The other shoe

SAC netted but white whale remains elusive

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US prosecutors have netted SAC Capital Advisors, but the white whale remains elusive. On Monday the Justice Department secured a multi-faceted win against Steven Cohen's hedge fund firm. Unresolved, though, is what Cohen knew. Absent answers at two upcoming trials, an empty feeling will linger from the almost seven-year probe.

The government can take satisfaction from shutting down SAC and Cohen's career as a hedge fund manager. He's free to invest his personal billions, but outsiders' fortunes are out. Add to that $1.8 billion in criminal fines and forfeited capital -minus a $600-million payment to the Securities and Exchange Commission announced in March - and guilty pleas to five criminal counts and it marks a solid prosecutorial performance and an impressive insider trading haul.

There's work to be done, however, and it starts with SAC portfolio manager Michael Steinberg's trial later this month. He stands accused of illegally using inside information to make $1.4 million from trades in Dell and Nvidia stock some four years ago. Prosecutors have enlisted Steinberg's former analyst to testify against him, and the case could reveal what Cohen was told about the basis for minions' transactions.

The main event comes in January, though, at the trial of former portfolio manager Mathew Martoma. The complaint filed against him last year was the first to suggest a direct link to Cohen's transactions. The substance of a 20-minute phone conversation between the two - just before SAC started trading shares of pharmaceutical firms Elan and Wyeth - is one of the overall investigation's great mysteries. The transactions netted SAC $276 million, perhaps the largest haul in insider trading history.

The agreement announced on Monday doesn't cover any individual's criminal liability. So, Cohen can't know whether he's in the clear until at least the end of those two trials and his own administrative proceeding for failing to supervise employees properly.

There's little doubt that he is the feds' dream target, though. After years of investigating, it's also clear that prosecutors still don't have enough to nail him. Extracting a record insider trading penalty highlights the illegal conduct's high cost and may even deter others from engaging in it. For now, however, the case carries an aroma of the fish that got away.