If, according to a Viennese wit, psychoanalysis is the disease that calls itself the cure, then Steve Cohen’s deal with the US government is the highway robbery that calls itself justice. In brief: Steve Cohen is a bald Wall Street hedgie whose $18 billion fund, SAC, has scored Madoff-like returns over the past 20-odd years. Cohen is a secretive kind of guy whose first wife blew the whistle on him because of his lack of generosity towards her. (Funny how cheap guys never learn. Always be nice to your ex.) Out of the 18 billion big ones Cohen manages, nine are his own, having piled them up over the past 20 years along with some very serious art — expensive that is, a collection a vulgarian like him might be expected to own.
Cohen’s company’s name is SAC, and 11 of his former employees have been charged by the government with insider trading. Six of the 11 have pleaded guilty to criminal charges. Cohen himself is negotiating with the Feds, which is the point of my story. I remember serious bankers speaking off the record and telling me, when I complained about their returns on my investments, that, if I wanted an SAC-type performance, I should look elsewhere. ‘We know they’re insider trading, and we know how they’re doing it, and one day the Feds might wake up’ — or words to that effect. Cohen returned 30 per cent annually to his investors, piling up his billions along with hundreds of works of art, buying and selling the latter for tax reasons as he could defer his tax liability by exchanging one piece for another. (This is what art has become.)
Uncle Sam has called SAC ‘a magnet for market cheaters’. Two of Cohen’s major lieutenants are going on trial soon, but Stevie-baby is smarter than that. He’s dealing with the good uncle, which makes me mad as hell. Uncle Sam should require that SAC gives every ill-gotten gain back, or else take it to trial. Word is out that Cohen might return two billion, a record fine, which leaves him with seven billion big ones. Plus the art, not a bad little saving, as they say. In settling, Cohen is seeking to resolve both the criminal case against SAC, plus any lawsuit the SEC might come up with. In other words, the bum will insulate himself against any future problems and will be free to play basketball in his Greenwich, Connecticut home where he has built a court inside his art-laden mansion. (He’s short and fat and bald but is reputed to have a mean hook shot.)
The lesson in all this is that crime pays. The government is looking at the fine that SAC will pay, rather than at what SAC has accumulated by its alleged cheating. And Stevie, as some insiders call him, seems to be playing with the Feds. Late last year, just as his two top men were arrested, he proclaimed his innocence and went out and bought Picasso’s ‘Le Rêve’ from the casino owner Steve Wynn for 155 million big ones. Cohen also owns ‘great art’ like Damien Hirst’s shark submerged in a tank of formaldehyde. If one can judge a man by his art collection, you’ve got the message by now.
All of Cohen’s investors are now busy redeeming their — should we call them ill-gotten gains? — but even there Stevie baby is ahead. They get paid in instalments over the coming months, even years. Which raises a legal point in itself. Madoff’s beneficiaries — the very few but very rich close friends of his — were forced to return most of it. The clawback took place because the Feds had them cold. Which is not the case with Cohen. He has very smart lawyers, which the government doesn’t, who are willing and ready to go the long route. Aggressive district attorneys with political ambitions fear long trials and uncertain results. Forcing Cohen to settle gets their names in the papers and keeps their political futures bright. So Cohen holds on to seven billion, so what? So plenty, says Taki.
Legal experts claim that Cohen is a dead duck if SAC goes to trial. A Nuremberg-like defence of taking orders from above does work in such cases. The six employees who have pleaded guilty would most likely testify against SAC — for lighter sentences, of course, nothing personal — providing powerful evidence for Uncle Sam. This is what I find maddening. Why are the Feds so pusillanimous? For the reasons mentioned above, I suppose. Because Cohen owns 100 per cent of his firm, and because he hates to spend money, he is now busy selling some of his extremely expensive and extremely ugly junk-art, waving the moolah in front of the Feds: come and get it, little boys, two billion big ones, it’s now or never…Uncle Sam has turned cowardly. He destabilised the Middle East by invading Iraq, but is too timid to make Cohen pay for SAC’s crimes. It’s a good lesson for future insider traders. Cheat, cash in, then settle. Seven billion still goes a long way for the respectability that Stevie craves. The ‘art’ collection also helps.
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