Leon Cooperman on Life After an SEC Investigation
The billionaire investor, philanthropist, and Omega Advisors founder opens up about how his firm is faring now that it has settled civil insider trading charges with the regulator — and why he’s still not over it.
Leon Cooperman wants an answer.
Sitting in the kitchen of his Short Hills, New Jersey, home on a recent Saturday afternoon, the founder of Omega Advisors shows me a two-and-a-half-page letter he sent on July 27 to Securities and Exchange Commission chairman Jay Clayton, just two months after Cooperman had settled civil insider trading charges with the regulator. In the letter, Cooperman demanded to know what facts had changed between September 2016 — when the SEC initially proposed an onerous deal to settle the charges, including a five-year ban from the industry — and the benign terms Cooperman agreed to six months later. He did not hear back from Clayton, and on September 13, Cooperman sent a follow-up two-paragraph letter, again demanding a response.
“That’s the question I’m hung up on,” he tells me dur-ing a two-hour interview. Most people in a similar situation would be happy to settle, especially on the mostly favorable terms Cooperman got, and put the matter behind them.
For the 74-year-old Wall Street legend, who has run Omega for more than 26 years after having spent 25 years rising to the upper ranks at Goldman Sachs, preserving his professional legacy has become something of an obsession. He bitterly and publicly disputed the SEC’s charges initially; even now he remains irked that Clayton still has not responded to his questions. (Clayton also did not respond to several requests from Institutional Investor to comment.)
As Cooperman explains, he can no longer proclaim his innocence, as the terms of the settlement require him to neither admit nor deny guilt.
“I cannot say I’m innocent, and I cannot say I’m guilty,” he says. But he is only too happy to go over the facts of his case.
In September 2016 the SEC formally accused Cooperman and his firm of trading various securities of Atlas Pipeline Partners using illegal insider information, as well as violating other SEC rules on making timely filings of securities holdings. The SEC initially offered to settle if the legendary investor would agree to pay a $10 million fine and accept a five-year ban from the securities industry, which would essentially have been an admission of guilt.
Cooperman angrily turned down the deal, insisting at the time he had done nothing wrong. Then in May 2017 he and the regulator officially reached a settlement that called for him to pay $4.95 million and agree to a compliance monitor for five years. Most crucially, there is no industry ban or admission of wrongdoing.
Cooperman makes it clear that the SEC case was very personal for the Bronx-born billionaire, the son of immigrants and the first person in his family to graduate from college. “My wife was very nervous during that whole period — very upset,” he says.
He is especially annoyed that as the SEC’s investigation and settlement process dragged on, Omega suffered $4 billion in redemptions, cutting total assets to about $3.5 billion, more than half of it now from Cooperman and other general partners and employees. Since the settlement just $7 million has come back, although Cooperman stresses that he is not aggressively marketing. The much smaller asset base means he must personally pay some of the firm’s expenses, especially bonuses.
Cooperman is particularly upset about the loss of fees. He quickly runs through the math. Assuming a 10 percent return — Omega’s main fund has compounded at 14 percent — and a management fee of 1.5 percent and a performance fee of 15 to 20 percent, the loss of $4 billion in client assets translates to a loss of $60 million in annual management fees and $80 million in performance fees.
In spite of the intensity of our conversation and his continued irritation with the SEC, Cooperman, dressed in a suit but no tie, is visibly relaxed on his home turf — a stark contrast to the often harried, sometimes gruff version reporters and others often see on TV or hear over the phone. Toby, his wife of 53 years, stops by a couple of times to offer a drink.
The famously frugal Cooperman — who switches off lights whenever he leaves a room — insists he has no hobbies. He does not live in a large, ostentatious mansion in an exclusive gated community. Although Zillow says his house, which he has lived in for more than 40 years, is now worth $1.84 million, that’s more a reflection of its tony Short Hills zip code than its luxe interiors. Cooperman does not buy expensive art and has no desire to own a professional sports team.
His lone nod to a billionaire’s lifestyle is his philanthropy, which he says is his sole passion besides investing and his family. Cooperman, who is estimated to be worth $2 billion, has given away about $200 million in the past five years and has taken Bill Gates and Warren Buffett’s Giving Pledge to donate half of his fortune when he dies (the other half will be placed in trust for his two sons and their families to give away).
At various points throughout our conversation, he gets up to fetch tokens acknowledging his recent gifts, including sizable donations to Saint Barnabas Medical Center, which recently opened the Cooperman Family Pavilion; Hunter College; and Columbia Business School.
Cooperman keeps a busy schedule. On the day I met with him, he was up at 7:30 to greet people from the New-York Historical Society, who spent more than two hours visiting his house and interviewing him about the history of Wall Street. After seeing me, he headed to the New Jersey Performing Arts Center for its annual dinner and fundraiser, where he made a $10 million gift. The following Monday morning it was back to the Performing Arts Center, where he paid for a screening of the Academy Award–winning movie Hidden Figures for 2,000 children.
He proudly tells me about Cooperman College Scholars, which over the past three years has given 500 New Jersey kids as much as $10,000 a year each for up to six years toward a college degree. “It’s life-changing,” he says.
He beams as he describes a recent $1 million donation to the Songs of Love organization, which has songwriters visit children facing medical, physical, or emotional challenges and then craft custom songs for them. As a thank you, the group created a song for Cooperman, which he plays for me, saying, “You’ll get a kick out of this one.”
But even the discussion of his philanthropy eventually makes its way back around to his beef with the SEC.
“I told them, ‘For what you’re wasting of my funds, I could send 2,500 kids to college,’ and they didn’t care,” he says. “I told the SEC that my money is only earmarked for charity, and all you’re doing is taking money out of the pockets of needy people.”
Before we part, Cooperman stresses once more that he did not admit or deny guilt, but points out that the SEC case cost him dearly in assets and accompanying fees.
“What will always bug me is the abusive use of their power and their process,” he says. “And I learned a lot about human nature. A vast number of institutions just pulled out just because of the allegations without making any attempt to learn whether the allegations were proper or not.”