STEVEN COHEN HIS OWEN PRIVATE BRAVADO

Below is  an article about Steve Cohen published  on  Greenwich time.com

His investors are running for cover.He's seen at least nine of his trusted associates charged or implicated in a rapidly-metastasizing insider trading scandal, one that has cost his firm a record $616 million regulatory settlement and can be felt from hedge fund row on Connecticut's Gold Coast to Wall Street.

And the industry he has come to personify -- nimble when picking pharma stocks, soybean futures and derivatives -- can't seem to decide whether to take a long or short position on Steven Cohen, the reclusive and much-maligned founder of SAC Capital Advisors. 

While he has not been charged with a crime, Cohen was subpoenaed last month by the government to testify in front of a grand jury as part of its very public inquisition of the $15 billion Stamford hedge fund. 

Worth $9.3 billion, which has enabled him to acquire paintings by Picasso, Warhol and Jasper Johns, run a charitable foundation and live in relative sequestration on his sprawling Greenwich compound, Cohen is expected to invoke his constitutional right to remain silent.

But even the mighty Cohen might not be able to avert what some insiders say is the inevitable."If he is going to give all clients' money back, I'm surprised it's taken him this long," said Stephen McMenamin, a Cohen acquaintance who is executive director of the financial services trade group the Greenwich Roundtable.

 

From George Soros to Stanley Druckenmiller, McMenamin said there is a precedent of top hedge fund managers closing shop to outside investors, a scenario that Cohen ruled out in a recent letter to his employees.

"If he does, he's following in the footsteps of the greatest managers ever," said McMenamin, who is also a partner in the Greenwich-based alternative investments firm Indian Harbor LLC.

That's where the similarities would end for Cohen, whose peers didn't have the dark cloud of a full-bore investigation hanging over them. 

Cohen, 56, declined an interview request through his external spokesman, Jonathan Gasthalter, the main conduit for the hedge fund's PR machine that last year plucked communications guru Mark Herr away from damage control at bailout recipient American International Group.

"I would think he's thinking more about his neck than his public relations right now," said John Coffee Jr., a securities law professor at Columbia University. "I suspect he is legitimately concerned. You don't take the Fifth and expect it doesn't have some consequences."

His friends call him "Stevie."So do those who have never met Cohen, but speak of the bespectacled investing maven as if they are familiar acquaintances while the stock ticker scrolls beneath them on CNBC and Fox Business Network.

But when your name is bandied about in the same sentence as Ivan Boesky and Michael Milken, both of whom went to prison for securities fraud during the Gordon Gekko era of 1980s excess, an industry that is hard-wired to spurn media attention can begin to turn and disassociate itself.

"There's no question -- it's not good for the industry," an industry insider told Hearst Connecticut Newspapers on the condition of anonymity. "It does not help. The longer it goes on, the worse it gets." 

Investors are heeding the signs, withdrawing in excess of $2 billion from SAC since the scandal unfolded through what are known as redemptions.

One of the first to pull the rip cord was Titan Advisors, a Rye Brook, N.Y., asset management firm focusing on hedge funds.Multiple messages seeking comment were left for George Fox, the president and founder of Titan, which notified its clients it was abandoning its position in SAC at the end of 2012.Cohen is not without his unabashed adherents who are willing to buck the trend, however."You don't get much better than Stevie Cohen," said Ed Butowsky, founder of Chapwood Investments, a private wealth management firm based in Dallas with client money invested in SAC.If Butowsky had his druthers, he would steer more investment assets to Cohen's hedge fund, which he said has delivered three times the return as the "Oracle of Omaha" Warren Buffett with a third of the risk since 1994."The very thought that people want to trash Stevie Cohen, who is one of the great legends in portfolio management, because of some allegations, shame on them," Butowsky said. "If it was me and I had to live through this stuff the last three years, I would tell everybody to go jump off a boat."

Mathew Martoma won't be listing Cohen as a reference.Cohen's former protege is accused of pulling a Martha Stewart.Much like the domestic doyenne, who landed in the clink after dumping shares of the biopharmaceutical stock ImClone Systems based on an illegal tip, Martoma is awaiting trial for insider trading.

 

The 38-year-old former portfolio manager for SAC pleaded not guilty to charges that a doctor leaked confidential details to him about a clinical trial of an Alzheimer's drug, helping the hedge fund avoid $276 million in stock losses in the pharma companies Wyeth and Elan.

Martoma switched to one of the top white-collar defense attorneys in April, perhaps signaling a change in strategy or his willingness to snitch on his former mentor, Cohen, who himself has retained the services of the high-powered Manhattan law firm, Paul, Weiss, Rifkind, Wharton & Garrison LLP.

The government's investigation is said by industry insiders to be keying in on a 20-minute telephone conversation between Martoma and Cohen on the eve of a stock dump by SAC of the drug makers.

