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The Morning Brief: SAC Capital in Record Settlement; John Paulson Isn’t Decamping for the Tropics After All
Steve Cohen is spared. CR Intrinsic Investors, an SAC Capital affiliate, has agreed to pay about $600 million in the largest ever settlement of an insider trading case brought by the Securities and Exchange Commission. The regulator alleges that portfolio manager Mathew Martoma engaged in an illegal scheme to trade on confidential information related to a clinical trial for an Alzheimer’s drug being jointly developed by two drug companies, Elan Pharmaceuticals and Wyeth. Moreover, in an amended complaint, the SEC added SAC Capital Advisors and four hedge funds managed by CR Intrinsic and SAC as relief defendants because they each received illegally earned gains from the scheme. The gains involved profits and avoided losses resulting from trades and included fees that SAC received as a result of these gains. The settlement does not involve Martoma, who according to the SEC received a $9.3 million bonus at the end of 2008, mostly attributable to the illegal profits from the scheme. Cohen hasn’t been charged with wrongdoing.
Sigma Capital Management, another SAC unit, also agreed to pay nearly $14 million to settle SEC charges that it engaged in insider trading after obtaining nonpublic information about Dell and Nvidia. The case stems from the regulator’s widespread and ongoing investigation into expert networks and their relationships with hedge funds Diamondback Capital Management and Level Global Investors. Former Sigma analyst Jon Horvath pled guilty to criminal charges in September and agreed to cooperate with the government’s investigation. Last month he also agreed to settle SEC charges. According to the SEC’s amended complaint, Horvath provided inside information to two unidentified fund managers at SAC.
John Paulson put out a brief statement Friday to say he has no plans of moving to Puerto Rico. An earlier report said he planned to move to the island to slash his tax bill. “While Mr. Paulson has considered real estate investments and has vacationed on the Island, he has no plans to establish a permanent residence there,” the statement reportedly said.
Investors are turning up the heat on Pershing Square Capital Management’s William Ackman over his investment in JC Penney. According to Reuters, two investors in Pershing Square who requested anonymity said they want to meet with Ackman to learn more about his case for betting on the struggling retailer. JC Penney stock is down more than 21 percent this year.
London-based Man Group does not plan to pay bonuses to any of its top executives, according to published reports. The firm, which posted an 8 percent drop in assets under management since September, is scheduled to file its annual report sometime this week. Man’s stock is down by about two-thirds since the beginning of 2011.