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2. Gupta makes his case for a new trial

The news that Steven Cohen received a subpoena has led to some head-scratching and lots of tea-leaf reading, though in the end it's still unclear what the prosecution has in mind.

One obvious interpretation is that Cohen is off the hook for personal criminal charges. The idea here is that prosecutors rarely subpoena the target of the investigation. But it seems odd that the prosecution would want to intentionally indicate that Cohen is no longer a possible target for indictment. It has every reason to want the world and Cohen to think that personal charges are still possible.

The other interpretation, as noted by Reuters, is that investigators are trying to boost the pressure on Cohen, issuing a subpoena to essentially force him to take the fifth, which always looks bad in the media. It's certainly an indication that the long-running investigation of Cohen is reaching the end game with lots of sound and fury. With a statute of limitations looming, something dramatic has to happen soon.

Cohen's team seems amenable to some sort of deferred prosecution agreement, even it leaves SAC Capital as a mere family office. But you also get the idea that such a deal will not sit well with the FBI and U.S. attorney's office, not after mounting a massive investigation. If they can't charge Cohen -- something that will remain unlikely barring a strong witness -- then they have to go after the firm aggressively. It would not be surprising if they are aiming for much more than an admission of guilt.

For more:
- here's the article

Read more about: insider trading, prosecutors
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By Jim Kim

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3. Important deadlines could hamper a Cohen indictment

Lawyers for Rajat Gupta, the disgraced former Goldman Sachs director and ex-head of McKinsey, made the case for a new trial at a hearing this week. Some big issues include:

Wiretap evidence. None of the wiretap evidence that figured in Gupta's trial, in which he was found guilty, included Gupta as a participant. But they were eye-opening nevertheless, especially the one in which Raj Rajaratnam, the criminal mastermind in the eyes of some, boasted that he had inside information from "somebody who's on the board of Goldman Sachs" who said "that they are going to lose 42 per share." Gupta's team contends that the wiretapped conversation amounts to hearsay and should not have been allowed as evidence, effectively tainting the first jury conviction.
The testimony of Gupta's daughter. In the trial, Gupta's daughter's testimony was circumscribed by Judge Jed Rakoff such that she was only able to discuss her father's state of mind. She was prepared to be quite specific, hoping to testify that her father thought that Rajaratnam had cheated him out of millions. The defense wants to show that Gupta had no motive to aid and abet Rajaratnam's schemes because of disputes.
The timing of the calls from Gupta to Rajaratnam. One judge on the panel suggested that the evidence from Gupta's daughter might not be very powerful in light of the other evidence, notably the phone call made by Gupta to Rajaratnam less than one minute after a the conclusion of a conference call with the Goldman Sachs board. Shortly after the two men spoke, Rajaratnam made a large trade in Goldman Sachs. The defense claims the timing of the call anyway was a coincidence, as Gupta is a busy man and often returns calls between meetings.

We won't know how all this shakes out for a few months. Gupta remains out of jail on bail.

For more:
- here's a Huffington Post article
- here's a NY Post article
- here's a DealBook article
- here's a WSJ article

Related Article:
Rajat Gupta's sad decline

Read more about: insider trading, Raj Rajaratnam
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By Jim Kim

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4. JPMorgan directors must go, but Dimon must stay

Is Steven Cohen likely to be criminally charged?

As of now, you would have to say that it still seems like a longshot. But we should know fairly soon, as two important statute of limitations are set to run out.

As noted by Bloomberg Businessweek, the first deadline involves the 2008 trades in Elan and Wyeth that were suggested by Mathew Martoma, who then worked at a unit of SAC Capital.

"If the U.S. Attorney's Office for the Southern District of New York, the FBI, and/or the U.S. Securities and Exchange Commission can build a case against him based on those trades, they have to bring it in the next four weeks."

Without the cooperation of Martoma -- he has yet to turn and seems bent on going to trial -- the conventional wisdom holds that a criminal indictment would be tough to sustain.

But an even more important deadline looms a few weeks later, according to the magazine. That deadline involves trades in tech stock, including Dell. Trading in Dell by people at SAC Capital has already led to various charges, including against Michael Steinberg among others. Cohen was "engaged in his own Dell trading at the time."

As of now, "Cohen is far more vulnerable to charges over Dell, according to a person familiar with the matter. Those cursed Dell trades have already taken down at least half a dozen traders. By the time August arrives, Cohen will likely wish he'd never heard of Dell."

It's tempting to agree, but the government would obviously like a direct witness. So far, it has not been able to turn anyone that can offer that kind of testimony. It will be very interesting to see if the government will attempt to make its case without such witnesses.

For more:
- here's the article

Read more about: SAC Capital, Steven Cohen
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By Jim Kim

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5. Wall Street wealth: Nannies as surrogate parents

Just two weeks before its 2013 annual shareholder meeting, JPMorgan's (NYSE: JPM) board had plenty to worry about. They set up a war room to grapple with the upcoming vote, and there was deep concern as the early vote trickled in, showing that a proposal to split the chairman and CEO positions was winning. The board started pulling out all the stops in a stepped-up lobbying campaign.

Then came a serendipitous event.

"People close to the bank say a turning point in the campaign came from an unexpected source, an influential shareholder advisory firm, Institutional Shareholder Services, which urged shareholders earlier this month to withhold their votes from three directors on the board's policy committee," reports DealBook.

In a widely publicized report, ISS "faulted three directors, saying they lacked risk expertise. By zeroing in on the board members, several people close to the bank said, the advisory firm effectively gave shareholders an alternative. They could register their dissatisfaction with JPMorgan without going after Mr. Dimon, the people said."

No one is saying that the board had an explicit strategy to sacrifice its risk policy committee members -- all of which received extremely low votes in the final tally. But that effectively is what is going on.

After Ellen Futter, James Crown and David Cote received just 53 percent, 57 percent and 59 percent of the vote, the board has no choice but to remake the committee. Media reports hold that big changes are on the way.

One issue for the board is how to make a graceful transition. You don't want to create the appearance that they are being fired. We'll likely see some strategic resignations.

For more:
- here's the article

By Jim Kim

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