According to Bloomberg.com, hedge funds lost an average of 2.7 percent in May according to the HFRX Global Hedge Fund Index, as the sovereign debt crisis in Europe prompted declines in stocks, the euro and commodities, and the gap between the yields in U.S. short-term and long-term debt narrowed. This was the biggest decline in the industry since November of 2008, when hedge funds lost 3 percent in the wake of Lehman Brothers’ collapse two months earlier.
Two decades after his divorce, Steve Cohen is being sued by his ex-wife Patricia for the second time since December– this time for a “substantial, if not controlling, interest” in SAC Capital, the $12 billion hedge fund he founded and manages. According to an article by New York Magazine, in the first lawsuit,
Patricia demanded $300 million, accusing him of fraud under racketeering statutes—the suit was withdrawn after Patricia changed attorneys, but her new lawyer, Gaytri Kachroo, says she will soon refile. Patricia charged that at the time of their divorce, in 1990, Steve cheated her by hiding assets. But her suit didn’t merely seek financial redress; it was also a stinging personal attack, portraying Steve as not only cheap and deceitful but shady and secretive, a person who 25 years ago might have tried to evade taxes and trade on insider information, suggestions superfluous to the suit’s central claims but which nonetheless made headlines, and at a delicate moment. Steve’s company has been mentioned in connection with stock-manipulation probes, including one by the FBI.
But Patricia’s latest lawsuit aims to hit Stevie where it hurts: by trying to claim what she sees as her rightful share of his eponymous SAC Capital (then known as SAC Trading) which she claims her ex quietly built during their marriage in the 1980s, using nearly $1 million that she earned from a real estate transaction to help seed the firm. If she succeeds in winning the suit, Pat could stand to win billions.
In a New York Post article, SAC Capital spokesman Jonathan Gasthalter said, “These recycled allegations are ridiculous. They are nothing more than a blatant extortion attempt arising from a divorce that was finalized over 20 years ago.”
In the famous words of Kanye West: “Now I ain’t saying she a gold digger…. but if you fu@%ing with this bitch then you betta be paid.”
The man’s a poet and a genius. A modern day renaissance man.
But back to Steve and Pat. Their relationship has always been a little dysfunctional– even in the twenty years since they’ve divorced. Especially in the twenty years since they’ve divorced. Because, even though they’re divorced, they never really cut ties or made efforts to establish a healthy relationship. And they’ve been bickering about money ever since– revising child support agreements since day one.
Another point of contention:
In 2000, [Steve] even insisted on moving Patricia and her kids into a bigger place, but that became yet another case study in family dysfunction. Steve was renovating his Greenwich mansion and thought it was time to also improve his children’s living conditions—the son’s bedroom was a converted dining room. He got Patricia a 2,340-square-foot three-bedroom on Central Park West, renovated it for her, whatever she wanted. But Patricia had to move out during the renovation, and she felt evicted. To add to her sense of injury, Steve and his new wife, Alexandra, whom he married in 1992, kept the title in their name, giving her a $1,471.49-a-month lease in perpetuity. In Steve’s mind, it was for her own good. That at least kept her from mortgaging the place and running through the money and ending up homeless. In Patricia’s eyes, it also kept her subservient, a vassal of the wealthy lord, where once they’d been equals. His so-called generosity enraged her.
Another special twist in this story is that Steve’s new wife, Alex, is in control of the family checkbook. A little background on Alex: 1) she’s not well-disposed towards Patricia because Steve broke up with her four times in order to go back to “that woman“, according to New York Magazine; 2) Alex was a single mom prior to marrying Steve and has been quoted as saying “Why didn’t she get a job? I had to pay for every paper clip if it was for the kids,” and that’s over and above the child support. So, naturally, there’s a little bit of tension there– and it incensed Patricia to “beg” her husband’s new wife for money and to think her children were receiving lesser treatment than their half-siblings.