"So flipping Martoma is not only critical to going after SAC, it's critical to going after Cohen," said Coffee, also former legal adviser to the board of directors of the New York Stock Exchange.

Martoma might not be the toughest nut to crack -- it's been well chronicled that he fainted when the feds confronted him on his lawn in Florida to tell him he was under investigation for insider trading.

The scope of Cohen's legal troubles is expected to come into sharper focus in July, when the five-year statute of limitations for bringing insider trading charges runs out for stock transactions SAC made involving Wyeth and Elan.

The government could buy itself time by bringing charges against Cohen or SAC under the Racketeer Influenced and Corrupt Organizations Act, which Coffee said would extend the statute of limitations but require the approval of the U.S. Justice Department.Coffee said he was not privy to the details of the case being built."I'm not saying this is inevitable progression to indictment," Coffee said.

 

A second portfolio manager for SAC's Sigma unit in New York, Michael Steinberg, 40, was arrested March 29 on charges of insider trading in technology stocks Dell and Nvidia. Steinberg also pleaded not guilty.

Silent on the widening dragnet is a somewhat surprising figure, U.S. Sen. Richard Blumenthal, D-Conn., who, during his tenure as Connecticut's attorney general, called for stricter regulation of hedge funds.

Blumenthal declined to comment through a spokeswoman, who cited the ongoing investigation.

***

Cohen is still living "the dream."Characterized as a modern-day Medici, the Florentine family of aristocrats known for their art patronage during the Italian Renaissance, Cohen bought the Picasso masterpiece "La Reve" from Las Vegas casino mogul Steve Wynn in March for a $155 million ransom, the highest amount ever paid by a U.S. art collector.Wynn infamously put his elbow through the canvas of "La Reve," French for "the dream," while gesticulating and had it restored. The erotic portrait of Picasso's mistress incorporates the image of the artist's erect penis in her upturned head.

It is the piece-de-resistance of an art collection Cohen's acquaintances say rivals top museums such as the Certosa in Naples, Italy."There's a clear and deep art appreciation," said Dacia Toll, co-CEO and president of Achievement First, a network of urban charter schools in Bridgeport, New Haven and Hartford supported by the charitable foundation of Cohen and his wife, Alexandra.

Cohen has opened his 37,000-square-foot mansion -- opened is the operative word -- to the charter school organization and prospective donors on multiple occasions for dinner parties and brunch meetings.

Cohen's not-so-humble abode is tucked behind a perimeter wall pushing 9 feet in height, 3 feet taller than most of the stonewall applications received by the town, which requires anything above 6 feet to get a building permit.

There's a guardhouse and a wrought iron fence at the foot of the driveway to Cohen's 14-acre domain, which he shares with his wife and seven children, four of whom the couple had together. Two are from Cohen's previous marriage, which ended in divorce. She also has a child of her own.

The grounds of the compound boast a sculpture garden, two-hole golf course and a basketball court. It's aptly located on Crown Lane in backcountry Greenwich, nine miles from SAC's trading floor in Stamford.

Authorities from the town got a rare glimpse inside Cohen's pad in late 2008 when the tycoon applied for a variance to add about 1,000 square feet to the footprint of the mansion for a "his" closet. The variance was ultimately approved.

Cohen is not exactly keeping a low profile, annexing his real estate holdings in March to include a $60 million oceanfront estate in East Hampton. 

The annual real estate taxes on Cohen's Greenwich property are $190,000 alone, according to the local assessor's office.

"You can't accumulate that much wealth and be beloved," said a person who once inspected the house.

Cohen does not fit the coiffed-hair, square-jawed and sartorial-splendor caricature of a tycoon.

He's bald. He's stocky. And he's not known as an outdoorsman.

"There was no pretense of wealth at least in the way he was dressed. He could have been the mail clerk," said Jack Schwager, one of the few writers who has been granted an audience with Cohen.

The "Stock Market Wizards" author interviewed Cohen twice in 1999, spending a day at the side of the hedge fund manager when SAC's trading operation was located in a bunker-like space in Stamford, where the firm has been based since 1996.

"He was constantly flicking through different screens and looking at different markets," Schwager recalled. "I saw an excessiveness with his involvement with the markets and an all-consuming focus."

Schwager characterized Cohen's investing philosophy as a fluid one.

"He can change his opinion on a dime," Schwager said. "He was giving me all the reasons why he was bullish on the bond market. And the next time I was there he was giving me all the reasons why he was bearish on the bond market."

Cohen's proclivity for risk-reward situations can be traced back to his adolescence on Long Island, where he was said to have dominated his high school friends in poker. At lunchtime, the teenage Cohen would watch the ticker tape at a brokerage firm, Schwager recalled.

