United States v. S.A.C. CAPITAL ADVISORS, L.P.; S.A.C. CAPITAL ADVISORS, LLC; CR INTRINSIC INVESTMENTS, LLC; SIGMA CAPITAL MANAGEMENT, LLC; S.A.C. OFFSHORE CAPITAL FUNDING, LTD.; S.A.C. SPECTRUM FUND, LLC, et al., Southern District of New York (July 25, 2013) — Complaint

JUDGE FAILLA
13 CV 5182

PREET BHARARA
United States Attorney for the
Southern District of New York
By: SHARON COHEN LEVIN
MICAH W. J. SMITH
Assistant United States Attorneys
One Saint Andrew's Plaza
New York, New York 10007
Telephone: (212) 637-1060
Facsimile: (212) 637-0421

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA
Plaintiff,
v.
S.A.C. CAPITAL ADVISORS, L.P.;
S.A.C. CAPITAL ADVISORS, LLC;
CR INTRINSIC INVESTMENTS, LLC; and
SIGMA CAPITAL MANAGEMENT, LLC,
Defendants,

ANY AND ALL ASSETS OF S.A.C.
CAPITAL ADVISORS, L.P.; S.A.C.
CAPITAL ADVISORS, LLC; CR
INTRINSIC INVESTMENTS, LLC; and
SIGMA CAPITAL MANAGEMENT, LLC,

ANY AND ALL ASSETS OF S.A.C.
OFFSHORE CAPITAL FUNDING, LTD.;
S.A.C. SPECTRUM FUND, LLC; S.A.C.
GLOBAL MACRO FUND, LLC; S.A.C.
ARBITRAGE FUND, LLC; S.A.C.
MULTIQUANT FUND, L.P.; S.A.C.
GLOBAL INVESTMENTS, L.P.; S.A.C.
PRIVATE EQUITY INVESTORS, L.P.;
S.A.C. DOMESTIC INVESTMENTS, L.P.;
S.A.C. DOMESTIC CAPITAL FUNDING,
LTD.; CANVAS CAPITAL ASSOCIATES,
LLC; SIGMA CAPITAL ASSOCIATES,
LLC; S.A.C. CAPITAL ASSOCIATES,

VERIFIED COMPLAINT
13 Civ.
ECF Case

[illegible]
JUL 25 2013
U.S.D.C. S.D. N.Y.
CASHIERS

--- page 2 ---

LLC; S.A.C. STRATEGIC INVESTMENTS, LLC; S.A.C. MERIDIAN FUND, LLC; S.A.C. INTERNATIONAL EQUITIES, LLC; CR INTRINSIC INVESTMENTS, LLC; INTERNATIONAL EQUITIES (S.A.C. ASIA), LTD.; S.A.C. STRUCTURED INVESTMENTS, L.P.; SIGMA FIXED INCOME FUND, LTD.; S.A.C. SELECT FUND, LLC; S.A.C. ENERGY INVESTMENTS, L.P.; S.A.C. GENESIS FUND, LLC; S.A.C. HEALTHCO FUND, LLC; and S.A.C. DOMESTIC INVESTMENTS (CA), LLC, Defendants in Rem. -x

Plaintiff the United States of America (the "Government"), by its attorney, Preet Bharara, United States Attorney for the Southern District of New York, for its complaint ("Complaint") alleges, upon information and belief, as follows:

I. NATURE OF THE ACTION

1. This action is brought by the Government pursuant to 18 U.S.C. §§ 981(a)(1)(A), 1956, and 1957, seeking the forfeiture of certain property involved in laundering the proceeds of insider trading offenses and the imposition of civil money laundering penalties.

2. As set forth in more detail below, insider trading offenses were committed by numerous employees of corporate entities responsible for the management of a major hedge fund. This insider trading was substantial, pervasive, and on a scale without known precedent in the hedge fund industry. It resulted

--- page 3 ---

in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public. The illegal profits from this criminal conduct were then commingled with other assets, used to promote additional insider trading, and transferred with the assistance of financial institutions.

