One day in early 2013, Preet Bharara, the U.S. Attorney for the Southern District of New York, met with his deputy, Richard Zabel, about one of the biggest cases of his career—a crackdown on insider trading in the hedge-fund industry. Although the financial crisis had receded, popular rage against Wall Street bankers and traders was still strong; most Americans had seen their incomes stagnate while the fortunes of the wealthiest continued to swell. For the previous few years, Bharara and the prosecutors who worked under him at the Southern District, along with investigators at the Federal Bureau of Investigation and the Securities and Exchange Commission, had been studying phone logs, wiretapping traders’ calls, and flipping witnesses, one after the other, as they worked their way deep into some of Wall Street’s most profitable hedge funds. Bharara was now considering a criminal indictment of Steven A. Cohen, the founder of a fourteen-billion-dollar hedge fund called S.A.C. Capital Advisors.
Cohen was a captivating figure on Wall Street. He was not the sort of investor who, like Warren Buffett, took a large stake in a company and held it for years, immersing himself in how the business worked. He was a short-term speculator, who had built a vast personal fortune by placing high-volume bets on small movements in stock prices; he was often driven by earnings announcements and other such events, and maintained high returns, against the odds, year after year. He was short and thick, had a fierce mind and a quick temper, and he lived in a thirty-five-thousand-square-foot mansion in Greenwich, Connecticut. A passionate art collector, he would spend a hundred million dollars or more on a single work.
Zabel and Bharara had had multiple conversations about the case, and the time had come to decide how they were going to proceed. The two men were often in agreement about how to approach their cases—Bharara has called Zabel “my consigliere and my closest friend”—but Bharara relied on him especially for his insight into white-collar opponents and their highly compensated defense lawyers. In fact, Zabel had more in common with rich Wall Street defendants than he did with Bharara.
Bharara, the son of a pediatrician, immigrated to the United States from India as a young child, grew up in New Jersey, and moved swiftly through Harvard, Columbia Law School, and, eventually, into the office of Senator Charles Schumer, of New York, where he spent four years as chief legal counsel for the Senate Judiciary Committee. For Zabel, by contrast, the hedge-fund industry was native ground: his father was a founder of Schulte, Roth & Zabel, an immensely successful law firm that served hedge-fund clients. Many on Wall Street saw Zabel as one of them. One prominent fund manager, whose company had been investigated by the U.S. Attorney’s Office, recalled many bitterly competitive rounds of squash with Zabel, and was convinced that they had led to ill will between them. Like others in the hedge-fund world, he felt that his industry was being unfairly persecuted by government officials who were overly aggressive in advancing their cases.
Bharara, having amassed dozens of guilty pleas and convictions for insider trading, had come to enjoy the feeling of winning, and was not inclined to file ambitious cases unless he was confident of victory. He had just brought insider-trading charges against two S.A.C. employees: Michael Steinberg, a high-level portfolio manager who was close to Cohen, and Mathew Martoma, a former portfolio manager, who had made enormously profitable trades in two pharmaceutical companies, Elan and Wyeth, before Cohen fired him, in 2010. In both cases, it appeared to Bharara and his colleagues that Cohen had made money trading stocks on the basis of inside information that Steinberg and Martoma provided.
Bharara had to decide if his office was going to bring criminal charges against Cohen as well. Putting a legendary hedge-fund manager behind bars would send a strong message to the industry, and show the public that the Justice Department could take on one of the most powerful men in finance. Yet mounting a trial against such a prominent defendant, who had billions to spend on his defense, was daunting. It would be helpful to have an idea of what the prosecutors were up against.
It was not uncommon for prosecutors to meet with the attorneys of a prospective defendant, giving them a chance to present their side and try to talk the prosecution out of filing a case. Now Bharara and Zabel agreed that it was time to bring Cohen’s lawyers in and hear what they had to say.
The eighth-floor conference room at 1 St. Andrew’s Plaza, the home of the Manhattan U.S. Attorney’s Office, is the largest one in the building. But even its ample capacities were tested on the morning of April 25, 2013, when men and women in dark suits began streaming in for the meeting between prosecutors and Steven Cohen’s lawyers. Bharara did not attend, but Zabel did, and he took a seat at the center of the “government” side of the long table. On either side of him were federal prosecutors, the securities-unit chiefs, the head of the asset-forfeiture unit, and the leader of the office’s criminal division, along with several F.B.I. agents and S.E.C. lawyers. Someone had to get extra chairs from down the hall.
