The criminal case against the hedge fund SAC Capital Advisors has reached a conclusion, people briefed on the matter said, with the government expected to announce Monday that SAC will plead guilty to insider trading charges and pay a fine of roughly $1.2 billion.
But the plea deal will hardly remove SAC and its owner, the billionaire money manager Steven A. Cohen, from the legal spotlight.
For one thing, the people said, the agreement does not resolve a separate civil lawsuit that the Securities and Exchange Commission brought against Mr. Cohen in July, accusing him of failing to supervise his employees. Six former SAC traders have pleaded guilty to insider trading crimes.
The firm and Mr. Cohen will also remain under scrutiny during the coming criminal trials of two other employees, one whose case begins in federal court in Manhattan this month. The trials of the employees, Michael S. Steinberg and Mathew Martoma, are expected to provide the first detailed witness testimony about the inner workings of SAC and Mr. Cohen’s role in the trades at the center of those cases.
And while Mr. Cohen has not been charged criminally or even accused of insider trading, the people briefed on the matter said, federal authorities continue to view him and other SAC employees as targets of the continuing insider trading investigation.
In recent weeks, the people said, the F.B.I. has been poring over SAC’s trading records and increasingly pursuing the cooperation of potential witnesses. With the help of one person who is now cooperating, authorities have scrutinized SAC trading in shares of Gymboree, the children’s clothing and music chain, said these people, who spoke on condition of anonymity because the guilty plea had not been announced. Authorities suspect that the trading activity might involve Mr. Cohen.
The flurry of investigative work shows that even after a guilty plea and a decade of digging, the government continues to press its case relentlessly against SAC.
Mr. Cohen, 57, a collector of art and real estate, has assured his investors that he has acted appropriately at all times. As the investigations drag on, Mr. Cohen has come to believe that the government is fixated on trying to shut down his business, people close to him say.
A plea deal, the latest but not the last development in the case, would come more than three months after the United States attorney’s office in Manhattan announced a criminal indictment of SAC, a rare criminal action against a Wall Street firm. The indictment cited the guilty pleas of SAC’s former employees as evidence that the firm permitted a “systematic†insider trading scheme for more than a decade.
The $1.2 billion penalty for SAC, which at the beginning of the year managed $15 billion, would be a record fine for insider trading cases. It would come on top of a $616 million penalty that the fund already paid to the S.E.C., which previously filed civil charges against the firm.
As part of its agreement with prosecutors, SAC, based in Stamford, Conn., will also wind down its business of managing money for outside investors, the people briefed on the matter said. It would still allow Mr. Cohen and SAC to invest his own wealth, which is estimated at about $9 billion.
The S.E.C., in its civil “failure to supervise†case against Mr. Cohen, is looking to go a step further than federal prosecutors. The commission, the people briefed on the matter said, is expected to demand that Mr. Cohen himself never manage outside money at SAC or anywhere else.
That civil action, which has been delayed pending the outcome of the criminal case against SAC, contends that Mr. Cohen ignored “red flags†that should have led him to investigate suspicious trading activity at his fund.
Mr. Cohen has denied the accusations. “Steve Cohen acted appropriately at all times and will fight this charge vigorously,†a spokesman said when the civil action was brought in July.
The S.E.C.’s case stems from charges against former SAC employees like Mr. Martoma and Mr. Steinberg.
Prosecutors have accused Mr. Martoma of corrupting two doctors to obtain confidential data about an Alzheimer’s drug being developed by the pharmaceutical companies Elan and Wyeth. When one of the doctors told Mr. Martoma that the trial results were not as good as expected, SAC dumped its shares, netting gains and avoiding losses totaling $276 million, the government said.
With the arrest of Mr. Martoma a year ago, the government appeared to be zeroing in on Mr. Cohen. Prosecutors said that Mr. Cohen was intimately involved with the Elan and Wyeth trades. The day before SAC began aggressively selling its shares, Mr. Martoma spent 20 minutes on the telephone with Mr. Cohen.
But the government stopped short of saying that Mr. Martoma told Mr. Cohen about the secret clinical trials. In a sworn deposition with the S.E.C., Mr. Cohen said he sold the drug stocks after Mr. Martoma told him that he had lost conviction about the investments, said a person briefed on the case. There was little else Mr. Cohen said he remembered about the conversation, according to that person.
Government investigators sought to turn Mr. Martoma into a witness against SAC and Mr. Cohen. While he rebuffed the government’s multiple overtures, and his trial is scheduled for January, some investigators are holding out hope that he will plead guilty and cooperate.
Mr. Steinberg faces charges that he traded shares of the technology companies Dell and Nvidia while in possession of secret information about their quarterly earnings results. Jon Horvath, a former SAC analyst who worked under Mr. Steinberg, has pleaded guilty and is expected to testify against Mr. Steinberg at his trial, which is set to begin Nov. 18.
A guilty plea by SAC this week could have an impact on Mr. Steinberg’s case. Lawyers for Mr. Steinberg have already expressed concern that news media coverage of SAC could compromise their client’s right to a fair trial. And there is a fear that with jury selection only two weeks away, headlines about an SAC guilty plea could corrupt the jury pool.
In a legal filing this summer, Barry Berke, a lawyer for Mr. Steinberg, asked the presiding judge in the case, Richard J. Sullivan, for a number of protections to address the risk that pretrial media attention would taint the trial. Specifically, he requested that Mr. Sullivan focus his questionnaire for potential jurors on their exposure to publicity surrounding the case.
Mr. Berke said that since September 2012, alleged insider trading at SAC had been mentioned in 931 articles, and that Mr. Steinberg and SAC were the subject of 531 Twitter messages and 3,454 retweets.