3. On or about July 23, 2013, a Grand Jury sitting in the Southern District of New York returned a sealed five-count Indictment, 13 Cr. 541 (the "Indictment") charging S.A.C. CAPITAL ADVISORS, L.P. ("SAC CAPITAL LP"); S.A.C. CAPITAL ADVISORS, LLC ("SAC CAPITAL LLC"); CR INTRINSIC INVESTMENTS, LLC ("CR INTRINSIC"); and SIGMA CAPITAL MANAGEMENT, LLC ("SIGMA CAPITAL") (collectively, the "SAC ENTITY DEFENDANTS" or "Defendants in Personam") with committing wire fraud, in violation of 18 U.S.C. §§ 1343 and 2, and securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5 and 240.10b5-2; and 18 U.S.C. § 2. A true and correct copy of the Indictment, which was unsealed today, is attached hereto as Exhibit A and is incorporated by reference as if fully set forth herein.

4. By this Complaint, the Government seeks forfeiture of all right, title and interest in the following property (collectively, the "Defendants in Rem"):

--- page 4 ---

(a) ANY AND ALL ASSETS OF THE SAC ENTITY DEFENDANTS; and

(b) ANY AND ALL ASSETS OF S.A.C. OFFSHORE CAPITAL FUNDING, LTD.; S.A.C. SPECTRUM FUND, LLC; S.A.C. GLOBAL MACRO FUND, LLC; S.A.C. ARBITRAGE FUND, LLC; S.A.C. MULTICUANT FUND, L.P.; S.A.C. GLOBAL INVESTMENTS, L.P.; S.A.C. PRIVATE EQUITY INVESTORS, L.P.; S.A.C. DOMESTIC INVESTMENTS, L.P.; S.A.C. DOMESTIC CAPITAL FUNDING, LTD.; CANVAS CAPITAL ASSOCIATES, LLC; SIGMA CAPITAL ASSOCIATES, LLC; S.A.C. CAPITAL ASSOCIATES, LLC; S.A.C. STRATEGIC INVESTMENTS, LLC; S.A.C. MERIDIAN FUND, LLC; S.A.C. INTERNATIONAL EQUITIES, LLC; CR INTRINSIC INVESTMENTS, LLC; INTERNATIONAL EQUITIES (S.A.C. ASIA), LTD.; S.A.C. STRUCTURED INVESTMENTS, L.P.; SIGMA FIXED INCOME FUND, LTD.; S.A.C. SELECT FUND, LLC; S.A.C. ENERGY INVESTMENTS, L.P.; S.A.C. GENESIS FUND, LLC; S.A.C. HEALTHCO FUND, LLC; and S.A.C. DOMESTIC INVESTMENTS (CA), LLC (collectively, the "SAC INVESTMENT FUNDS").

5. The Government also seeks civil money laundering penalties against the SAC ENTITY DEFENDANTS in an amount to be determined at trial.

II. JURISDICTION AND VENUE

6. This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1345 and 1355.

7. Venue is proper pursuant to 28 U.S.C. § 1355(b)(1)(A) because acts and omissions giving rise to forfeiture took place in the Southern District of New York.--- page 5 ---

III. THE DEFENDANTS

The Defendants in Personam

8. At various times relevant to this Complaint, the SAC ENTITY DEFENDANTS were affiliated corporate entities responsible for managing a group of affiliated hedge funds ("SAC" or "SAC Hedge Fund").

9. SAC CAPITAL LP is a Delaware limited partnership with its principal business office in Stamford, Connecticut. SAC CAPITAL LP has actively managed investments in the SAC Hedge Fund since in or about 2009, when it was assigned the employment and investment management contracts of SAC CAPITAL LLC and became the parent company to CR INTRINSIC and SIGMA CAPITAL.

10. SAC CAPITAL LLC is a Delaware limited liability company that was incorporated in or around 1995. From at least in or around 1999, up to and including in or around 2008, SAC CAPITAL LLC actively managed investments in the SAC Hedge Fund. SAC CAPITAL LLC's principal business office was in Stamford, Connecticut.

11. CR INTRINSIC is a Delaware limited liability company that was incorporated in or around 2004. From at least in or around 2006, up to and including in or around 2013, CR INTRINSIC has actively managed investments in the SAC Hedge Fund. CR INTRINSIC's principal business office is in Stamford, Connecticut.

5

--- page 6 ---

12. SIGMA CAPITAL is a Delaware limited liability company that was incorporated in or around 2001. From at least in or around 2002, up to and including in or around 2013, SIGMA CAPITAL has actively managed investments in the SAC Hedge Fund. SIGMA CAPITAL's principal business office is in Manhattan, New York.

