Is Steve Cohen really calling it quits?

Stevie Cohen Tells Kids he Wants to Sell Stake in SAC Capital

By Teri Buhl

Bryan Burrough, co-author of famed corporate raider book Barbarians at the Gate, has scored a rare interview with Stevie Cohen of SAC Capital for Vanity Fair. Today we get a story tease where Burrough tells us Cohen’s confessed to wanting to get out of the daily grind of trading.

Wow that’s some pretty big exclusive news, which has sent some Wall Street minions mourning over the possible loss of a trading titan they consider a hero. Others are left wondering what it means to the hard-working traders at SAC Capital, who according to a March story in AR Magazine, have to give up trading profits via SAC’s shadow system, where Stevie monitors everyone’s trades and then adds the best ones to his portfolio.  But what we really want to know is why Stevie wants to leave his 30 year trading career now?

In March, Bloomberg reported that Man Group was in talks to buy SAC Capital. Last month Man chooses London-Based GLG instead.

This reporter can confirm the Man Group talks were real because a few months ago Stevie actually told some of his kids he was trying to sell to Man and still wants to sell a stake in his firm. You see that whole problem with his back pain, that Burrough gets Stevie to chat about, still has in him rehabilitation and at some point I guess you have to choose your health over the profits. SAC’s pressman, Jonathan Gashalter, would not comment on Stevie’s desire to sell his firm. While back pain surely makes it hard to work in the fast pace world of trading that gules traders to a chair and a few shiny Bloomberg screens for most the day, we think there has to be more to why Stevie wants out now.

While traders often admit they admire Cohen for his trading skill and intuition, they also point out he’s still facing the challenge of that pesky ongoing SEC investigation, into his firm, for insider trading. An investigation we’ve learned is still ongoing because people told us they’ve recently been interviewed by the SEC about SAC trades- no charges have been filed against Cohen but ex-SAC traders have pleaded guilty. Burrough tells Vanity Fair readers he thinks Stevie walked a gray line when it comes to trading research at the beginning of his career, but based off his recent interview he thinks Stevie’s got that all under control now.

Burrough says, “The thorough changes he claims to have implemented at SAC to ensure that the firm is in full compliance with the law after gaining a reputation for being ‘way out there’ (in the words of one competitor) on information gathering.”

While we think Burrough’s look into how SAC Capital gets information to use in their investment decisions is limited, by the access Stevie’s press team supplied to get a positive news story out on a fund that’s trying to sell itself, the SEC does have a tough battle ahead in trying to link Cohen personally to encouraging inside trades.

But in case the SEC needs a little direction as to where the bodies are buried inside Cohen’s super secretive hedge fund, we’ve learned there’s one person they should definitely be talking to.

New Canaan, CT resident Paul Orwicz suddenly left SAC capital after the SEC brought forth their case against Galleon and friends for insider trading. He’d been one of Stevie’s top traders for nearly a decade focusing first on telecom stocks and then moving over to energy stocks in the last few years. Hedge Fund Alert was first to report on Orwicz’s sudden departure in October 2009 saying he ran a sizable amount of money ($400-500 million) for SAC Capital. The ex-SAC trader filed SEC documents in March that says he now runs his own fund, called Sursum Capital, but it’s not clear if Cohen invested seed money with Orwicz as we’ve seen him do so many times in the past.

Orwicz also has an expensive habit of racing Porches and even invested in an upstate New York private motorsport race track.  According to several sources who know Orwicz from track racing and New Canaan, the ex-SAC trader wasn’t shy about explaining how they gather info on the energy companies they trade.  These sources say the Orwicz told them SAC would pay people to get hired into Canadian companies that are working on tar sands — An energy process that firms like Murphy Oil, who SAC’s public filings show they hold a large stock position in, are often blasted for not being friendly to the environment. Word on the street is the SAC spies would even come into SAC’s Stamford office to report on what they learned about the company.  Names of which tar sands companies the SAC spies worked for could not be confirmed and Orwicz could not be reached for comment.  Of course SAC just denies any notion of using spies to get ahead of trades.

But this move sounds similar with what Britt Ericka Tunick at AR Magazine reported this March, about SAC hiring a quant trader to spy on a competitive hedge fund.

