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SAC Trader Charged


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Portfolio manager, Michael Steinberg, is the latest Cohen crony to be charged by the government.  Cheers!




This smells like Scrushy's mess.  Six or more of his direct reports were convicted of fraud, but they all testified that Scrushy never told them specifically to do anything explicitly fraudulent.  He would tell them they had to come up with the numbers he wanted. he made it clear that he didn't want to know the details of how they did it. They would get together and bring him their best efforts.  If that wasn't good enough, he would send them back to work up better numbers.


Scrushy's first trial was like the OJ Simpson trial.  His lawyers put a parade of witnesses on the stand who were well known in the community who testified how much Scrushy had helped them and the minority communities.  The government never could get all 12 men and women on the jury to agree  that he was guilty.  However, on the third try, Scrushy finally was convicted on a charge that was tangential to the charge of fraud.


I think it's interesting that Cohen's deposition that was forced on him by Fairfax in their lawsuit may turn out to be his Achilles Heel.

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Thank you for contacting the U.S. Securities and Exchange Commission.  When the SEC enforces a civil action against a corporation guilty of violating SEC regulations, there may be a fine imposed.


Monetary penalties levied by the SEC fall into two categories: civil money penalties and disgorgements.  Civil penalties are usually paid by defendants found to have engaged in violations of the federal securities laws.  In the past, civil money penalties went to the U.S. Department of the Treasury.  A civil money penalty's value will usually be similar to the monetary value of the individual or company's ill-gotten gains. Under Section 308(a) of the Sarbanes Oxley Act of 2002 (the Fair Fund Provision) (http://www.law.uc.edu/CCL/SOact/sec308.html ), the Commission, in appropriate cases, is authorized to distribute civil money penalties to harmed investors.

The second type of penalty is called disgorgement.  This penalty is a remedy meant to restore, with interest, the funds that were obtained through illegal or unethical business transactions to the victims of the illegal activities. With the enactment of the Sarbanes-Oxley Act in 2002, the courts gave the SEC the ability to distribute disgorgement proceeds (plus interest judged owing on it) and civil money penalties received to the victims of securities law violations through the Fair Funds for Investors provision.


If disgorgement has been ordered, the court will appoint a receiver and an investors claims fund will be established.  Information about specific investors claims funds can be found on the SEC website (http://www.sec.gov/divisions/enforce/claims.htm).  Although disgorgement may be ordered in a specific case, there are situations where no investor claims fund may be established, for example the money cannot be collected or the amount recovered is too small to distribute to the investors eligible to participate in any distribution.  In this latter situation, the funds collected will go to the United States Treasury. 




Rinell Randolph


Office of Investor Education and Advocacy   

U.S. Securities and Exchange Commission

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