The Defendants in Rem

13. In addition to seeking the forfeiture of any and all assets of the SAC ENTITY DEFENDANTS, this Complaint seeks the forfeiture of any and all assets of the SAC INVESTMENT FUNDS. The SAC INVESTMENT FUNDS are limited partnerships and limited liability companies organized in the United States and elsewhere, including the Cayman Islands and Anguilla, that were in existence since at least in or around 2008 or that are successors to investment funds in existence in or around 2008.

14. At various times relevant to this Complaint, the SAC INVESTMENT FUNDS held most of the SAC Hedge Fund's assets and received investment management services from one or more of the SAC ENTITY DEFENDANTS or other SAC fund management companies.

IV. FACTUAL ALLEGATIONS

The Structure Of The SAC Hedge Fund

15. At all times relevant to this Complaint, an individual residing in Greenwich, Connecticut (the "SAC Owner") operated the SAC Hedge Fund. At its peak, the SAC Hedge Fund included

--- page 7 ---

approximately $15 billion of assets under management. The majority of the capital managed by the SAC Hedge Fund belonged to the SAC Owner himself, with the balance of capital provided by outside investors. At all times relevant to this Complaint, the assets of the SAC Hedge Fund were held primarily by the SAC INVESTMENT FUNDS.

16. At all times relevant to this Complaint, the SAC Owner operated the SAC Hedge Fund through his ownership of several fund management companies, which served as investment advisors for the SAC Hedge Fund. These management companies generally charged outside investors annual fees of approximately three percent of assets under management and up to 50 percent of investment returns. At all times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS were the principal management companies of the SAC Hedge Fund.

17. At most times relevant to this Complaint, the SAC Hedge Fund’s structure included “feeder funds” (“SAC Feeder Funds”) that allocated capital to the various SAC INVESTMENT FUNDS, either directly or through an intermediate holding company, and at the direction of the SAC ENTITY DEFENDANTS. As a result of this investment structure, outside investors generally did not invest directly in the SAC ENTITY DEFENDANTS or the SAC INVESTMENT FUNDS. Instead, outside investors generally invested in the SAC Feeder Funds, from which they

--- page 8 ---

purchased shares or partnership interests. The capital obtained by the SAC Feeder Funds from the sale of these shares or partnerships was allocated to the various SAC INVESTMENT FUNDS and pooled with the capital provided by the SAC Owner himself.

The Allocation Of Capital Within The SAC Hedge Fund

18. At most times relevant to this Complaint, the SAC ENTITY DEFENDANTS were active investment advisors and directed the SAC INVESTMENT FUNDS to use significant leverage, engage in short-sale transactions, and exercise various options and arbitrage strategies. At the direction of the SAC ENTITY DEFENDANTS, the SAC INVESTMENT FUNDS frequently invested in equities, secured and unsecured debt, futures, forward contracts, options, convertible bonds and preferred stock, derivative instruments, contracts for differences, currencies, and commodities.

19. At all times relevant to this Complaint, the SAC Hedge Fund placed restrictions on investors’ ability to make withdrawals from the SAC INVESTMENT FUNDS. Any profits the SAC Hedge Fund earned from the execution of securities transactions were not immediately withdrawn from the SAC INVESTMENT FUNDS, but rather were generally used to make new investments on behalf of the SAC INVESTMENT FUNDS. At all times relevant to this Complaint, the SAC Hedge Fund made reinvestments of any profitsfrom its sales of securities with the assistance of multiple prime brokers.

20. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS retained and exercised the authority to direct that capital be transferred between and among the SAC INVESTMENT FUNDS. For example, in a private offering memorandum from 2009 for the largest SAC Feeder Fund, the SAC Hedge Fund explained that SAC CAPITAL LP "may, from time to time in its sole discretion, refine or change its investment methods and strategies" and "allocate whatever amount of [the SAC Feeder Fund's] capital to any" of the SAC INVESTMENT FUNDS "in its sole discretion." The private offering memorandum added that "[s]uch allocations of capital will vary, often materially, over time."

21. At most times relevant to this Complaint, the SAC ENTITY DEFENDANTS followed an investment management approach in which SAC Hedge Fund assets were frequently reallocated to potentially outperforming strategies.

