Silver as an investment

“We Have Done Nothing Improper” – Omega’s Cooperman Responds To Insider Trading Charge: Full Letter

As reported earlier today, in a stunning crackdown on one of the hedge fund industry’s icons, the SEC accused Omega Advisors’ Leon Cooperman of insider trading in shares of Atlas Pipeline. As expected, Cooperman disagrees, and in a 5 page letter to investors, he explains why “we are highly disappointed with the Commission’s decision to file charges, and we strongly disagree with the Commission that either the firm or I have engaged in any unlawful conduct.”

We have done nothing improper and categorically deny the Commission’s allegations. As I wrote last year when we first received the subpoenas, I have throughout my fifty-year career in the securities business firmly believed in detailed, fundamental research. As I explained then, that approach has long contemplated direct, face-to-face interactions with company management. Such exchanges of information with company management are appropriate, well-established in the industry, and even necessary. As a Wall Street Journal op-ed put it just last year, “information is not a crime.” Although we don’t think it would be productive to state here our views on what we believe to be a seriously misguided effort by the authorities in these matters, we would refer anyone who is interested to Three Felonies a Day: How the Feds Target the Innocent by Harvey A. Silverglate and Licensed to Lie: Exposing Corruption in the Department of Justice by Sidney Powell, both of which provide fascinating insights into the machinations of our country’s criminal justice system.

This is how Cooperman justifies his internal communications with management:

As I explained then, that approach has long contemplated direct, face-to-face interactions with company management. Such exchanges of information with company management are appropriate, well-established in the industry, and even necessary. As a Wall Street Journal op-ed put it just last year, “information is not a crime.” Although we don’t think it would be productive to state here our views on what we believe to be a seriously misguided effort by the authorities in these matters, we would refer anyone who is interested to Three Felonies a Day: How the Feds Target the Innocent by Harvey A. Silverglate and Licensed to Lie: Exposing Corruption in the Department of Justice by Sidney Powell, both of which provide fascinating insights into the machinations of our country’s criminal justice system.

While readers can peruse his response at their leisure, we found this section particularly amusing, namely the “I let my son suffer” gambit…

I was at the time the largest investor in Cobalt Capital, the hedge fund run by my son, Wayne. In July 2010, Cobalt was short APL stock. As such, Cobalt (and by extension, I) stood to lose money if APL’s stock price rose. But, as my son is prepared to testify if need be, I didn’t share with him any information concerning the Elk City transaction or even know what position Cobalt had in APL securities at the time.

And also the “we used fundamental analysis” defense:

In short, none of the APL trading at issue is indicative of someone trying to position themselves ahead of an anticipated market-moving announcement, or to reap profits from inside information. Our approximately eight-year investment in Atlas Pipeline was based on fundamental research, rigorous analysis, and insight — not inside information. Unfortunately, as sometimes happens in our business, this particular investment turned out to be unsuccessful.

… perhaps forgetting that all “inside trading” has a basis in fundamental research, or rather one where the “research” leads to a speedier receipt of the information than for everyone else.

His full memo is below: