over the span of more than a decade and involving the securities of more than 20 publicly traded companies across multiple sectors of the economy.
As charged in the indictment, the systematic insider trading engaged in by SAC PMs and research analysts were the predictable and foreseeable result of multiple institutional failures. The failures alleged included hiring practices heavily focused on recruiting employees with networks of public company insiders, the failure of SAC management to question employees about trades that appeared to be based on Inside Information, and ineffective compliance measures that failed to prevent or detect such trading, particularly prior to late 2009.
“What SAC Capital’s plea demonstrates is that cheating and breaking the law were not only permitted but allowed to persist," said Venizelos adding, "The result is $1.8 billion in fines and forfeiture, the largest penalty in an insider trading case ever, and termination of their investment advisory business. The problem of insider trading is real. For companies that wilfully turn a blind eye, be on notice: how your employees make money is just as important as how much they make. The FBI’s investigation into insider trading on Wall Street, on Main Street, in hedge funds, at expert networking firms, and anywhere else, continues.”
"The agreement would resolve the criminal charges against the SAC companies but does not provide any individual with immunity from prosecution. Under the terms of the agreement, the government is not prevented from charging any individual with insider trading offences and seeking the maximum prison term authorized by law for such offences," the release from FBI says.
The CIC said the information sought by the appellant must be provided and MCD must ensure that it must available suo moto in fulfilment of its duties under Section 4 of the RTI Act. This is the 187th in a series of important judgements given by former Central Information Commissioner Shailesh Gandhi that can be used or quoted in an RTI application
The Central Information Commission (CIC), while allowing an appeal, directed the Public Information Officer (PIO) at the office of the Superintending Engineer in Municipal Corporation of Delhi (MCD) to provide entire information sought by the appellant and comply with Section 4 of the Right to Information (RTI) Act.
While giving the judgement on 9 June 2009, Shailesh Gandhi, the then Central Information Commissioner said, "The information sought by the appellant must be provided and MCD must ensure that this must available suo moto in fulfilment of its duties under Section 4 of the RTI Act."
Delhi resident, Harpal Singh Rana, on 29 December 2008, sought from the PIO information regarding employees, works assigned and carried out for road making in Delhi. Here is the information he sought and the reply provided by the PIO...
1. How many Departments and offices are working under Civil Line Zone, Give address of all those department and offices?
PIO's reply- Ward No. 5,6,7 and 8 comes under Civil Line Zone's E.E.M-I address of which below mentioned:-
Civil Line Zone, 16, Rajpur Road,
2. Give details of appointment of officers and employees in the respective department.
PIO's reply- Mr. V.K.Grover (AE), Mr. V.S.Chouhan (JE), Mr.V.K.Gupta (AE), Mr. Amit (JE), Mr. Yashpal Raahilla (JE), Mr.Jagmohan Sharma (JE).
3. Give the details of vacancy in the all department on said ward.
PIO's reply- There is no vacancy.
4. Give the details of income and expenditure on different items in different departments and offices.
PIO's reply- The copy had already been provided.
5. The details of given duties of officers and employees related to Civil line zone.
PIO's reply- It is related to Town Hall Head quarters.
6. Give the following details in written of development work in wards:-
a) Name of work
b) Brief description of work
c) Approved amount of work
d) Approval date of work
e) Status of the work
f) Name of the agency.
Give the details of the kind of guarantee or time limit was provided.
PIO's reply- The copy had already been provided.
7. Please give the details of population density and total area of Bhalsva, in the Jahangirpur ward J.J.Colony, Nagali Poona, Kadipur area etc.
PIO's reply- It is not related to this part of question.
8. Give the details of agencies which did the work of excavation and cutting of road for which purpose in what time in all the wards from April 2007 to Nov, 2008.
PIO's reply- No excavation work of road had begun in the said wards.
9. Give the details of dates and amount deposited by agencies and expenditure in different wards.
PIO's reply- -As above-
Not satisfied with the PIO's reply, Rana filed his first appeal. In his order, the First Appellate Authority (FAA) directed the PIO to provide information on points 4, 5 and 6.
Rana, then approached the CIC with his second appeal.
After hearing Rana, the appellant and the PIO, the Bench of Mr Gandhi, said, "The nature of information sought by the appellant should have been provided suo moto by the public authority. It is apparent that this is not been done and MCD is not fulfilling its basic duties under Section 4 of the RTI Act. The then PIO Pushkar Sharma is also guilty of not providing information in time and not complying with the direction of the first appellate authority."