The SAC Portfolios

22. The SAC ENTITY DEFENDANTS and other management companies affiliated with the SAC Hedge Fund employed dozens of portfolio managers ("SAC PMs") to manage the capital of the various SAC INVESTMENT FUNDS. SAC PMs were allocated investment capital from the SAC INVESTMENT FUNDS and were responsible for the profit-and-loss results of their portfolios.

9

--- page 10 ---

23. SAC PMs specialized in particular investment sectors, such as technology, health care, financial services, industrial, consumer, or energy. Each SAC PM, in turn, typically employed one or more research analysts ("SAC RAs") to assist with the development of investment ideas for the SAC PM's portfolio.

24. At all times relevant to this Complaint, the SAC Hedge Fund portfolios were in many ways autonomous from each other. Each SAC PM had substantial discretion to make investment decisions in his or her portfolio, even if a position was contrary to a position taken by other SAC PMs operating a portfolio in the same sector. SAC PMs were compensated principally based on the performance of their own portfolios, and without regard to the investment performance of other SAC PMs. Likewise, SAC RAs were compensated largely at the discretion of the SAC PM to whom they reported and based on the profitability of that PM's portfolio.

25. At all times relevant to this Complaint, the largest portfolio in existence at the SAC Hedge Fund was a portfolio managed by the SAC Owner himself. The SAC Owner had sole trading discretion over his portfolio and made these decisions principally based on trading recommendations from SAC PMs.

26. At all times relevant to this Complaint, the SAC Owner required each SAC PM to share "high conviction" investment ideas — i.e., the investment recommendations in which the SAC PM had

--- page 11 ---

the greatest confidence with the SAC Owner. In fact, providing such ideas to the SAC Owner was an express part of a SAC PM's duties and was emphasized to SAC PMs in the hiring process and once working at SAC.

Bonus Payments To SAC Employees

27. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS formally tracked trades made by the SAC Owner in the portfolio he personally managed in order to "tag" or credit the SAC PM responsible for the idea. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS paid SAC PMs an annual bonus - which could in some cases exceed all other components of compensation - based on a percentage of the net profits made by the SAC Owner on trades "tagged" to a particular SAC PM.

28. At certain times relevant to this Complaint, the SAC Hedge Fund made bonus payments to its SAC PMs and SAC RAs through wire transfers. These wire transfers were deposited into the bank accounts of the SAC PMs and SAC RAs, which accounts were held at financial institutions whose deposits were at all relevant times insured by the Federal Deposit Insurance Corporation ("FDIC").

Overview Of The Insider Trading Scheme

29. At various times between in or 1999 through at least in or about 2010, employees and agents of the SAC ENTITY

--- page 12 ---

DEFENDANTS obtained material, non-public information ("Inside Information") relating to publicly-traded companies and, on behalf of the SAC ENTITY DEFENDANTS and using the capital of the SAC INVESTMENT FUNDS, traded on that Inside Information.

30. The SAC ENTITY DEFENDANTS committed this insider trading scheme through the acts of, among others, numerous SAC PMs and SAC RAs who engaged in a pattern of obtaining Inside Information from dozens of publicly-traded companies across multiple industry sectors. Employees of the SAC ENTITY DEFENDANTS traded on Inside Information for the portfolios they managed and, at times, recommended trades to the SAC Owner based on Inside Information.

31. While engaging in this insider trading scheme, SAC ENTITY DEFENDANTS obtained the Inside Information by telephone, e-mail and other electronic forms of interstate communication, while located in SAC ENTITY DEFENDANT offices in Manhattan, New York and elsewhere.

