If somebody were to write a history of white collar crime on Wall Street, they would need to devote at least one chapter to SAC Capital, and the golden days of insider trading in the hedge-fund world, where firms like SAC routinely posted world-beating returns thanks to the endless flow of material non-public information passing to its traders from an army of analysts, executives, consultants, researchers, etc.
It was just over a decade ago that then-US attorney Preet Bharara decided to start a war by going after Cohen, starting a legal fight that lasted for for years, culminating with Cohen’s decision to accept a temporary ban from managing outside money, and the conversion of SAC into a family office.
Now, Cohen is back with a new firm (they’re about to wrap up their first year of managing outside money, and the Street will no doubt be curious to see those returns). And Bharara is settling into a new career as a podcast host after being unceremoniously fired by President Trump back in 2017.
The crackdown on SAC never touched Cohen. But some of his former employees really took it on the chin. Matthew Martoma, one former SAC trader believed to have extracted the largest insider-trading payout in history, is still in prison. But six months ago, a federal judge in Manhattan vacated the guilty plea of former SAC trader Richard Lee in Bharara’s insider-trading case. That was a huge blow to the case’s legacy: Lee was one of the first guilty pleas, and a crucial government witness.
Now, in his first interview since his guilty plea was vacated, Lee opened up to Bloomberg about why he thinks he was railroaded by Bharara, and insisted that, even though his lawyers convinced him to plead guilty, he always believed in his innocence.
Of course, the reversal of Lee’s plea was made possible by two things: New case law that raised the bar for prosecutors in insider trading cases, and the emergence of new evidence which seriously undermined the government’s case against Lee.
Lee said he agreed to the interview because he wants to explain to the public why he truly believes he never did anything wrong, and that he started asking his lawyers about how he could reverse his guilty plea almost from the minute that he made it official.
“Most people don’t understand,” said Lee, 40. “Why would anyone plead guilty to something that they hadn’t done?”
Lee insisted that when he was firs approached by FBI agents on the street and asked about the alleged insider trades, he had no recollection of the trades that the agents were talking about. And that shouldn’t be a surprise, he said: He made those trades more than four years prior. How many people remember what they did on a given workday four years ago?
“There’s a misconception that portfolio managers and analysts and trading professionals remember every single trade that they did, regardless of whether it is completely lawful, in the gray area or illegal,” said Greg Morvillo, Lee’s lawyer. “You’re talking about four, four and a half years later. It’s very hard to remember the details of how a day evolved.”