Famed investor Leon Cooperman was accused of insider trading by U.S. regulators in the government’s highest-profile case against a hedge fund manager since its crackdown on SAC Capital Advisors.
Marking the culmination of an investigation that dates back to at least 2011, the Securities and Exchange Commission said Cooperman, 73, used his status as one of Atlas Pipeline Partners’ largest shareholders to obtain confidential information from a company executive. He earned about $4 million by buying securities in Atlas before the sale of a company asset in 2010, which caused shares to jump 31 percent, the SEC said Wednesday in a statement.
“We allege that hedge fund manager Cooperman, who as a large APL shareholder obtained access to confidential corporate information, abused that access by trading on this information,” Andrew Ceresney, head of SEC’s division of enforcement, said in a statement.
Cooperman’s firm, with $5.4 billion in assets under management as of Aug. 31, is among the oldest in the industry. He’s built a reputation as a stock picker over almost half a century by scrutinizing undervalued companies and asking management tough questions. He previously headed Goldman Sachs Asset Management and worked at the Wall Street firm for 25 years before leaving in 1991. Like other hedge fund managers accused of wrongdoing, he could now be fighting for his firm’s survival and his legacy.
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Cooperman said in a letter on Wednesday to investors he strongly disagreed with the SEC’s allegations and that the firm hasn’t engaged in any unlawful conduct. He’s planning to hold a conference call with investors later in the day.
In his letter, Cooperman said Omega had been told by federal prosecutors that they haven’t wrapped up their own investigation into the firm. Still, prosecutors have decided not to pursue charges against Omega at this time because of concern tied to a U.S. Supreme Court case, Cooperman said.
When Omega Advisors received a subpoena in 2011, Cooperman contacted the Atlas company executive and urged him to fabricate a story in case they were questioned about their conversations, according to the SEC. The unidentified executive was shocked and angered when he learned that Cooperman had traded in advance of Atlas’s announcement, the regulator said.
Omega first invested in Atlas in June 2007, according to Cooperman’s letter to investors. At the time, the natural gas company was led by Edward Cohen. Cooperman said in his letter that he had known a “number” of members of the Cohen family “for many years.”
By 2010, the SEC said Cooperman had changed his view on Atlas, telling a consultant to the company that it was a “shitty business.” He took a bearish position on the stock in the first half of that year. But after learning of a pending asset sale, Cooperman changed his mind again and began buying call options and other securities, the regulator said.
The night before Atlas’s July 28, 2010, public announcement, Cooperman e-mailed a family member to say the company had struck a deal to sell one of its facilities for $682 million and that he thought the stock was worth at least $15 a share. The unidentified family member, who was also a hedge fund manager, then forwarded Cooperman’s e-mail to a colleague, who replied that the deal explained “fishy” call options.
The SEC said Cooperman “carefully guarded” the illicit information on Atlas, never previously sharing it with his hedge fund relative. The day of Atlas’s public announcement, Cooperman’s relative reached out to an executive at the energy company to complain about suspicious trades two weeks earlier.