Settlement talks between SAC Capital and the federal government, which could have led to a pact preventing criminal charges against founder Steven Cohen, are off after Cohen was issued a subpoena by prosecutors last week. That news may prompt outside investors in the embattled hedge fund, including the Blackstone Group, to accelerate yanking additional capital.
As recently as May 13, SAC officials were expressing confidence that a satisfactory resolution of the federal probe was soon to come, a person with knowledge of a potential pact said. A settlement package would have ended a multi-year probe into alleged insider trading of various stocks in exchange for a fine, among other concessions. But during the course of the last week, a surprise grand jury subpoena was issued to Cohen, truncating those deal talks abruptly.
Spokesmen for SAC have refused to confirm or deny that Cohen last week received a subpoena asking him to testify before a grand jury—a move that would essentially ask him to provide evidence against the firm he founded two decades ago and still runs. A spokesman for the Manhattan U.S. Attorney's office, which has been handling the SAC cases, declined comment.The subpoena was first reported by the New York Times late Sunday.
During a noontime conference call with investors on Monday, SAC officials remained mum, according to a listener, saying that media reports on the subpoena and related matters were pure speculation. SAC officials, who took no questions during the call, added that a resolution to the prosecutorial probe would occur within the next two months, this person added. Justice Department lawyers face a statute of limitations on bringing fresh charges on Cohen or the firm in connection with two particularly suspicious trades from 2008 that would force them to either indict the parties or stand down entirely by the end of July.