SAC Capital Is Arraigned on a Raft of Criminal Charges

After years of winning criminal convictions against employees of SAC Capital Advisors, federal prosecutors on Friday confronted SAC itself.

In a brief proceeding in Federal District Court in Lower Manhattan, the hedge fund was arraigned on a raft of criminal insider trading charges, making it the first large American company to face an indictment in more than a decade. The appearance came a day after prosecutors announced the case against SAC, run by the billionaire Steven A. Cohen, calling it a “veritable magnet of market cheaters.”

As expected, SAC pleaded not guilty to the charges. Peter Nussbaum, SAC’s general counsel, delivered the plea on behalf of the fund.

Judge Laura Taylor Swain informed Mr. Nussbaum of SAC’s rights, namely that it had “the right to remain silent” and the right to a court-appointed lawyer if the fund could not afford a legal team.

The latter offer was not necessary for SAC, which has more than 1,000 employees and some $10 billion in assets under management, including $8 billion in Mr. Cohen’s fortune.

Mr. Nussbaum, in fact, was flanked by no fewer than five outside lawyers from two of the most sophisticated law firms: Willkie Farr & Gallagher and Paul, Weiss, Rifkind, Wharton & Garrison. Martin Klotz at Willkie and Daniel J. Kramer at Paul Weiss have led SAC’s defense.

But on Friday, Theodore V. Wells Jr., a partner at Paul Weiss who is one of the country’s most renowned criminal defense lawyers, also appeared in court. Mr. Wells played a central role in the Wall Street scandals of the 1980s, defending Michael Milken, the Drexel executive who eventually served prison time.

The government had its own show of might. In addition to an F.B.I. agent, several prosecutors from the United State’s attorney’s office appeared in court, led by Arlo Devlin Brown, who has helped build many of the office’s financial fraud cases.

Both sides agreed on Friday that the government would turn over to SAC the bulk of e-mails, wiretaps and other evidence within the next 30 days. Judge Swain set the next hearing for Sept. 24.

It is unclear whether the two-month gap will lead to settlement talks between the two sides.

For now, SAC is fighting the charges.

“SAC has never encouraged, promoted or tolerated insider trading,” an firm spokesman said on Thursday. The spokesman added: “The handful of men who admit they broke the law does not reflect the honesty, integrity and character of the thousands of men and women who have worked at SAC over the past 21 years.”

But that defiant stance could soften, given the force of the government’s case.

In the indictment, authorities argued that SAC and its units permitted a “systematic” insider trading scheme to unfold from 1999 to 2010, activity that generated hundreds of millions of dollars in profit for the firm.

The case centers on SAC’s pursuit of an “edge” in stock trading.

In one e-mail about the technology company Sun Microsystems, an SAC analyst informed Mr. Cohen that, “My edge is contacts at the company and their distribution channel.”

In an instant message, an employee informed Mr. Cohen that he planned to bet against Nokia’s shares and then apologized for being “cryptic,” explaining that SAC’s compliance chief “was giving me Rules 101 yesterday â€" so I won’t be saying much.” Mr. Cohen never responded to the message.

SAC, the government says, also recruited employees who had an improper “edge,” including one trader who was fired from another hedge fund on suspicion of insider trading.

Underpinning the indictment is the theory of corporate criminal liability, which allows the government to attribute the bad acts of employees to the company as long as the employees acted “on behalf of and for the benefit of” SAC when breaking the law. With six former SAC traders already pleading guilty, SAC has limited options for defending itself.

Because the corporate liability tool is so potent, prosecutors rarely use it against large companies. Instead, they deploy so-called deferred prosecution agreements, which suspend an indictment as long as the company improves its behavior. The government adopted this cautious approach more readily after the Justice Department indicted Enron’s accounting firm, Arthur Andersen, in 2002, leading the firm to collapse and terminate 28,000 jobs.

Arthur Andersen is the last major American company to face a criminal trial. Others corporate giants have either settled charges or had a subsidiary indicted.

Prosecutors rejected that course for SAC, believing that the fund was corrupt at its core. As punishment, they are seeking to collect SAC’s illicit gains from insider trading, a figure that theoretically could reach into the billions, though money from outside investors is likely safe.

SAC’s lawyers felt the uncomfortable glare of the media spotlight on Friday. When their private car was late to pick them up, they were stranded on Worth Street across from the courthouse, left to be confronted by a pack of ravenous journalists and photographers.

Mr. Kramer took to his cellphone. Mr. Wells, dressed in a pinstripe suit and cherry red tie, declined to comment.