SEC charges billionaire fund manager
Following a lengthy investigation, the U.S. Securities and Exchange Commission has filed charges against hedge fund manager Leon Cooperman for insider trading on behalf of himself and his company Omega Advisors.
The alleged unlawful trading occurred in July 2010, after Cooperman received word of an asset sale by Atlas Pipeline Partners, a company in which he is a majority shareholder. According to Bloomberg News , this case is potentially one of the biggest of its kind since Steve Cohen and SAC Capital Advisors. This claim is partially due to the fact that Cooperman has a longstanding reputation in the financial industry and held a position at Goldman Sachs for over 25 years before starting his own successful firm.
According to litigation documents provided by the SEC, Cooperman generated nearly $4 million in illicit profits after conducting trades based on material information that were not available to the public, provided by an Atlas Pipeline senior executive. The commission stated that Cooperman misappropriated the information he was given after agreeing to keep the information confident, leading the executive to believe that there was no reason to not share the news. The Omega Advisors founder was able to access such sensitive intelligence because of his significant investor status with Atlas, both through his company and personally.
Although such charges have the potential to damage Cooperman’s reputation as a Wall Street legend, the charges are strictly civil. Even if found guilty, the hedge fund mogul does not have to worry about facing criminal charges. The consequences laid out by the SEC are monetary and occupation oriented, including civil monetary penalties, return of illicit gains and the ban of Cooperman as a director or officer of a securities trading organization.
Evidence against the defendant is laid out in court documents provided by the SEC.
According to the formal complaint, Cooperman sent an email to an Omega advisor on the night of July 27 stating, “When you get in please check how much APL we could buy to get to 9.9 percent... depending on the trading level we might add.”
It should be noted that this is just below the 10 percent mark that requires disclosure to the public and federal government. The Elk City asset then sold for $682 million on the morning of July 28, causing Atlas Pipeline stock to increase by 31 percent. Since Cooperman engaged in purchasing securities on behalf of himself and his clients through Omega before the sale was announced to the public, the SEC is condemning any resulting profits as illicit and undeserving.
The commission is also claiming that Cooperman failed to follow reporting regulations for information pertaining to securities transactions of “publicly-traded companies that he beneficially owned.” As a result, the Omega founder is considered to have violated the above provisions of federal securities regulations over 40 times.
Upon the release of this motion by the SEC, Cooperman composed a letter to investors addressing the charges and defending his position vehemently, denying any involvement in illegal activities.
In reference to his questionable trading activity, Cooperman claims, “Our approximately eight-year investment in Atlas Pipeline was based on fundamental research, rigorous analysis and insight–not inside information.”
He then went on to reassure the recipients of his letter that top legal professionals are handling the situation and that Omega Advisors remains committed to their clients’ best interests. He invites investors to direct any inquiries to his team, while conceding that he will not be able to divulge all relevant information until the case is addressed by his legal team.