On the other side of the table sat Cohen’s main defense attorney, Martin Klotz, looking slightly dishevelled. Klotz, who was the senior counsel at Willkie, Farr & Gallagher, had been Cohen’s, and S.A.C.’s, outside legal adviser for more than a decade. He had also spent time as a prosecutor, in the late nineteen-eighties, had a Ph.D. in philosophy from Yale, and was known for his courtly demeanor and his reluctance to raise his voice. He was accompanied by a colleague from his firm and three partners from Paul, Weiss. Theodore Wells, a star trial lawyer at Paul, Weiss, was also in attendance. He didn’t speak, but the implication was clear: if this case reached a courtroom, Wells, whose closing statements were so powerful that he sometimes brought himself to tears, would be the government’s adversary.
Klotz led the presentation. He and Cohen’s other attorneys came prepared to target the prosecutors’ fear of losing a big case. Every member of the defense bar knew that the government’s calculations were based at least in part on risk assessment and vanity. The aim was to get the prosecutors to think hard about what it would be like to suffer a humiliating defeat at trial.
A Willkie associate distributed a black binder to everyone in the room. Klotz looked out at the crowd of faces. “Thank you all for giving us this time to come and talk to you today,” he said.
The government’s case relied on an e-mail that Michael Steinberg had received from his analyst, Jon Horvath, who was now coöperating with the prosecutors. Horvath had obtained inside information about the computer-manufacturing company Dell from a friend at another hedge fund, and had shared it with Steinberg. (Horvath pleaded guilty to insider trading in 2012, but charges against him were dropped before sentencing, in 2015.) The source predicted that Dell would miss the estimates most investors were expecting. “I have a 2nd hand read from someone at the company—this is 3rd quarter I have gotten this read from them and it has been very good in the last two quarters,” Horvath wrote on August 26, 2008, two days before Dell publicly announced its quarterly earnings. To a layperson, it wouldn’t have made much sense, but to sophisticated Wall Street traders it meant that the information about Dell’s as yet nonpublic earnings had come from someone inside the company who had provided valuable information in the past. The e-mail was forwarded to another portfolio manager at S.A.C., and, eventually, to Cohen. Shortly afterward, Cohen began selling all five hundred thousand of his Dell shares. On August 28th, Dell made its earnings announcement: it had indeed missed the estimates, and its stock fell. Cohen avoided a loss of $1.7 million.
Klotz focussed on whether Cohen could be convicted of insider trading on the basis of the “2nd hand read” e-mail. He made a three-part argument: that it was highly unlikely Cohen had read the e-mail; that even if he had read it he didn’t necessarily trade on the basis of it; and that, even if he had made a trade based on it, this didn’t necessarily constitute insider trading, because Cohen knew so little about the original source of the tip, and the e-mail didn’t indicate that its contents were nonpublic.
“There is no evidence that Steve read the ‘2nd hand read’ e-mail or that he spoke to anyone about the e-mail,” Klotz went on. “There isn’t a single witness who would testify that they discussed the e-mail with Steve.” He added, “Steve only reads a very small percentage of his e-mails.”
Opening his binder, Klotz flipped to a screen shot of Cohen’s e-mail in-box. Cohen had spam filters that diverted junk messages from his correspondence, but he still received almost a thousand e-mails every business day. According to Cohen’s legal team, he looked at just eleven per cent of them, and at only about twenty-one per cent of the e-mails from the research trader who had forwarded the “2nd hand read” e-mail. Klotz’s screen shot included a message about scheduling a golf game and dinner; research reports from various brokerage firms about oil prices and geopolitics; and a report on the Federal Reserve minutes.
Halfway down, the message from Horvath—“FW: DELL,” in bold type—was clearly visible. The government lawyers tried not to chuckle at the Amazon message directly above it—“Up to 60% Off Art Magazines.” Apparently, the spam filters didn’t always work.