32. The following individual SAC PMs or SAC RAs, identified by name, have been charged with and/or convicted of insider trading in connection with one or more of the SAC ENTITY DEFENDANTS:

a. Wes Wang ("Wang") was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2002 to 2005. While serving as a SAC RA, Wang

12thought
--- page 13 ---

obtained Inside Information with respect to various technology companies, including but not limited to Taiwan Semiconductor Manufacturing Company ("TSMC"), Cisco Systems, Inc. ("Cisco"), Broadcom Corporation ("Broadcom"), eBay, Inc. ("eBay"), Cypress Semiconductor Corporation ("Cypress"), Polycom, Inc. ("Polycom"), QLogic Corporation ("QLogic"), and Cirrus Logic Inc. ("Cirrus"). Wang provided trading ideas based on Inside Information to the SAC PM to whom he reported ("Sigma PM-1"). On or about July 13, 2013, Wang pled guilty in federal court to two counts of conspiracy to commit securities fraud, one of which involved insider trading in connection with Wang's employment at SIGMA CAPITAL from 2002 to 2005. At his guilty plea, Wang admitted that, while at SIGMA CAPITAL, he obtained Inside Information and provided it to Sigma PM-1 to be used for the purchase and sale of securities.

b. Richard Choo-Beng Lee ("CB Lee") was a SAC RA specializing in the technology sector employed by SAC CAPITAL LLC from approximately 1999 to 2003 and by SIGMA CAPITAL from approximately 2003 to 2004. While serving as a SAC RA, CB Lee obtained Inside Information with respect to various technology companies, including but not limited to Intel Corporation ("Intel"), Advance Micro Devices, Inc ("AMD"), and Altera Corporation ("Altera"). CB Lee provided trading ideas based on Inside Information to the portfolio manager to whom he reported

--- page 14 ---

and the SAC Owner. On or about October 13, 2009, CB Lee pled guilty in federal court to, among other things, conspiracy to commit securities fraud and wire fraud relating to trading recommendations based on Inside Information that CB Lee had provided to Sigma PM-1 and others following CB Lee’s departure from SIGMA CAPITAL. At his guilty plea, CB Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information.

c. Jon Horvath was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2006 through 2011. Horvath served as a research analyst for portfolio manager Michael Steinberg, who has been employed by SIGMA CAPITAL from approximately 2003 to the present, and as a portfolio manager for SAC CAPITAL LLC from approximately 1996 to 2003. On or about September 28, 2012, Horvath pled guilty in federal court to conspiracy and securities fraud for insider trading Horvath committed while at SIGMA CAPITAL, including but not limited to insider trading in relation to Dell Inc. (“Dell”) in August 2008 and NVIDIA Corporation (“NVIDIA”) in May 2009. Horvath admitted at his guilty plea that he obtained Inside Information about Dell and NVIDIA and provided the Inside Information to Steinberg, who executed trades in these stocks based on that information. On or about March 28, 2013, a grand

14

--- page 15 ---

jury in the Southern District of New York returned an indictment
charging Steinberg with insider trading at SIGMA CAPITAL.

d. Noah Freeman was a SAC PM specializing in the
technology sector who was employed by SAC CAPITAL LLC in
approximately 2008 and by SAC CAPITAL LP from approximately 2009
to early 2010. While serving as a portfolio manager, Noah
Freeman obtained and/or traded on Inside Information from
various technology companies, including but not limited to,
Research in Motion, Ltd. ("RIMM"), NVIDIA, Marvell Technology
Group, Ltd. ("Marvell"), Avnet, Inc. ("Avnet"), Fairchild
Semiconductor ("Fairchild"), Atheros Communications, Inc.
("Atheros"), Broadcom, and Dell. On or about February 7, 2011,
Noah Freeman pled guilty in federal court to, among other
things, conspiracy and securities fraud for insider trading he
committed while employed by SAC CAPITAL LLC and SAC CAPITAL LP.
At his guilty plea, Freeman admitted that he obtained Inside
Information, and that he purchased and sold securities based in
part on such Inside Information in connection with his
employment at SAC CAPITAL LLC and SAC CAPITAL LP.

e. Donald Longueuil was a SAC PM specializing in the
technology sector who was employed by CR INTRINSIC from
approximately 2008 through 2010. While serving as a portfolio
manager, Longueuil obtained and/or traded on Inside Information
from various technology companies, including but not limited to,

--- page 16 ---

RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom, and Dell. On or about April 28, 2011, Longueuil pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by CR INTRINSIC. At his guilty plea, Longueuil admitted that, while he was employed by CR INTRINSIC, he received Inside Information for the purpose of trading on that information at CR INTRINSIC.

f. Mathew Martoma was a SAC PM specializing in the health care sector employed by CR INTRINSIC from approximately 2006 to 2010. On or about December 21, 2012, a grand jury in the Southern District of New York returned an indictment charging Martoma with insider trading at CR INTRINSIC relating to shares of Elan Corporation, plc (“Elan”) and Wyeth.

