The billionaire
investor, who managed to fend off a criminal insider trading
investigation of himself, if not of his former hedge fund, is looking
for a former prosecutor and several agents from the Federal Bureau of Investigation
to join his new $10 billion investment firm, Point72 Asset Management,
said several people briefed on the matter, who spoke on the condition of
anonymity.
The prospective law
enforcement hirings appear to be another chapter in Mr. Cohen’s
continuing effort to prove to federal authorities that his new firm will
not tolerate the kind of aggressive behavior that led to eight people
who once worked for his former hedge fund, SAC Capital Advisors, to
either plead guilty or be convicted of insider trading. SAC itself also
pleaded guilty to securities fraud, paid $1.8 billion in fines to the
federal government and agreed to stop managing money for outside
investors — which is why Point72 is a family office that manages just
his personal fortune.
Mr. Cohen’s new firm
has taken a number of steps to polish its image since SAC entered its
guilty plea a year ago. Point72 is in the process of putting together an
outside board of advisers to review its management practices. It has
also signed a deal with Palantir Technologies, a software company that
receives backing from the Central Intelligence Agency, to monitor trading. The firm has said it is now paying bonuses to employees who report unethical behavior.
In April, the firm
announced the hiring of a former federal prosecutor, Vincent Tortorella,
to serve as its chief compliance and surveillance officer. Mr.
Tortorella is overseeing the search to bring several F.B.I. agents into
the firm. The executive search firm Spencer Stuart is running the search
for a new general counsel, the people briefed on the matter said.
Mr. Cohen’s effort to
recast his image is seen by some securities law experts as part of a
plan to pave the way for his eventual return to managing money for
others — something his former hedge fund did for a little over two
decades and in the process generated some of the highest annual returns
in the hedge fund industry.
“It could be window
dressing, but it’s possible this experience has really shaken him,” said
Erik Gordon, a professor of business at the University of Michigan Ross School of Business. “He would much rather still be in the game and managing other people’s money.”
Mark Herr, a spokesman for Mr. Cohen, said the 58-year-old investor had no desire to manage outside money again.
The firm’s makeover
comes after an appellate court ruling that dealt a major blow to the
campaign against insider trading being waged by the United States
attorney in Manhattan, Preet Bharara. The ruling, which overturned the convictions of
two hedge fund managers, could make it more difficult for prosecutors
to pursue insider trading cases against traders who are far removed from
the source of a potentially illegal stock tip.
Last week’s ruling, by
the United States Court of Appeals for the Second Circuit, is said to
have heartened Mr. Cohen, according to another person briefed on the
matter.
Against that backdrop,
his recent recruitment effort is causing a stir in law enforcement
circles, given the prominent role that Mr. Cohen and his former $14
billion hedge fund have played in the government’s insider trading
investigation, the people briefed on the matter said.
So far, none of the
F.B.I. agents or former prosecutors approached about taking a job at
Point72 have expressed any serious interest despite the promise of hefty
salaries, the people briefed on the matter said. One person briefed on
the matter said F.B.I. agents have “rebuffed” the overtures.
In an interview, Mr.
Tortorella confirmed that Point72 was looking to bring in people with
law enforcement backgrounds to bolster both its internal compliance
effort and the recruitment of new employees. He recently hired a person
from the C.I.A. and another from the New York City Police Department to help with the effort.
“We had the corporate
equivalent of a heart attack, and we need to make sure that never
happens again,” said Mr. Tortorella, who noted that the firm’s
compliance and surveillance team had grown by 20 percent this year, to
35 employees. “There’s a determination from the top down that history
does not repeat itself here.”
Other big money
managers have looked to law enforcement for either a top legal or
compliance job. Ray Dalio’s hedge fund, Bridgewater Associates, with
about $120 billion under management, hired James B. Comey, a former
United States attorney for Manhattan, as its general counsel in 2010.
Mr. Comey left Bridgewater in 2013, when President Obama tapped him to
head the F.B.I. Mr. Dalio’s firm also recruited Arthur M. Cummings, a
former executive assistant director of the F.B.I., to serve as its chief
security officer. Mr. Cummings has since moved to a similar job at General Electric.
Mr. Cohen still has to
deal with a pending civil administrative claim of failure to supervise
that was lodged against him by the Securities and Exchange Commission.
The S.E.C.’s administrative action poses a threat to any plan he might
have to eventually manage money of outside investors again, as he could
be barred from ever returning to the securities industry.
But the decision last
week that overturned the insider trading convictions of the former hedge
fund managers Anthony Chiasson and Todd Newman may have strengthened
Mr. Cohen’s legal hand. Legal experts say the decision casts doubt on
the insider trading conviction of the SAC portfolio manager Michael
Steinberg, a longtime confidant of Mr. Cohen’s, who was convicted of
trading on the same stock tips as Mr. Chiasson and Mr. Newman. The
court’s ruling also may give Mr. Steinberg’s former analyst at SAC, Jon
Horvath, grounds to withdraw his guilty plea.
If both Mr.
Steinberg’s conviction and Mr. Horvath’s guilty plea are dismissed, it
would weaken the S.E.C.’s claim, which is based in part on the criminal
charges against both men.
“As a practical matter
a lot of wind has come out of the S.E.C.’s failure-to-supervise
action,” Mr. Gordon, the Michigan business professor, said.
As of early October,
Mr. Cohen’s new firm, which has about 870 employees, was said by people
briefed on the matter to have generated a year-to-date gross profit of
$1.8 billion.
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