Klotz pointed out that Cohen’s desk had seven monitors on it. His Microsoft Outlook messages appeared on the far-left one, behind multiple other screens, further increasing the likelihood that he never saw the Dell message. He would have had to “turn to the far left of his seven screens, minimize one or two computer programs, scroll down his e-mails, double-click into the ‘2nd hand read’ e-mail to open it, read down three chains of forwards to read the ‘2nd hand read’ e-mail, before issuing an order to sell shares of Dell.” And all of this would have taken place in less than half a minute.
Klotz was essentially saying that Cohen, the most successful trader of his generation, was winging it every day. Maybe he read a critical e-mail; maybe he didn’t. Who knew? Cohen lived in a swamp of information so deep that there was no way to prove that any particular e-mail was read, let alone acted upon. There was no method to what he did; it was all improvisation.
Most of the government investigators in the room balked at this notion. They had been studying Cohen for years and understood him to be a rapacious consumer of information about his stocks. They believed that S.A.C. had been structured to insure that Cohen, a notoriously demanding boss, had access to every bit of trading data that was gathered by his portfolio managers and their teams. The suggestion that he ignored eighty per cent of the messages from his own research trader, whose job was to alert him to critical market information, struck them as absurd.
Still, as a glimpse into Cohen’s potential defense arguments, it was unnerving. Klotz reminded everyone of the convoluted journey the “2nd hand read” e-mail had taken before being sent to Cohen. “Steve does not remember reading it,” Klotz said. “He may not have read it.”
Klotz then started attacking the legal underpinnings of the Dell case. The information had been passed from a Dell investor-relations employee to an analyst at an investment fund and then to an analyst at another fund before reaching Horvath, whereupon it went to Steinberg, then to another portfolio manager, then to Cohen’s research trader, and, finally, to Cohen. Klotz and his colleagues believed that Cohen was too far from the original source of the information, and too ignorant of the circumstances, to be criminally liable for any securities fraud.
“A number of people I’ve spoken to say that isn’t a legitimate extension of insider trading,” Klotz said.
“Are any of these people federal judges?” Zabel asked. He, like his colleagues, felt confident about his interpretation of the events. “Give me a break.”
Zabel understood how hedge-fund people operated, and he wasn’t afraid to express his cynicism about their motives. But, where his bluntness would normally have prompted laughter, there was only awkward silence. The government attorneys knew that Cohen’s distance from the Dell leak was a serious weakness.
Then, there was the Mathew Martoma case: the former S.A.C. portfolio manager had an inside source—a doctor who helped supervise drug trials for the Elan Corporation—and investigators had established that Martoma made a phone call to Cohen shortly before Cohen gave orders to sell the stock. But Klotz observed that, before the selloff, Elan had risen from nineteen dollars to more than thirty, and that several analysts had issued reports arguing that the stock had peaked. It made sense for Cohen to sell his shares. In Klotz’s telling, Martoma had told Cohen that he was “no longer comfortable” being long in the stock. Given that S.A.C. had an unrealized profit of around eighty million dollars, selling was simply the prudent thing to do.
When Klotz finished, Zabel shook his head. “I’m sorry, I just don’t buy it,” he said. Klotz’s points involved few positive assertions. Cohen may not have read the e-mail. He may not have had time to react to it. It was a bit like saying, “I might have been in the bank, and I might have had a mask, and I might have had a gun, but that doesn’t mean I robbed the bank.”
Still, Cohen had been notably discreet. The government had subpoenaed his e-mails, his phone records, and his instant-message logs; prosecutors and F.B.I. agents had studied his communications patterns and his trades in detail. They had even placed a wiretap on his phone. They wanted to find, say, Cohen thanking Steinberg or Martoma or someone else for sharing his valuable inside information—some piece of evidence that would prove that Cohen knew the information was dirty before he traded on it. Nothing like that had turned up, and, having scrutinized Cohen and his background, the prosecutors had an inkling about why.
One morning in December, 1985, Cohen, a twenty-nine-year-old trader at Gruntal & Company, a small New York brokerage firm, spoke on the phone to his brother Donald. The two often talked about stocks, and on this day Cohen had a recommendation to pass along: he suggested that his brother buy shares of RCA, the parent of NBC. “I believe there might be a restructuring going on,” Cohen told him, according to testimony that Donald gave later to the S.E.C. “These TV stocks were pretty hot,” Donald recalled him saying. “If NBC was spun off, it could run up about twenty points.”
