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The 7 Most Damning Quotes In The SAC Indictment

Steven Cohen and the hedge fund named after him insist they've done nothing wrong in response to a federal jury indicting the firm this morning. If federal prosecutors take SAC to trial, here's what they'll be telling the jury to focus on.

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1. "The guy who knows the quarters cold, has a share house in the Hamptons with the CFO of [a Fortune 100 industrial sector company] , tight with management."

This is an excerpt from an email written by an SAC employee to Steve Cohen describing a potential hire in 2008. According to the grand jury indictment, SAC sought out precisely those portfolio managers and researchers who had lots of contacts within the industries and companies they covered and did little to confirm that the information they got, traded on, and passed on to Cohen wasn't obtained illegally.

2. “I suspect the line about contacts at the company may wake up some of our legal eagles."

When Michael Steinberg, who worked with Jon Horvath, received that email about Sun, he forwarded it to SAC's chief operating officer with the above attached to the message. The COO, prosecutors allege, did not think Horvath had indicated he had received inside information, but instead wrote that "my interpretation of his comment is just that he developed good relationships with mgmt. that enhance his comfort level."

The indictment says that the COO's interpretation of Horvath's message was "unsubstantiated" and that "Horvath's e-mail was based on confidential information about Sun earnings that Horvath had obtained from his contact at Sun." Steinberg will go on trial for insider trading in November. Steinberg plead not guilty to insider trading in Dell and Nvidia stock.

3. "The head of SAC compliance 'was giving me Rules 101 yesterday - so I won't be saying much [.] [T]oo scary.'"

One of the reasons prosecutors brought charges against the firm as a whole is because of what they portray as a widespread culture of non-compliance and superficial compliance with insider trading rules. In 2009, according to the indictment, a new SAC employee sent an instant message to Cohen saying that he was going to short the stock of Nokia when he started working at the hedge fund ten days later. He then apologized for being "cryptic" and cited the compliance rules he had learned the day before.

The indictment says that Cohen did not do any followup on his new employee who was leaving information out of his rationales for a trade because he was scared of running afoul of compliance rules.

4. "My edge is contacts at the company and their distribution channel."

This is from an email by Jon Horvath, a portfolio manager, to Steven Cohen in October 2007. The email described how he had acquired information on Sun Microsystems which, according to the indictment, Cohen never asked if it had been acquired illegally. Horvath plead guilty last year to insider trading using non-public information on Dell and Nvidia. The phrase "edge," meaning information or insight on a stock no one else has, shows up throughout the indictment.

5. "A SAC business development employee subsequently informed Richard Lee that the SAC Owner had decided to hire Richard Lee as a SAC PM anyway, overruling objections from SAC's legal department."

A new wrinkle in today's charges was that Richard Lee, who worked at SAC through March of this year, had plead guilty to securities fraud and is cooperating with the ongoing investigation. The section that describes how Lee was hired also says that he was part of an "insider trading group" at his previous firm, which has been identified in reports as Citadel. Preet Bharara, the U.S. Attorney for the Southern District of New York, said in a press conference today that "the particular story of Richard Lee's time at SAC is emblematic of the broader culture at the firm."

6. "Tough one[.] I think Mat [Martoma] is closest to it."

This is from an instant message conversation Cohen had with other analysts at SAC in 2008 concerning Mathew Martoma's trade recommendation for two pharmaceutical stocks, Wyeth and Elan. Two other analysts were questioning Martoma's thoughts on the results of trials on a new drug and Cohen said, according to the indictment, that he would go with Martoma's recommendation because of Martoma's superior contacts. Martoma has plead not guilty to insider trading based on confidential drug trial information. Cohen's messages about Martoma first came out in an SEC complaint filed last week.

7. "The SAC Owner did not express any concern about CB Lee's proposed sources of information during these conversations."

This portion of the indictment alleges that Cohen did not try to prevent insider trading by a different Richard Lee who worked at SAC. According to the indictment, Lee told Cohen that "he had people in sales and in finance at NVIDIA who gave him information relating to quarterly earning." Lee plead guilty to insider trading in 2009 while working at a different hedge fund.

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

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