Elan Pharmaceuticals is seeking to recoup the more than $1.5 million in legal fees it paid to comply with document requests by the federal government in its insider trading investigation of the hedge fund SAC Capital Advisors.
The drug company is asking the federal judge presiding over the hearing in April on the guilty plea and penalty for Steven A. Cohen’s hedge fund to consider it as a victim under the Mandatory Victims Restitution Act. Elan submitted a letter to Judge Laura T. Swain of federal District Court saying it incurred the legal fees from its outside law firm Shearman & Sterling in connection with the SAC inquiry.
Elan said that since 2010 it has provided documents and other information to officials with the Department of Justice, the Federal Bureau of Investigation and the Securities and Exchange Commission.
In February, a former SAC portfolio manager, Mathew Martoma, was convicted of insider trading in shares of Elan and Wyeth, which were jointly developing an drug to treat Alzheimer’s disease. The allegation of insider trading in shares of Elan and and another drug company, Wyeth, were included in the securities fraud indictment that federal prosecutors leveled against SAC last summer.
In November, SAC agreed to plead guilty to securities fraud charges and pay a $1.2 billion penalty. Earlier, SAC agreed to pay more than $600 million in restitution to the S.E.C. to settle allegations that its former employees has engaged in insider trading in shares of Elan, Wyeth and several technology companies. Mr. Cohen, the billionaire investor, is facing a related civil charge of administrative failure to supervise action arising out the improper trading in those stocks.
Gregory M. Bokar, Elan’s chief legal officer, said in an affidavit, that “over the course of more than three years, Elan responded to numerous requests from D.O.J., F.B.I. and S.E.C. for documents, electronic data, and related materials.†He said the company also made a number of employees available for interviews.
On April 10, three days after SAC officially changes its names to Point72 Asset Management, Judge Swain has set a hearing as to whether to accept or reject SAC’s guilty plea. Lawyers for the hedge fund, which is converting to a family office that will manage mainly Mr. Cohen’s $9 billion, have said the firm is remorseful and have asked Judge Swain to approve the guilty plea.
Elan’s request for legal fees sheds a light on the behind-the-scenes process in the federal government’s long-running investigation into insider trading in the hedge fund industry and SAC, specifically. It reveals that companies whose shares were wrongfully traded in sometimes must pay a lot of money to comply with the government’s requests for information.
It is possible that similar requests to be treated as a victim will come from other companies involved in the SAC investigation.