After studying RCA’s stock chart over the weekend and looking through a few back issues of Forbes, Donald bought twenty March call options in his personal trading account at Fidelity. This gave him the right to buy RCA shares, three months later, at fifty dollars, an aggressive bet that the stock price was going to increase. According to Donald’s testimony, Cohen had made a similar investment in his own account.
Cohen had grown up in Great Neck, the third of eight children. His father ran a garment firm, and his mother gave piano lessons. According to people who were close to Cohen then, he knew from an early age that he didn’t want a version of his family’s middle-class life, and was intensely driven to make money. He attended the Wharton School and joined Gruntal shortly after graduating, in 1978. On his first day there, Cohen made eight thousand dollars trading, a significant profit at the time. He wasn’t a math wizard, had no deep knowledge of global economies, and didn’t rely on a unique investing philosophy. He was simply a great trader. “I knew he was going to be famous within a week,” his boss at Gruntal said. “I never saw talent like that.” Seven years later, he was running his own division.
The movement of RCA’s stock looked like the skyline of the Andes, a series of dramatic spikes as investors kept buying more shares in response to takeover rumors. Cohen’s first wife, Patricia, later said in court filings that he’d been telling people that a Wharton classmate had mentioned an impending takeover offer for the company. Five days after Cohen’s conversation with his brother, General Electric announced a takeover of the broadcaster, for $66.50 a share, which sent RCA’s stock price shooting up. Cohen made twenty million dollars on the trade, according to a lawsuit that Patricia later filed against him.
Four months later, an S.E.C. subpoena arrived at the office of Gruntal’s legal counsel. The agency had launched an investigation of possible insider trading in RCA before the takeover, and wanted Cohen to testify.
The S.E.C. was looking at other stocks, too—Warner Communications, General Foods, and Union Carbide. It was a violation of securities law to trade on material, nonpublic information that was leaked by an insider who was supposed to keep it confidential. According to the agency’s investigation, a group of people had accumulated shares of all four stocks right before public announcements drove the prices higher. The agency suspected an insider-trading ring.
Donald got a subpoena, too. He called Steven, who reassured him. “Everyone that bought RCA at the time was being questioned,” Donald recalled him saying, in his testimony.
Privately, though, Cohen was stressed, according to court documents filed by Patricia. Around the same time, Dennis Levine—a top mergers-and-acquisitions banker at Drexel Burnham Lambert, the firm where the junk-bond financier Michael Milken worked—was arrested and charged with orchestrating an immense insider-trading scheme. The arrest was just the beginning of a series of securities-fraud prosecutions—run by Rudolph Giuliani, then the U.S. Attorney for the Southern District of New York—that dominated news headlines for months. The S.E.C. accused Levine of accumulating $12.6 million in illegal profits and froze his assets.
Around 6 P.M. on June 5, 1986—the same day that Levine pleaded guilty to tax evasion, securities fraud, and perjury and agreed to become a government witness—Cohen arrived at 26 Federal Plaza, at Broadway and Worth Street. He was about to be deposed in the RCA investigation. Gruntal had arranged for Cohen to be represented by Otto Obermaier, a former head trial lawyer for the S.E.C. Obermaier was one of the most talented and well-connected defense attorneys in the field, and he was about to validate his reputation.
An S.E.C. staff attorney and a financial analyst who evaluated trading data for the agency’s enforcement division greeted Cohen and Obermaier, and the formal proceedings began. “This is an investigation by the Securities and Exchange Commission entitled ‘In the matter of trading in the securities of RCA Corporation,’ ” the staff attorney said. Cohen then raised his right hand and was sworn in. “Have you seen the subpoena?” the staff attorney asked Cohen.
“He has,” Cohen said, referring to Obermaier.
The staff attorney looked at Obermaier, then turned to Cohen again. “Have you seen the subpoena?”
“I don’t think so,” Obermaier said, answering for Cohen. “It hasn’t been shown to him.”
The agency had sent a separate subpoena to Cohen requesting trading records and other documents as part of its investigation. The staff attorney mentioned this and then asked Cohen, “Do you plan to produce any documents today?”
“No,” Obermaier said, again on Cohen’s behalf. Obermaier said that they would “decline the invitation to produce documents,” on the basis of his client’s constitutional rights.
“Which constitutional right is that?” the staff attorney asked.
“The provision that no person shall be compelled to be a witness against himself,” Obermaier said.
