Hedge fund magnate Steven A. Cohen was accused by his former wife on Wednesday of hiding millions of dollars from her and of engaging in insider trading in a high-profile merger in the 1980s.Patricia Cohen’s allegations, described by Cohen’s spokesman as “ludicrous,” bring to the fore details from a 1986 insider trading probe in RCA shares before it was bought by General Electric for $6.3 billion.
Keeping in mind that the Cohens divorced nearly two decades ago, the question presented is: Can Patricia re-open her divorce decree to get more money from her husband on the basis that he committed insider trading twenty years ago and hid some of the loot from her? Can her argument stand up in court and be taken seriously as a basis to reopen and renegotiate her divorce settlement agreement?
INSIDER TRADING IS A CRIME!
If, as proffered by Patricia and her attorney, Paul Batista, that Steven got all this money from his insider trading deals, it is unclear why Patricia feels she would be entitled to any money that was illegally obtained by her husband. Any assets he accrued on account of any alleged criminal activity
is are NOT MARITAL ASSETS. And therefore it is they are not distributable. And therefore Patricia would not be entitled to squat. That money would have to be restored to the government. Steven would owe restitution. And as a matter of fact, Patricia should be careful that her settlement agreement that she did receive from Steven are not fruits of the poisonous tree as it stands. So far, Steven A. Cohen and his hedge fund SAC Capital Advisors have NOT been charged with any wrongdoing, even though the SEC, FBI and other federal agencies are cracking down on insider trading scams such as Galleon, and have probed SAC Capitals for insider trading. But an investigation is on going, and it is conceivable that he will be charged at some point.
However, any lawyer who got even a D- in law school ought to know that in a situation like this, even assuming Mr. Cohen is brought up on charges of insider trading, Patricia Cohen is not entitled to diddly squat of that money if he hid it from her. She ought to be happy he hid it from her, actually. Otherwise, she might be an accessary to his crimes, and whatever she did receive in her settlement with him could be taken away by the feds as poisonous fruits.
It defies logic why Patricia and her attorney Mr. Batista would bring such an action in the first place. Says Reuters:
In the lawsuit filed in federal court in Manhattan, Patricia Cohen is seeking millions of dollars she claims her ex-husband hid from her during their divorce proceedings some two decades ago.
Cohen’s former wife claims that since their divorce in 1989, the hedge fund billionaire “has consistently and systematically engaged in a scheme to defraud plaintiff of millions of dollars.”
A spokesman for Cohen, Jonathan Gasthalter, said: “These are ludicrous allegations made by a former spouse that are entirely without merit. It is disgraceful that a member of the bar would assist her in what can only be considered a transparent attempt to extort money.”
In the litigation papers, Cohen’s ex-wife said her former husband “received and realized substantial profits in late 1985 and early 1986 from insider trading generated by the RCA-GE transaction.”
They’ve got to be kidding me, those two. He must have recently graduated or something. He and his client should stay as far away from this mess as they possibly can! He should read up on the anti-racketeering statutes to start. And brush up on what “marital property” is and withdraw or amend his complaint. STAT.
1/17/09 UDPDATES: She apparently withdrew the complaint. I just got wind of this on Daily Intel, aka New York Magazine. Sigh of relief. I can’t belief a lawyer brought such a suit in the first place.