In November 2011, a little less than a year before President Obama faced private equity veteran Mitt Romney in his reelection battle, hedge fund billionaire Leon Cooperman wrote a letter to the president.
He accused Obama and his "minions" of using a "divisive, polarizing tone" about the economy that reeks of "class warfare". Such framing, he said, is "a naked, political pander to some of the basest human emotions — a strategy, as history teaches, that never ends well for anyone but totalitarians and anarchists."
Around the same time Cooperman wrote his letter, the hedge fund manager received a subpoena from the Securities and Exchange Commission about trades he had made in the stock of the gas pipeline company Atlas Pipeline Partners. The trades happened just before a 2010 asset sale by the company, which led to a 31% jump in its stock.
Today the SEC charged Cooperman and his fund with insider trading, marking an escalation in his long-running public battle with the regulator. Using his position as a major Atlas investor, Cooperman "obtained access to confidential corporate information" and "abused that access by trading on this information,” the SEC's enforcement director Andrew Ceresney said in a statement.
Cooperman and his fund are "disappointed with the commission’s decision to file charges, and we strongly disagree with the commission that either the firm or I have engaged in unlawful conduct,” according to a letter to investors seen by the Wall Street Journal.
According to the complaint, in late 2011 or early 2012, Cooperman spoke with an Atlas executive regarding a subpoena he had recently received from the SEC, asking about trades he had made in the company's stock in the lead-up to its 2010 asset sale.
Cooperman wanted the executive to say he had not shared confidential information with the hedge fund manager about the sale, according to the complaint. The executive "believed that Cooperman was attempting to fabricate a story in case the two were questioned about their conversations."
The complaint says Cooperman spent the first half of 2010 selling down his stake in Atlas, which he had described to one consultant as a "shitty business." But after learning from an Atlas executive that company was in talks to sell a chunk of its assets — and promising not to trade based on that information — he began purchasing call options on the stock, effectively betting its price would rise substantially in a short period of time.
It wasn't just regulators who noticed the suspicious trading patterns. A day before Atlas announced the asset sales, Cooperman told a family member — who was also a hedge fund manager — about the "good news", the complaint alleges. The family member forwarded Cooperman's message to a colleague, who replied: "That explains the fishy $17 August calls, etc.,"
"Somebody should investigate that," the family member responded, apparently unaware of the origin of the trading.
Cooperman's family member even emailed Atlas investors asking them about the suspicious trades. "I also would like to make sure that the SEC looks into the shady options trades," they wrote. "How do I become a whistle blower?"
Here is the full SEC complaint.
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at email@example.com.
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