NEW YORK -- A prosecution of SAC Capital Advisors would not only imperil the major hedge fund, but it would also signal a tougher government stance toward Wall Street.
According to news reports, federal prosecutors in Manhattan are close to filing criminal charges against SAC Capital, a Connecticut-based firm known known for its remarkable returns and, recently, as the focus of the government’s years-long crackdown on insider trading.
The U.S. Justice Department has been weary of bringing criminal cases against corporations in recent years, mindful that prosecution led to the death of Arthur Andersen, Enron’s accounting firm. That resulted in thousands of lost jobs.
Critics have said the Justice Department’s policy, in effect, has meant some major Wall Street firms are too big to indict.
When the Justice Department announced a settlement with British banking giant HSBC over money-laundering charges in December, then-Assistant U.S. Atty. Gen. Lanny Breuer defended the government’s consideration of economic “collateral damage.”
“Our goal is not to bring HSBC down,” Breuer said at the time. “It’s not to cause a systemic effect on the economy.”
SAC Capital lacks the global reach of a major bank, but the $15-billion fund nevertheless has an outsize presence on Wall Street in the New York area’s economy.
SAC Capital employs roughly 1,000 people and generates enormous trading revenue for other firms in the financial ecosystem (a spokesman declined to estimate how much revenue the fund generates).
It’s unclear how much damage a prosecution could cause SAC, and federal prosecutors have not announced their intentions. If SAC Capital becomes merely a “family office” to manage founder Steven A. Cohen’s personal fortune, the firm might still employ a large number of traders, analysts and other staff.
The Wall Street Journal and New York Times, citing anonymous sources, reported charges against SAC Capital could come as soon as this week.