The effect of insider trading allegations against Great Neck-native Steven Cohen’s hedge fund SAC Capital Partners could ripple beyond the financial and law enforcement communities to charities and hospitals.
Cohen, a billionaire whose alleged ties to illegal trades and opulent lifestyle of mansions and nine-figure art deals have drawn scrutiny from the press and federal authorities, has also given tens of millions of dollars in philanthropy – including more than $10 million to North Shore-Long Island Jewish Hospital in New Hyde Park.
Cohen, who is facing administrative charges from the Securities and Exchange Commission over alleged failure to supervise senior employees and whose company is the target of a federal criminal indictment released Thursday, is, along with his wife, the namesake of North Shore-LIJ’s Steven and Alexandra Cohen Children’s Medical Center – a highly regarded facility that earned national rankings from U.S. News and World Report in seven specialties this year.
North Shore-LIJ currently has no plans to change the name of the center or its donor relationship with the Cohens, said spokesman Terry Lynam.
Lynam praised the Cohen’s philanthropy but said the hospital has no comment on the charges against him and his company.
“The Cohens are wonderful philanthropists whose support has greatly benefitted our children’s hospital,” Lynam wrote in a statement. “Because our involvement with the Cohens is limited to their interest in Cohen Children’s Medical Center, we know nothing about the criminal and civil enforcement actions taken against him.
The Steven A. and Alexandra M. Cohen Foundation committed $50 million North Shore-LIJ in 2010 and by 2011 had given $10.8 million of that total, according to the foundation’s tax records. Tax forms from 2012 are not yet available.
Schneider Children’s Hospital was renamed the Steven and Alexandra Cohen Children’s Medical Center of New York in recognition of the gift, according to a North Shore-LIJ press release.
“We’re deeply touched and honored by Steve and Alex Cohen’s support of the hospital. As someone who has known the Cohens for many years, I’ve seen first hand their deep love of children and family,” senior vice president of children’s services Dr. Arthur Klein said in the 2012 release. “The new construction made possible by this gift will enable us to develop what will truly be a world-class children’s hospital unmatched in the New York area.”
Other charities and hospitals may face questions about their relationships with Cohen as the cases against him and his hedge fund progress.
Cohen has contributed millions to the New York City-based anti-poverty group Robin Hood Foundation and sits on the charity’s board. He has also contributed millions to Mt. Sinai Hospital, which as recently as June 4 issued a press release touting a “generous gift” from Cohen and his wife’s foundation to support the newly-renamed Steven and Alexandra Cohen Center for Labor and Birth.
The Robin Hood Foundation and Mt. Sinai Hospital did not return requests for comment.
Cohen, who has been a central figure in a years-long insider trading investigation that has seen his employees and associates charged but until last week had not targeted him directly, was charged on July 19 by the SEC for allegedly failing to supervise two high-level employees who have already been arrested for alleged illegal trading. The SEC’s administrative charges are not criminal, but could result in fines and a prohibition on Cohen working in the financial services industry.
The U.S. Department of Justice filed its own charges against SAC Capital itself, releasing a criminal indictment described in reports as a rare criminal prosecution of a large company. The Greenwich, Conn.-based hedge fund, according to the indictment, peaked at managing more than $15 billion in assets.
The 41-page indictment describes a business culture centered around obtaining an informational “edge” over competitors that led the company and Cohen himself to turn a blind eye to evidence that traders were using inside information.
“Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without precedent in the hedge fund industry,” said the indictment.
The SEC’s legal filing alleges that Cohen, a graduate of Great Neck North High School, failed to prevent traders Matthew Martoma and fellow Great Neck native Michael Steinberg, both of whom are facing criminal charges, from making illegal trades despite being in possession of “highly suspicious information” about their activities.
Steinberg, who graduated Great Neck North High School 20 years after Cohen, was arrested by FBI agents outside his Manhattan apartment building in March.
The indictment also alleges that Cohen and other managers deliberately hired employees they believed had contacts within publicly traded companies with no safeguards to ensure those employees did not use those contacts to obtain insider information. According to the SEC’s charges, illegal trading allegedly netted SAC Capital more than $275 million.
“A company reaps what it sows, and as alleged, SAC seeded itself with corrupt traders, empowered to engage in criminal acts by a culture that looked the other way despite red flags all around,” Manhattan U.S. Attorney Preet Bharara said in a statement. “SAC deliberately encouraged the no-holds-barred pursuit of an ‘edge’ that literally carried it over the edge into corporate criminality.”
The Department of Justice is seeking forfeiture of assets and civil money laundering penalties against the hedge fund.
