White collar criminals have made their mark on Wall Street since the earliest days of the U.S. financial industry. When dishonest people and organizations are unmasked, it is best to avoid doing business with these parties at all costs. SAC Advisors is one of the latest financial companies to plead guilty to aiding and abetting insider trading. As part of its reported deal with federal authorities, the hedge fund will pay $1,800,000,000 and agree to give up its financial advising business for the indefinite future.
Company founder Stevie Cohen might only narrowly avoid criminal prosecution for his role in creating a friendly crime infested work environment. Furthermore, the government's investigation of Mr. Cohen is continuing steadily by the United States of America.
SAC is the first Wall Street corporation to plead guilty to financial crimes since 1989. That year saw the shaming and conviction of Drexel Burnham Lambert, which ultimately led to a huge fine and a 10-year prison conviction for Mike Milken. One might easily suppose that SAC's sins would make the company a Wall Street pariah. Surprisingly, a number of major mega banks will continue to do business with the feckless hedge fund. Reportedly, SAC can count on continued patronage from Bank of America (BAC), JPMorgan (JPM) and Goldman Sachs (GS). With prominent backers like these, SAC can avoid many of the harshest consequences of its questionable actions. (See newslink)
Only time will tell if SAC's corporate partners will experience a sobering public backlash. Bank of America, JPMorgan and Goldman Sachs are behaving quite boldly in light of their many ongoing, recent and shameful government proposed and ongoing settlements for bad behavior. Any company still willing to soil its hands with SAC demonstrates a disturbingly cavalier attitude towards the law. After all, SAC hurt thousands of ordinary investors when it systematically enabled insider trading. If companies like our Bank of America is willing and able to continue working with SAC, it may cast doubt on the efforts of financial regulators.
It is enlightening to review the remarkable number of SAC employees indicted and convicted of financial crimes. Investors should tread carefully when they consider investing in the mega banks that do business with SAC. Any firm with questionable partners like SAC can undermine its future with reckless gambles.
How much more will regulators have to do to dissuade irresponsible companies like SAC from swindling Main Street with insider scams and false dealings?