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.