SAC, which celebrated its 20th anniversary in 2012, currently employs 1,000 people. Its headquarters, situated on Cummings Point near the serene waters of Long Island Sound, also houses lots of expensive artwork. The firm commands fees in the neighborhood of 3 percent of expenses and 50 percent of upside.

"The highest I've ever heard of," Schwager said.

Cohen has a Robin Hood complex.Not only does he stand to benefit from keeping the Sheriff of Nottingham at bay, so do dozens of nonprofit groups that rely on $50 million in yearly donations from the Steven and Alexandra Cohen Foundation, started in 2001.

 

Those organizations are standing by their man, including Stamford Hospital, which has received millions in funding from the foundation earmarked for wellness programs for underprivileged children.

"Steven Cohen has not been charged with any crime, much less convicted," said Dr. Edward Schuster, a cardiologist and internist who serves on the hospital foundation board. "We remain grateful for the Cohens' generosity and the great benefits it has brought to the city of Stamford and the children of Stamford. And we look forward to a continuing relationship with them for many years."With funding from the couple's foundation, the hospital was able to start a program called Tully for Teens that provides exercise opportunities and dietary education for at-risk youths.

 

The couple's generosity enabled the hospital to open a pair of 10,000-square-foot fitness centers at Stamford and Westhill high schools, according to Schuster, who said the private fundraising effort was unprecedented.

At the Tully Health Center, part of Stamford Hospital, the family funded a clinic for unprivileged children to see ear, nose and throat specialists, urologists and eye doctors who visit from Manhattan once or twice a month. The facility is called the Cohen Children's Specialty Center.

"We've been able to accomplish many things that we would not have been able to," Schuster said.

Cohen serves on the board of the anti-poverty Robin Hood Foundation founded by industry peer and fellow Greenwich billionaire Paul Tudor Jones. He is said to have taken a keen interest in the well-being of military veterans, donating $17 million to New York University to research and treat the effects of post traumatic stress disorder.

A lead gift of $5 million for the public park project along Stamford's Mill River corridor came from the couple's foundation. It will be used to build an outdoor skating rink and interactive fountain, expected to open in 2015.

"He's very approachable," said Milton Puryear, executive director of the Mill River Collaborative. "There's been a strong emphasis on the benefits to young people and children, particularly to those who don't have the means to take lessons, pay for lessons, buy or rent skates."Through their foundation, the couple gave $10 million over the last six years to Achievement First, helping to build charter schools in Connecticut."We have offered to put their name on the facility, in particular, or to highlight their contributions in some way and they are quite modest and have actually turned down a request to name a room or a facility," said Toll, the organization's co-chief executive, who met the couple through the Robin Hood Foundation.

Cohen is diversifying a different kind of portfolio.With his wife, he has contributed $500,000 to candidates on both sides of the political aisle since the 2007-2008 campaign cycle, according to the Washington, D.C., based Center for Responsive Politics.And when Cohen gives, he hedges, steering $28,500 each to the Democratic Senatorial Campaign Committee and the National Republican Senatorial Committee in 2007. 

 

A year before Congress took up financial regulation reforms, Cohen gave $2,300 to then-U.S. Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee and the namesake of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Cohen also gave $4,600 to U.S. Sen. Chuck Grassley, R-Iowa, in 2008, when he was ranking member of the Senate Finance Committee.

In 2006, Cohen hosted a fundraiser for then-Stamford Mayor Dannel P. Malloy, who is now governor. Filings with the state Elections Enforcement Commission show that Cohen's wife gave $375 to Malloy's gubernatorial exploratory committee in 2010.

"They are friends of the governor," said Andrew Doba, a spokesman for Malloy. "The governor has made keeping the good paying jobs in finance part of his economic development agenda, and, obviously, SAC is a part of that community."

State Sen. L. Scott Frantz, R-36th District, a venture capitalist from Greenwich, described Cohen as a highly intelligent and nice guy.

"I think he's totally devoted to running a very successful hedge fund," Frantz said. "They pay very, very high taxes to this state and, obviously, to the town."

Sometimes you have to lose the battle to win the war.SAC could face additional fines and possible censure if the firm is found not to be in compliance with rules prescribed by the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority.At the time it reached a $616 million settlement with the government over the Elan and Dell trades, the company defended its conduct in a statement issued by Gasthalter."We are committed to continuing to maintain a first rate compliance effort woven into the fabric of the firm," the company said.That was before SAC's head of compliance, Steven Kessler, was subpoenaed on the same day as Cohen.

The government is said to be scrutinizing whether SAC's compliance standards applied to the "center book" of investments personally managed by Cohen, and if they didn't, why not.Some say that the government would be wise to take a different tack."It would look like you caught John Dillinger with a machine gun in his car out in front of the Federal Reserve bank and you charged him only with double parking," Coffee said.

neil.vigdor@scni.com; 203-625-4436; http://twitter.com/gettinviggy

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