New York , NY – Last week, the Wall Street Journal broke a story that another government informant told federal investigators that a former portfolio manager at SAC Capital Advisors had shared and traded on inside information for years.
The Players in this Case
The former SAC portfolio manager implicated in the matter, Dipak Patel, worked at SAC’s Sigma division from 2002 to the end of 2010. While at Sigma, Patel led a small technology investment team and had discretion over roughly $500 million in capital.
The government informant in this case is reported to be Ms. Reema Shah, a technology manager at New York-based mutual-fund J&W Seligman & Co. Last year Ms. Shah pleaded guilty in a New York federal court to swapping material nonpublic information with a former Yahoo, Inc. executive.
In an agreement Ms. Shah signed with the government before pleading guilty, she acknowledged her participation in five alleged insider-trading conspiracies between 2004 and 2009. One of these alleged conspiracies involved exchanging inside information with Mr. Patel while he worked at Sigma.
Cooperating Witnesses Converge
According to the WSJ article, Ms. Shah has been reportedly cooperating with the government since 2009 and continued working at Seligman for more than a year after she became an informant for the FBI.
Mr. Patel’s potential involvement in insider trading became public last summer during the guilty plea of Wesley Wang, an analyst who worked at Sigma under Mr. Patel from 2002 until 2005. Mr. Wang is also cooperating with the government.
Mr. Patel was listed as someone the government sought to have recorded, a request that was approved in December 2008. The government request was to wiretap the phone conversations of another former SAC analyst, Richard Choo-Beng Lee. Mr. Lee began cooperating with federal authorities in 2009. He pleaded guilty in November 2009 to securities fraud and conspiracy but hasn’t been sentenced.
Investigation of SAC Builds
As has been clear over the past few years, the FBI and federal prosecutors have been aggressively trying to collect evidence and build an insider trading case against $14 bln hedge fund, SAC Capital and its founder Steven A. Cohen. This has led them to investigate a large number of current and former employees who worked at the firm or one of its divisions.
At this point, six former SAC employees have either been convicted or pleaded guilty to insider trading charges since late 2009. Four of these employees are now cooperating with the government in its investigation. These former SAC employees include Richard Choo-Beng Lee, Noah Freeman, Anthony Chiasson, Todd Newman, Jon Horvath, and Wesley Wang. The names of a number of other current and former SAC employees have come up in testimony, but have yet to be charged in this ongoing investigation.
A seventh employee, Mathew Martoma, was recently indicted by federal authorities in the largest ever insider-trading case, allegedly worth $276 mln in trading profits or averted losses. Martoma pleaded not guilty to the charges. Although unidentified in the Martoma complaint, Mr. Cohen has been widely acknowledged to be the hedge-fund owner referenced in the criminal and civil court documents.
Dipak Patel, who has yet to be accused of any wrong doing, is just the latest former SAC employee who could be caught up in this federal insider trading investigation as the FBI and government prosecutors try to bring down SAC and its elusive founder Steve Cohen.