“That’s his Fifth Amendment right,” the staff attorney said, trying to insist that Cohen answer the question about the documents himself.
During depositions, there was usually some wrangling over this point. The S.E.C.’s preference was always to get a witness to admit, on the record, that he was “taking the Fifth” when he was refusing to answer questions; it could be used later as an inference of guilt. If you were innocent, the thinking went, why wouldn’t you use the opportunity to tell the S.E.C. all about it? White-collar defense attorneys were well aware of this, of course, so their job was to keep the client from saying that he was “taking the Fifth,” even when he was taking the Fifth, for precisely the same reason. It was standard legal maneuvering.
“He has to assert personally his right not to produce documents under the Fifth Amendment,” the S.E.C. staff attorney said, trying again.
“I don’t think he does,” Obermaier replied. “I’m responding as his lawyer.”
“What is your date and place of birth?” the staff attorney asked Cohen.
“Upon the advice of counsel,” Cohen said, “I respectfully decline to answer the question on the ground that I’m being compelled to be a witness against myself.”
“Did you purchase securities on behalf of Gruntal & Company in December of 1985 while in possession of nonpublic information concerning RCA?”
“Same response,” Cohen said.
The staff attorney asked more questions: Did Cohen purchase RCA shares in his own account in December, 1985? Did anyone tell him that RCA would be involved in a merger with General Electric before the public announcement? Did Cohen, in December, 1985, recommend that anyone else buy RCA shares? Each time, Cohen repeated the same answer, taking the Fifth without saying that he was taking the Fifth.
The testimony was over in twenty minutes. Riding the elevator back down to the lobby, Obermaier felt that it wasn’t a major event. Cohen, though, worried that he was at risk of losing his livelihood.
“I’m just a stock trader and I happen to have been trading in these stocks,” Cohen complained to a friend on the golf course, according to the friend’s later testimony. “It’s creating a lot of problems for my family, my children, and my personal life.”
Much to Cohen’s surprise, though, the investigation seemed to go quiet during the months after he testified—or, rather, refused to testify. Cohen was never charged or sanctioned in the case. Taking the Fifth, Cohen learned, could take all the momentum out of a securities investigation.
After Klotz left and the meeting concluded, Zabel tried to summarize the salient points of Cohen’s defense for Bharara, distilling his impressions before sharing them with the larger team of prosecutors working on the case. Zabel explained that Klotz’s basic argument—which could be reduced to “Cohen probably didn’t read his e-mail”—was weak. The picture of Cohen as a hands-off investor who didn’t care what his other traders were doing defied belief. “It’s just inconceivable that they didn’t explore their position, with that much money flying around,” Zabel told the team. “It just isn’t credible.”
The insider-trading investigation had been an enormous investment of time and resources—at the expense of other financial-fraud cases that could have been pursued, in the opinion of some critics—and people were now waiting to see whether Bharara would indict Steven Cohen. If Cohen went to jail, it would be one of the most significant Wall Street prosecutions in history, possibly bigger even than Giuliani’s case against Milken. It would prove that the new billionaires who dominated America’s economic and political life were not above the law. But the government was running up against the statute of limitations. A decision had to be made quickly.
A few weeks earlier, Bharara had asked his team to prepare a detailed memo outlining all the evidence that the government had against Cohen. Two prosecutors, Antonia Apps and Arlo Devlin-Brown, had spent a week putting it together. In addition to describing the Dell and Elan cases, the memo contained many other examples of Cohen receiving what seemed to be inside information from his traders and analysts; some had told the F.B.I. that they regarded it as part of their job. Yet nothing definitively proved that Cohen knowingly traded on inside information. Martoma and Steinberg were pleading innocent and fighting their indictments; no witness would testify that he had given Cohen inside information and that Cohen knew it.
In the room with Klotz, Zabel and his colleagues had felt confident. But now, looking through the memo, and reviewing what Cohen’s defense arguments seemed likely to be, they felt their confidence waning. Resignation was setting in. They knew that they had to assess the evidence coldly. They looked again at what they had, and what they had, they saw, wasn’t enough to insure a victory. Klotz’s defense was patchy, tenuous, and rooted largely in speculation, but it could be enough to withstand the government’s meagre evidence. And Cohen, like most powerful Wall Street defendants, was unlikely to testify. The time and energy prosecutors would have to spend trying the case, the years of appeals and arguments, all under close public scrutiny, would be excruciating. If it resulted in failure, the entire narrative of Bharara’s tenure would change.