While allowing the appeal, the Bench directed the PIO to provide entire information to Rana. The CIC also asked the additional commissioner for revenues at MCD to ensure compliance with Section 4 of the RTI Act, and make available all the information on the MCD website before 15 August 2009.
CENTRAL INFORMATION COMMISSION
Decision No. CIC/SG/A/2009/000891/3620
Appeal No. CIC/SG/A/2009/000891
Appellant : Harpal Singh Rana
Respondent : Pushkar Sharma
Municipal Corporation of Delhi
Office of the Superintending Engineer
Civil Lines Zone
This weekend brought more than a modicum of clarity to what happened behind the scenes in the run-up to the Oct. 1 launch of Healthcare.gov.
In a devastating story, Amy Goldstein and Juliet Eilperin of The Washington Post dissected how politics trumped policy when it came to the Affordable Care Act. In two key paragraphs, they wrote:
Based on interviews with more than two dozen current and former administration officials and outsiders who worked alongside them, the project was hampered by the White House's political sensitivity to Republican hatred of the law - sensitivity so intense that the president's aides ordered that some work be slowed down or remain secret for fear of feeding the opposition. Inside the Department of Health and Human Services' Centers for Medicare and Medicaid, the main agency responsible for the exchanges, there was no single administrator whose full-time job was to manage the project. Republicans also made clear they would block funding, while some outside IT companies that were hired to build the Web site, HealthCare.gov, performed poorly.
These interwoven strands ultimately caused the exchange not to be ready by its Oct. 1 start date. It was not ready even though, on the balmy Sunday evening of March 21, 2010, hours after the bill had been enacted, the president had stood on the Truman Balcony for a champagne toast with his weary staff and put them on notice: They needed to get started on carrying out the law the very next morning. It was not ready even though, for months beginning last spring, the president emphasized the exchange's central importance during regular staff meetings to monitor progress. No matter which aspects of the sprawling law had been that day's focus, the official said, Obama invariably ended the meeting the same way: "All of that is well and good, but if the Web site doesn't work, nothing else matters."
The Post also posted online a May 2010 letter written by David Cutler, a Harvard professor and health adviser to Obama's 2008 campaign, to Larry Summers, director of the White House's National Economic Council. In it, Cutler wrote:
My general view is that the early implementation efforts are far short of what it will take to implement reform successfully. For health reform to be successful, the relevant people need a vision about health system transformation and the managerial ability to carry out that vision. The President has sketched out such a vision. However, I do not believe the relevant members of the Administration understand the President's vision or have the capability to carry it out.
Another piece worth a read:“What’s Really Obstructing Obamacare? GOP Resisters,” by Michael Tomasky of Newsweek/Daily Beast. Tomasky writes that while media reports have focused on the problems of Healthcare.gov, not enough attention has been paid to the efforts by Republicans to obstruct the law. He wrote:
All across the country, Republican governors and insurance commissioners have actively and directly blocked efforts to make the law work. In August, the Obama administration announced that it had awarded contracts to 105 "navigators" to help guide people through their new predicaments and options. There were local health-care providers, community groups, Planned Parenthood outposts, and even business groups. Again-people and groups given the job, under an existing federal law, to help people understand that law.
What has happened, predictably, is that in at least 17 states where Republicans are in charge, a variety of roadblocks has been thrown in front of these folks. In Indiana, they were required to pay fees of $175. In Florida, which under Governor Rick Scott (who knows a thing or two about how to game the health-care system, you may recall) has been probably the most aggressive state of all here, the health department ruled that local public-health offices can't have navigators on their premises (interesting, because local public health offices tend to be where uninsured people hang out). In West Virginia, Utah, Pennsylvania, and other states, grantees have said no thanks and returned the dough after statewide GOP elected officials started getting in their faces and asking lots of questions about how they operate and what they planned to do. Tennessee issued "emergency rules" requiring their employees to be fingerprinted and undergo background checks.
America, 2013: No background checks to buy assault weapons. But you damn well better not try to enroll someone in health care.
I suspect in the weeks ahead, we will see more reporting on both story lines: how the administration mismanaged the rollout of the law and how Republicans have tried to ensure its failure. But let's not lose sight of consumers, whose lives will be directly affected by the act and what's happening now.