Four senior executives of the hedge fund SAC Capital Advisors have received subpoenas to testify before a grand jury as part of the government’s intensifying investigation into insider trading at the firm, according to people briefed on the case.
All four executives were issued subpoenas last week, along with the one served on Steven A. Cohen, the owner of SAC. The executives are Thomas Conheeney, the firm’s president; Solomon Kumin, its chief operating officer; Steven Kessler, chief compliance officer; and Phillip Villhauer, the head of trading.
The fresh round of subpoenas, which also included requests for additional documents and trading records, angered officials at SAC, which had been fully cooperating in the multiyear inquiry. As a result of the government’s new set of demands, the fund decided to take a more combative stance, and on May 17 informed its investors that it was no longer fully cooperating with the investigation.
Lawyers have advised Cohen against testifying before a grand jury and subjecting himself to unlimited questioning on virtually any topic. Instead, he is expected to assert his constitutional right against self-incrimination, lawyers briefed on the case said. Cohen, who last year gave testimony to federal securities regulators as part of a civil insider trading case, has not been accused of any wrongdoing. It was unclear whether Cohen’s executive team would also refuse to testify.
The Wall Street Journal earlier reported the names of the SAC executives.
Prosecutors are pressing their case against SAC after about six years of investigating the firm’s trading practices. The investigation has yielded four guilty pleas from former SAC traders; at least five other former employees have been tied to insider trading while at the firm. Earlier this year, SAC agreed to pay a $616 million penalty to resolve two civil insider trading actions brought against the firm related to questionable trading in pharmaceutical and technology stocks.
The government’s new requests indicated that prosecutors were stepping up their efforts to build a case against the fund itself. Typically, a grand jury hears testimony and reviews evidence before handing up an indictment.
However, the grand jury subpoenas delivered to Cohen and the other four executives suggested that they were not targets of the investigation, as Justice Department guidelines discourage prosecutors from seeking testimony from individuals they are seeking to charge.
The requested testimony, however, could relate to potential charges against the firm connected to trades made in July 2008 in the shares of the drug makers Elan and Wyeth. Prosecutors have already criminally charged Mathew Martoma, a former portfolio manager at SAC, with helping the fund gain profits and avoid losses of $276 million by corrupting a doctor into giving him secret data about clinical trials being conducted by the two companies.
Because of the five-year deadline to file securities fraud charges, prosecutors have until mid-July to bring a case against the firm related to those trades.