It doesn’t help that Pat’s a little cuckoo. In the New York Post article, she says she thinks Steve has spies and allies everywhere. She really believes he’s that powerful. The woman might be a little delusional. I’m just saying. I mean, Steve Cohen is powerful– he’s rich and moves rubs elbows with some pretty influential people… but I don’t know that he has spies…
And for someone who technically wasn’t entitled to any spousal support for the past twenty years, Pat has had it pretty good. Steve himself is worth $6.4 billion and is said to have been paying her some $400,000 a year (small change to him) while her kids were at home. She is still continuing to receive $9,000 a year even though her kids are in college. And the woman doesn’t hold a job. By all accounts she hasn’t held a job since they were married. So she has it pretty sweet. I don’t know why she’s wasting her $9,000/month on lawyer fees. Best of luck to her. At the very least, this will be fun to watch unfold.
Man Group, the world’s biggest publicly traded hedge-fund manager, is scouting investments, acquisitions and distribution in the U.S. and has spoken with firms including GLG Partners and billionaire Steven A. Cohen’s SAC Capital Advisors LLP, according Businessweek.com.
GLG Partners Inc., which manages more than $22.2 billion in investments, rose the most in more than nine months after Man Group was said to be considering a takeover of the firm. Based on these market whispers, GLG increased 39 cents, or 15 percent, to close at $3.07 in New York trading, its largest gain since June 4. The New York-based firm rose as much as 23 percent to $3.30 last Friday.
In a different Businessweek.com article, Man Group Chief Executive Officer Peter Clarke was quoted as having said in a conference call to investors,
The opportunity set is phenomenal at the moment, there’s probably not much that we couldn’t do if we wanted. But it’s not something we’re going to rush into.
Clarke said on the call that he’s looking to add “equity long-short capability” to the firm, which in the interim it could “access through others.”
Spokesmen for SAC and GLG declined to comment.
Man Group said March 24 that it expects to post a drop in full-year profit after its largest fund posted its first annual loss, cutting performance fees by three-quarters. According to Businessweek.com, the firm forecast profit before tax and adjusted items of $510 million in the year through March, down from $743 million last year. The company was expected to report a $555 million pretax profit this year, according to the average estimate of 11 analysts surveyed by Bloomberg.
A prominent Brooklyn rabbi, accused 7 years ago of stealing government grants, was arrested on Thursday for blackmailing a Connecticut hedge fund for $4 million which he allegedly planned to give to two schools he works with (Bais Yaakov and Torah Vodaath). Awww. Gotta love a criminal with a heart of gold. Hope it’s worth the jail time.
Rabbi Milton Balkany, 63, of Brooklyn, was charged with extortion, blackmail, wire fraud, and making false statements as part of an elaborate scheme to shake down the hedge fund he “discovered” had been using insider trading to profit from stock trades. Though prosecutors refuse to release the name of the hedge fund, Reuters has reported a source familiar with the matter confirmed that the hedge fund being blackmailed is SAC Capital Advisors, one of the world’s largest and most successful hedge funds which manages about $12 in assets. Mr. Balkany became privy to this information through his work as a “spiritual adviser” to a federal inmate. Prosecutors say that Balkany approached the hedge fund’s lawyers saying that the U.S Attorney’s Office and the FBI were trying to get the federal inmate to reveal what he knew about the illegal insider trades. There were apparently no such insider trades.
According to the New York Times, prosecutors say that Balkany told the hedge fund’s lawyers that unless they paid him $4 million, he would instruct the inmate to tell the authorities about the insider trades. The lawyers for the hedge fund recorded his conversations with Balkany. On Thursday, as video and audio tapes rolled, Balkany met with the lawyer and accepted two checks, totaling $3.25 million. He was arrested later that afternoon.
Balkany insists that he was merely trying to help a young man in prison. He was quoted in the NY Daily News as saying, “He got a very lengthy term and I was trying to reduce it. I was in touch with the U.S. Attorney’s office the whole time,” he said. Prosecutors are less than convinced. Balkany was in fact in contact with the U.S. Attorney’s office, but his motives appear to have been to induce prosecutors to contact the inmate in order to put pressure on the fund, prosecutors said. During those conversations, he allegedly made false statements.
Kudos to the unnamed hedge fund for walking away the victor in this one. In an era of extra-sensitivity regarding the mere suggestion of impropriety or insider trading, especially in the wake of the Galleon Group scandal, it would have been very easy to have give into the demands of a rogue extortionist in the interest of not being exposed for illegal activities (whether or not the fund had actually engaged in such practices, the mere suggestion could have been very damaging).
Balkany was released on $250,000 bond on Thursday, February 18.
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