Tunick writes: According to a source close to hedge fund firm QuantZ Capital Management, after the firm hired Prasad Chalasani, a former robotics professor … he bypassed the initial getting to know your workplace approach … and immediately began probing the inner working of QuantZ’s proprietary

quant programs. Chalasani’s digging aroused suspicion among his new employers, who began making calls and discovered that their new employee had “shopped his offer letter to SAC” to land himself a job with Cohen — which was all but confirmed when he failed to return after his first day with QuantZ.

Though SAC initially refused to acknowledge his employment, a call to the firm put us straight through to Chalasani, who declined to comment.

Now that we know Stevie Cohen wants out of trading, the question is can he find a buyer who thinks his 800-person money-making operation can continue in today’s tougher regulatory environment. Is SAC Capital designed to repeat its consistent double-digit performance without Stevie there getting his hands dirty in daily trades? If so, who can the Greenwich resident, who Forbes thinks is worth over $6 billion, convince to buy it?

Editors Note: Teri Buhl is a financial news reporter who has written for: Trader Monthly, New York Post, Dealbreaker, Greenwich Time, Fortune.com, TheAtlantic.com, and New York Magazine.

4 Comments

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4 responses to “Is Steve Cohen really calling it quits?

  1. First Dibs

    I’ll take his house when he moves. Just a quaint cottage in backcounrty.

  2. Walt

    Dude Man –
    Now I fully understand that Ms. McBeal causes what few brain cells you have to short circuit, and makes you start to giggle like a school girl when you see some of her “investigative journalism”. And with all due respect to the esteemed Ms. McBeal, but I ask you – is this really news? Just think about it for a second.
    You are little Stevie C. You have 6 billion sticks in the bank. That is a lot Dude. A real lot. For the past 30 years, no one bugged you, you did whatever you wanted, and basically had a blast.
    Now all of a sudden, the shit hits the fan. Through no doing on the part of little Stevie. Now, overnight, you have the SEC looking at you, the FBI maybe up your ass, and who knows who else probably trying to smear you – unjust or not.
    So your options are: A) Ignore it and go on with business as usual. Risk it all, and maybe go to prison – MAYBE just because they want a scapegoat. And spend 10 years with a cellmate trying to put stuff in an orifice that had previously been an exit only;
    OR B) Think about whether or not it is time to maybe do something else, and keep a low profile. HMMMM – that is a REALLY hard one.
    Now I know this is hard for you too, so ponder it for a while. Me, from personal experience, I choose door number 2. If you pick door number 1, now THAT is news worthy.
    Anyway, enough about that.
    You ask her out yet? You can use stuff like this to break the ice with her!! I don’t care if you plagiarize me. I know you need the help!!
    Here are some more thinks to ask her and talk about to get the conversation started:
    Has she ever slept with someone for a hot lead? (I have no ethical problems if she did, I am just a letch and really want to know). But try not to ask this until you have introduced yourself.
    Tell her you have the keys to Mel’s house, and ask her if she wants to go over and play your wench, while you dance around in Mel’s kilt.
    Ask her what she thinks of butt plug Santa.
    Those should get you off to a good start, but if for some reason, and I don’t know why this would happen, but if she gives you ANY negative vibes, tell her you need to use the men’s room and stick her with the tab. It shows she just isn’t your type.
    Your Pal,
    Walt

  3. John

    Cool scoop Teri – I wasn’t so sure about the selling to Man Group story the WSJ and Bloomberg were reporting a few months ago. But it’s looking like Cohen does want to sell out now. I think it has a lot more to do with the insider trading charges than his back. I mean how is he going to keep delivering big returns if he can’t cheat on company research?

  4. Anon-e-mouse

    I’m late to the party as always, but I’d be more than happy to “crack” Steve Cohen’s back.

    It was a medical skill I developed in college – along with a 100% record on hiccup cures – that never seemed to fail. Frequently at parties, I’d be called upon to fix baseball pitchers and linebackers – as long as they were 6′ or under due to leverage requirements and not maybe more than 250.

    (Obviously I didn’t go to Wharton…)

    Of course, due to the positioning it would be best if we have witnesses in the room and make the appropriate homophobic jokes et al, but I’ll bet 1,000 to one (really vice versa – my $100 to SAC’s…) that I can cure his pain, at least for a couple of days. (Volume discounts can certainly be negotiated.)

    I don’t think SAC has anything to lose at this point – his mamby-pamby chiro’s and specialists don’t seem to be getting the job done. SAC’s people can reach me via this post.

    (If it clears CF scrutiny of course…)