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Investment firm fights back against government fraud probe

For the past several years, prosecutors and investigators from the U.S. Department of Justice (DOJ) have been clamping down hard on alleged acts of white collar crime across a wide sphere of financially related activities, with a particular focus upon big banks and investment firms.

Although that scrutiny has resulted in a number of high-profile trials and convictions for defendants on securities fraud, insider trading and other charges, it has also had some commentators questioning a potential overreaching by the government in many cases.

A longstanding and notably vigorous DOJ probe into the activities of global investment firm SAC Capital Advisors would seem to serve as a case in point regarding that criticism. SAC has risen in a few short years from being a start-up hedge fund to a global player in that industry, with more than 1,000 employees and a number of international offices.

With that increased stature has come heightened scrutiny from federal regulators and enforcement officials, with some employees of SAC having already been convicted at trial on insider trading charges.

A number of company officials and media commentators have recently stated, though, that the continuing probe into the company, both in terms of its longevity and comprehensive nature, is excessive and punitive, both disrupting company business and targeting individuals who are not guilty of any criminal activity.

Until slightly more than a week ago, the investment firm had been reported as cooperating fully with the DOJ in that agency's continuing investigations, but SAC summarily suspended that cooperation last week following the issuance of subpoenas requesting that several of its top executives appear before a grand jury.

They may uniformly opt not to do so, asserting their constitutional right against self-incrimination. Several company spokespersons have repeatedly stated that SAC has been routinely forthcoming and cooperative with the government, but that cooperation appears to have now ceased.

One of the executives who was subpoenaed, chief compliance officer Steven Kessler, has noted that the misconduct of a few traders was a singular departure for the company, which has a strong history of stringent compliance and a sterling record of integrity overall in the hedge fund industry.

Source: New York Times, "4 SAC executives subpoenaed in insider trading inquiry," Peter Lattman, May 23, 2013

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