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Asher '15: The Corporation's price of admission

According to the FBI, a criminal enterprise is “a group of individuals with an identified hierarchy, or comparable structure, engaged in significant criminal activity.”

Last November, SAC Capital Advisors L.P., the hedge fund of Steven A. Cohen P’08 P’16, was fined a staggering $1.8 billion by the federal government for insider trading activities. Eight of the fund’s former employees have been slapped with criminal charges, all of whom have either pleaded or been found guilty. SAC Capital — recently rechristened Point72 Asset Management — is no longer allowed to manage outside money and now exists for the sole purpose of managing Cohen’s roughly $9 billion personal fortune. From a legal perspective, there is an argument to be made that SAC Capital is, under the FBI’s definition, a criminal enterprise.

But that can’t be true. If it were, that would mean we have a crime boss on our Corporation. It’s not as if we would stand for having Whitey Bulger on the Board of Trustees if he happened to have excellent managerial skills and financial acumen. We can accept Cohen’s explanation, offered in private to his friends, that he has been unfairly targeted by the federal government and is being forced to pay “for the crimes of rogue employees,” as the New York Times put it last year. Mistakes were made, and they have been paid for.

Particularly now that a new round of civil investigations has begun, involving several traders at SAC Capital based on trades of Foundry Networks and Dell in 2008 and 2009, I’ve been wondering if we should start having a conversation about whether Cohen should stay on the Corporation.

Since the investigation first became public, it has always been taken as a given that Cohen would remain on the Board of Trustees so long as he wasn’t sitting in a jail cell — and even then, I’m not sure he would have gotten the boot.

The bare facts of the case show that, under Cohen’s management, millions of dollars of insider trades were carried out with no ramifications. SAC Capital has agreed to pay $1.2 billion as a settlement based on what you can be sure is the best legal counsel money can buy. To me, this implies that Cohen felt it was in his interests to make this whole issue go away as quickly as possible. He was negligent. He did not pay close enough attention. These are not opinions, but facts, confirmed to the tune of a federal lawsuit and a larger fine than any firm has been initially charged with in the history of Wall Street.

Rather than look at why Cohen should not be a trustee, let’s look at why he is. The first reason is money — a lot of it. It would be very tough to figure out how much Cohen has given to the University over the years, but it’s safe to assume that if the money were to stop flowing from him, there would be a significant hole to fill. The second reason is his managerial counsel. Cohen has expanded his hedge fund from managing $25 million in 1992 to $9 billion today — and this only from personal funds, keep in mind. Insider trading aside, he clearly has an uncommonly brilliant mind for investing. He’s an important voice in an institution that needs to ensure it has the financial reserves to operate in the way it wishes to.

The second reason doesn’t sit well with me because I find it hard to imagine there isn’t at least one other person on Wall Street who can offer comparable financial counsel — someone who hasn’t been fined nearly $2 billion by the federal government.

In terms of donations, though — well, it’s harder to make sense of that. The fact is, Brown does need money, and Cohen has a lot of it. And if he’s willing to exchange that money for prestige and maybe a portrait in Sayles Hall one day, is that really so bad?

Maybe it isn’t. My inclination, though, is that it is. It really is that bad. Steven Cohen is not being held to the ethical standards of our University and should not be on the Corporation. I have no illusions about the impact of this piece. But I would ask anyone reading to understand that I’m not anti-Corporation. I’m not even all that anti-Wall Street. I’m for integrity and honesty in conduct, and all the evidence shows that Steven Cohen has a dearth of both. Whether we want Steven Cohen’s money, and his counsel, is a question that deserves to be answered properly.

 

Adam Asher ’15 is concentrating in Classics.



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