S.A.C. Capital Advisors and three affiliated companies will plead “guilty to every count” of an insider-trading indictment and will pay an additional $1.2 billion to settle charges, according to Preetinder Singh “Preet” Bharara, U.S. Attorney for the southern district of New York.
The total $1.8 billion S.A.C. settlement is believed to be the largest ever for insider-trading offenses, said Mr. Bharara in a letter sent Monday to U.S. District Court Judges Laura T. Swain and Richard J. Sullivan distributed by the Justice Department.
Court approval is required for the settlement.
In late July, a grand jury indictment in U.S. District Court in Manhattan leveled four counts of securities fraud and one count of wire fraud against parent company S.A.C. Capital Advisors LP and affiliates S.A.C. Capital Advisors LLC, CR Intrinsic Investors and Sigma Capital Management. Steven A. Cohen, founder and CEO of S.A.C. Capital Advisors, was not named in the criminal indictment.
In addition to paying $900 million in criminal penalties, the S.A.C. entities must forfeit $900 million. The forfeiture will be reduced by $616 million, the total paid in March 2013 by CR Intrinsic and Sigma Capital to settle parallel actions by the SEC, the letter said.
All four firms are required by the proposed settlement to close their money management businesses “effectively closing the affiliated S.A.C. Capital hedge funds to outside investors,” Mr. Bharara said in his letter.
The proposed penalties imposed against the SAC entities “are steep, but fair, and are commensurate with the breadth and duration of the charged criminal conduct,” the letter stated.
“We take responsibility for the handful of men who pleaded guilty and whose conduct gave rise to SAC’s liability,” according to a company statement provided via e-mail by Jonathan Gasthalter, an S.A.C. Capital Advisors spokesman. “These wrongdoers do not represent the 3,000 honest men and women who have worked at the firm during the past 21 years. Even one person crossing the line into illegal behavior is too many and we greatly regret this conduct occurred.”
Mr. Cohen still faces civil charges by the SEC for failing to supervise two senior employees and stop them from conducting insider trading within S.A.C.-affiliated hedge fund managers.
The resolution of the criminal case “provides no immunity from prosecution for any individual” for criminal activity, Mr. Bharara said in his letter.