Bharara and his colleagues could still take action, though. Legally, when any employee acting within the scope of his employment committed a crime, that crime could be attributed to the company he worked for. Steinberg and Martoma had been charged with insider trading, and six others from S.A.C. had pleaded guilty. (U.S. prosecutors withdrew the charges against Steinberg in 2015.) Bharara and Zabel analyzed the evidence in light of the principles of corporate prosecution that appear in the U.S. Attorney’s manual, and agreed that there was easily enough to meet the requirements. They decided to indict S.A.C. Capital, and not Cohen himself. It wasn’t what many in the office had hoped for, but it seemed a respectable fallback.
On the morning of July 25th, an alert went out from the U.S. Attorney’s Office to members of the news media: “1 P.M.—A press conference will be held on a securities fraud matter.” Bharara was ready to unveil his indictment of S.A.C. Capital Advisors, with all the pageantry of a major announcement. Around lunchtime, camera crews started setting up tripods along the back wall of the ground-floor atrium at 1 St. Andrew’s Plaza. The room grew so crowded that people had to stand in the aisles. At 12:59 P.M., Bharara stepped out from behind a dark curtain and stood behind the lectern. “Today, we announce three law-enforcement actions relating to the S.A.C. group of hedge funds,” he said, against a soundtrack of clicking camera shutters. He outlined three sets of charges against Cohen’s company: insider-trading charges, wire-fraud charges, and civil money-laundering charges, which could entail forfeiture of assets tied to the illegal trading. He also announced the guilty plea of another portfolio manager at S.A.C., the eighth employee to be charged with insider trading.
“When so many people from a single hedge fund have engaged in insider trading, it is not a coincidence,” Bharara said. “It is, instead, the predictable product of substantial and pervasive institutional failure. As alleged, S.A.C. trafficked in inside information on a scale without any known precedent in the history of hedge funds.” He described the scope of illegal trading at S.A.C. as “deep” and “wide,” spanning more than ten years and involving at least twenty different securities from multiple industries, and resulting in illegal profits of “at least” hundreds of millions of dollars.
Bharara said that he would take a few questions from the reporters in the room. “Do you plan to criminally indict Steve Cohen?” one of them asked.
A hint of irritation crossed Bharara’s face. He knew, of course, that the media would fixate on the absence of charges against Cohen. He had not, in the press’s familiar story line, caught the “big fish,” and reporters would be eager to cast the indictment of S.A.C. as something short of total victory. “Today, we’re bringing the charges that I’ve described,” he said, hoping that would be the end of it. “I’m not going to say what tomorrow may or may not bring.”
That weekend, Cohen retreated to his home in East Hampton and, as the news continued to circulate, had a word with his four youngest daughters. According to an account in New York, he warned that they were going to be hearing unpleasant things about him. “People in the company have done things that are wrong, and they’re going to pay for what they did,” he said. But, he reassured them, “I didn’t do anything wrong.”
For the rest of the summer, Cohen made a point of being at his desk by 8 A.M., as always. He sat in front of his seven screens and traded. Even though his company had been branded a criminal enterprise, major investment banks like Morgan Stanley, JPMorgan Chase, and Goldman Sachs, which had earned hundreds of millions of dollars in commissions from Cohen over more than a decade, refused to abandon one of the most profitable traders they had ever worked with.
“They have been an important client to us,” Goldman Sachs’s president, Gary Cohn, said on television about S.A.C., just days after the U.S. Attorney for the Southern District of New York called the firm a “magnet for market cheaters” and alleged that it had “trafficked in inside information” on a vast scale. Cohn called S.A.C. “a great counterparty.”
Before S.A.C.’s indictment, the U.S. Attorney’s Office had made it clear that, in order to resolve the case, Cohen would have to shut down his hedge fund. The government could not stop him from managing his own money, though; he would still have close to ten billion dollars of his personal fortune to trade and invest as a private family office. Cohen and his army of traders would still command respect from Wall Street’s major investment banks and have access to the best I.P.O. allocations. The ten-billion-dollar figure sent a signal to the world that nothing had really changed.
