Ex-SAC Fund Manager Has Insider-Trading Plea Tossed by Judge
Ex-SAC Fund Manager Has Insider-Trading Plea Tossed by Judge
(Bloomberg) -- A former SAC Capital Advisors LP fund manager had his conviction for insider trading tossed out after a judge said current law no longer supports his guilty plea.
Richard S. Lee pleaded guilty in 2013 days before SAC Capital was indicted for orchestrating a massive insider-trading scheme. Lee, who cooperated with prosecutors before seeking to withdraw his plea, was one of at least eight SAC fund managers or analysts who were criminally charged in the government’s yearslong attack on illicit trading.
Lee still faces an indictment in federal court in New York and prosecutors may now have to prove their case at a trial, adding another chapter to a crackdown that began a decade ago. The judge scheduled a July 10 hearing.
Lee, who managed a $1.25 billion portfolio at SAC, pleaded guilty to conspiracy and securities fraud in July 2013, admitting he got tips in 2009 about Yahoo Inc. and 3Com Corp. and that he earned more than $1.5 million in profits, according to the U.S.
Lee’s request to withdraw his guilty plea cited a series of insider-trading rulings that upended more than a dozen convictions, following a 2014 decision by a federal appeals court in Manhattan that raised the bar for prosecutors to prevail.
U.S. District Judge Paul Gardephe said he found no evidence that Lee knew if any of his alleged tippers received anything of value in exchange for the confidential information allegedly given to him -- a requirement under newer interpretations of the law.
Lee’s guilty plea is “insufficient,” given the “developments in insider-trading law” since 2013, U.S. District Judge Paul Gardephe in Manhattan said Friday. “His guilty plea must be vacated.”
In 2017, while Lee was awaiting sentencing, his lawyer Greg Morvillo argued that new evidence showed Lee’s alleged illegal trades weren’t based on inside tips and that he’d traded before he received the tips. The judge on Friday rejected Lee’s argument that he “demonstrated his innocence.”
Morvillo didn’t immediately return a call for comment. Jim Margolin, a spokesman for U.S. Attorney Geoffrey Berman in Manhattan, declined to comment.
At the time Lee was charged, then-U.S. Attorney Preet Bharara said Lee had specifically been hired by SAC despite warnings about his reputation for insider trading at other hedge funds.
SAC Capital later pleaded guilty and agreed to pay a record $1.8 billion to resolve criminal and civil probes. The fund has subsequently been renamed Point72 Asset Management. A spokeswoman for the fund didn’t immediately return an email seeking comment.
The case is U.S. v. Lee, 13-cr-539, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at pathurtado@bloomberg.net
To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, ;Steve Stroth at sstroth@bloomberg.net, Joe Schneider
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