Hedge fund ‘owes Elan shareholders at least $685m’

SAC Capital Advisors, the hedge fund firm founded by Steven Cohen, owes Elan shareholders at least $685.6m (€533.3m) as a result of alleged insider trades in the drugmaker’s stock, investors said in a lawsuit.

The Elan shareholders’ claim came in a consolidated complaint filed on May 13 in Manhattan federal court against SAC and Mr Cohen.

The suit stems from federal criminal charges against Mathew Martoma, a former SAC Capital portfolio manager accused of using inside information to help SAC make $276m on shares of Elan and Wyeth. Mr Martoma has denied the charges.

Prosecutors said they plan to disclose Mr Martoma’s co-conspirators in the alleged insider trading scheme, which they called the biggest ever, by Jul 31.

The government said Mr Martoma shared inside tips on a drug trial with Mr Cohen, who hasn’t been charged in the matter and denies any wrongdoing.

The lawsuit was filed by investors who bought American depositary receipts of Dublin-based Elan or traded in options from Jul 1, 2006, to Jul 18, 2008, and Jul 21, 2008, to Jul 29, 2008. It names as defendants SAC, Cohen, Martoma, and Sidney Gilman, the doctor who allegedly passed the drug- trial information.

The suit seeks $549.2m in profits gained and losses avoided plus $396m in prejudgment interest. The amount in damages is offset by $259.7m SAC agreed to disgorge as part of a record $602m March settlement with the US Securities and Exchange Commission, according to the complaint. Under the settlement, SAC didn’t admit fault.

The total minimum net amount owed to Elan shareholders is $685.6m, the complaint claims.

A spokesman for SAC declined to comment.

SAC has argued that its SEC settlement means the Elan shareholders aren’t entitled to any money for the alleged insider trading.

SAC has also been sued by shareholders of Wyeth, now a unit of Pfizer.

Last month, US District Judge Victor Marrero, who is overseeing the Elan shareholder case, conditionally approved SAC’s settlement with the SEC. Judge Marrero ruled on Apr 15 that the settlement can go forward, while saying it remains subject to a ruling by the US Circuit Court of Appeals in New York in a case involving an earlier SEC settlement with Citigroup.

The Elan investors claimed Mr Cohen created a “permissive culture” that encouraged insider trading. Since 2009, 11 current or former SAC employees have been charged, sued by the government or named as uncharged co- conspirators, the plaintiffs said.

— Bloomberg


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