With billions sought from hedge funds in a lawsuit filed by Biovail Corp. and others, it should come as some comfort for the defendants to know that it may not be easy for the Canadian pharmaceutical or its shareholders to win their case. Connecticut Attorney General Richard Blumenthal, who has been spearheading a campaign for tighter reins on hedge funds in his state, says cases against the likes of SAC Capital Management, located in the Nutmeg State, presents a number of difficulties. In an interview on CBS‘ “60 Minutes” on Sunday, Blumenthal noted, “There is no prohibition against anyone calling an analyst and providing information, and that kind of free flow of information often can do the market good,” referring to charges that SAC ghost wrote analyst reports for the firm now known as Gradient Analytics. While of course the information must be true, a court must determine “who knows what, what the criminal intent may be if it’s there.” Blumenthal responded to the question of whether passing on such information is designed to drive down stock prices runs afoul of the law. He concluded, “None of these securities violations is a slam dunk ever, under the best of circumstances.”
