SAC Capital Advisors - a criminal enterprise?

When tort remedies are inadequate the case for criminal prosecution grows stronger. Such appears to be the case for SAC Capital Advisors - the hedge fund owned by founder Steven A. Cohen. The Securities and Exchange Commission took the unusual step of obtaining an indictment of the company itself, while filing an administrative complaint under the Investment Advisers Act charging Cohen as manager with civil liability for overseeing the enterprise and failing to stop specified insider trades.

The wire fraud act 18 USC 1343 was called "our stradivarius" by Jed Rakoff, reflecting on his years as a federal prosecutor. It reaches "[w]hoever, having devised or intending to devise any scheme or artifice to defraud..." obtains money by false pretenses, etc. A corporation is a "whoever". Innocent investors and stockholders may suffer greatly from an ill conceived prosecution under such a broad criminal statute.

The indictment describes an enterprise with a corrupt culture, led by a principal shareholder who sought and obtained portfolio managers and research analysts with "an edge" over competitors, instructed to find "high conviction" investment opportunities.

A jury will have to decide whether these structures and incidents so characterize the enterprise - SAC Capital Advisors, etc. that the entity is guilty beyond reasonable doubt. The fact that a criminal enterprise is a large one is an aggravating not a mitigating factor. In this case, reportedly, little remains of stockholders beyond Steven A. Cohen himself. If the allegations are true those defrauded by SAC are legion.