Four months later, on November 4th, Bharara announced that the government and S.A.C. had reached a final settlement. The firm had agreed to pay $1.8 billion. (In fact, the fine was $1.2 billion, because the company was given credit for $616 million in fines that it had already committed to pay the S.E.C.) The settlement would also include a guilty plea by S.A.C.—an admission, in court, that the firm had done what the government was accusing it of. For Americans who were still upset that nobody had been held responsible for the crimes that led to the financial crisis of 2008, the punishment of Cohen’s company was, ostensibly, a clear victory for the forces of fairness and integrity.
A few days later, S.A.C. registered its guilty plea before a federal judge. While TV networks beamed news of the settlement onto trading floors around the world, Cohen sat at his desk in Stamford. He had an aggressive P.R. firm on retainer, ready to counterattack the second Bharara made his announcement. “The tiny fraction of wrongdoers does not represent the 3,000 honest men and women who have worked at the firm during the past 21 years,” S.A.C.’s public-relations firm said in a statement. “S.A.C. has never encouraged, promoted or tolerated insider trading.”
In his office, Bharara and his colleagues couldn’t believe what they were reading. S.A.C. had just signed a guilty plea admitting that it had, in fact, been built on a culture of securities fraud. The chief of Bharara’s securities unit called Cohen’s lawyers and told them to retract the statement, which they did. Then they released a new one that said, “We greatly regret this conduct occurred.”
A year and a half later, on May 11, 2015, Christie’s hosted a special evening sale for the world’s top art collectors at its headquarters, at Rockefeller Center. The auction was called “Looking Forward to the Past,” and it was built around a carefully selected group of twentieth-century masterpieces. The night’s sales were expected to be record-breaking, attesting to a worldwide boom in the art market, fuelled largely by Wall Street money and exploding wealth in Asia. One of the paintings up for sale was from Cohen’s collection—“Paris Polka,” by Jean Dubuffet. It had an estimated sale price of twenty-five million dollars.
In the months after S.A.C.’s guilty plea, Cohen, no longer burdened by the threat of criminal charges, seemed determined to show the world that he was as powerful as ever. He sat courtside at a Knicks game at Madison Square Garden, in full view of the television cameras. On November 10th, he made news by spending a hundred and one million dollars at Sotheby’s for an Alberto Giacometti sculpture called “Chariot.”
Cohen had been working to cleanse his reputation on Wall Street as well, trying to distance himself from the legal scandal. He had all but erased his old firm’s name, S.A.C. Capital Advisors, and rebranded his private family office as Point72 Asset Management, a reference to its address, at 72 Cummings Point Road, in Stamford. But, since he had ten billion dollars to invest, his daily life seemed little changed. When he looked for a new head of compliance, a recruiter contacted several prosecutors and F.B.I. agents. Eventually, Cohen hired a former Connecticut U.S. Attorney to be Point72’s general counsel and announced plans for a six-person “advisory board,” made up of high-profile business leaders who would counsel the firm on management and ethics issues. Cohen even started a program for college students called the Point72 Academy, a “highly-selective and rigorous 12-month training program” that would teach investment strategies to young people seeking careers in finance. In 2016, he reached an agreement with the S.E.C. that allowed him to return to the hedge-fund business in 2018. And, of course, Donald Trump won the Presidency, promising to drastically cut back on financial regulation. According to news accounts, Cohen’s new legal counsel worked briefly as part of Trump’s transition team. The result of the government’s nearly ten-year battle against Cohen’s empire was looking increasingly like a momentary setback.
The night of the auction, the Christie’s building was overflowing with the international élite. The atmosphere was feverish. Just before the auction’s start time, at 7 P.M., Cohen’s car pulled up to the building, and Cohen mounted a flight of stairs to the packed auction.
Smiling his gap-toothed, kid-in-a-candy-store smile, Cohen arrived right at the start of one of the season’s most hotly anticipated art auctions—another assertion of power. He knew that the sale couldn’t begin without him. Toward the end of the auction, Giacometti’s bronze sculpture “L’Homme au Doigt” (“Pointing Man”) came on the block. It is widely considered one of the artist’s greatest works. After several rounds of aggressive bidding, Cohen placed the winning bid, paying in total $141.3 million. It was the most anyone had ever paid for a sculpture at auction. ♦
