In the summer of 2008, Steven Cohen was warned by an employee at Citadel LLC that a portfolio manager he was about to hire, Richard Lee, had a reputation for insider trading.
Bloomberg News reports that Cohen ignored the red flag as well as objections from his own legal department and hired him the following year, according to an indictment Thursday that accused Cohen’s SAC Capital Advisors LP of securities fraud and wire fraud.
The government said SAC created an environment in which employees were encouraged to use illicit information and the compliance office identified only one example of suspected insider trading in its history.
Lee, 34, was charged with securities fraud for trading in stocks including Yahoo! Inc. and 3Com Corp. and has pleaded guilty. He is at least the 11th person to be linked to insider trading while working at the SAC, and his actions as late as 2010 represent some of the most recent examples of alleged wrongdoing at firm, occurring after the government’s probe was publicized.
'The particular story of Richard Lee’s time at SAC is emblematic of the broader culture problem at the fund', Manhattan U.S. Attorney Preet Bharara said Thursday at a news conference.
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