g. Richard Lee was a SAC PM employed by SAC CAPITAL LP between approximately April 2009 and June 2011, and again between approximately September 2012 and March 2013, who focused on “special situations” across industry sectors such as mergers, acquisitions, private equity buy-outs and corporate restructurings. While serving as a SAC PM, Richard Lee obtained Inside Information with respect to various securities, including but not limited to Yahoo! Inc. (“Yahoo”) and 3Com Corporation (“3COM”). On or about July 23, 2013, Richard Lee pled guilty in federal court to an information charging Lee with conspiracy and securities fraud in connection with his employment at SAC

16thought
--- page 17 ---

CAPITAL LP. At his guilty plea, Richard Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LP.

33. The SAC ENTITY DEFENDANTS enabled and promoted the insider trading scheme by seeking to hire PMs and RAs believed by the SAC Owner and others in SAC management to have an "edge" based in part on networks of contacts with employees of public companies, who were likely to possess Inside Information, in the sector in which the SAC PM or SAC RA specialized. The focus on hiring employees with such networks was not balanced by any corresponding effort to ensure that prospective SAC PMs and SAC RAs candidates did not use these contacts to obtain illegal Inside Information.

34. The SAC Owner also enabled and promoted the insider trading scheme by ignoring indications that trading recommendations were based on Inside Information, and instead encouraging SAC PMs and SAC RAs through financial incentives and otherwise to share "high conviction" trading ideas - including ideas developed through industry contacts likely to possess Inside Information. In particular, on multiple occasions SAC PMs and SAC RAs communicated to the SAC Owner trading recommendations sourced to information from a contact "at" a public company or with similar language. In these cases, the

17

--- page 18 ---

SAC Owner failed to inquire whether the contact was permitted to disclose the company information or to take other steps to ensure that the trade was not based on Inside Information.

35. Similarly, in connection with the hiring process, the SAC Owner failed to question candidates who at minimum implied that their "edge" was based on sources of Inside Information. For example, on several occasions in June 2009, CB Lee spoke to the SAC Owner about the possibility of providing the SAC Owner with trading ideas on particular companies in return for a payout on the SAC Owner's profits. CB Lee told the SAC Owner that he had people in sales and in finance at NVIDIA who gave him information relating to quarterly earnings and a contact at TSMC who provided him with wafer data. The SAC Owner did not express any concern about CB Lee's proposed sources of information during these conversations.

36. The SAC Owner also furthered the insider trading scheme by fostering a culture that focused on not discussing Inside Information too openly, rather than not seeking or trading on such information in the first place. For example, on or about July 29, 2009, a recently hired SAC PM (the "New PM") sent an instant message to the SAC Owner and relayed that, due to some "recent research," the New PM planned to short Nokia when he started work ten days later. The New PM apologized for being "cryptic" but noted that the head of SAC compliance "was

18

--- page 19 ---

giving me Rules 101 yesterday — so I won't be saying much. Too scary." The SAC Owner did not react or respond in the instant message to the New PM's proposal to trade securities based on information that the New PM was "scared" to tell the SAC Owner for fear of violating compliance rules.

37. The SAC ENTITY DEFENDANTS further enabled and promoted the insider trading scheme by employing limited compliance measures designed to detect or prevent insider trading by SAC PMs or SAC RAs. For example:

a. The SAC ENTITY DEFENDANTS automatically purged all instant messages after 36 hours and all e-mails not affirmatively saved after 30 days until adopting a revised document retention policy in September 2008. In addition, prior to approximately late 2009, SAC's compliance department rarely reviewed electronic communications by SAC employees for suspicious terms suggesting potential insider trading, notwithstanding the fact that the head of SAC compliance had recommended such searches to SAC management as early as 2005.

b. Although the SAC compliance department, beginning in approximately 2006, prohibited the use of expert networks to make payments to public company employees for industry information, SAC encouraged direct contact with public company employees at various levels outside of these networks. For example, in or around 2006, when Richard Lee initially

19

--- page 20 ---

interviewed for a job at SAC and told a senior SAC executive that his investment process involved, among other things, consultations through an expert network, the SAC executive responded in substance that most SAC PMs relied on their own personal networks of industry contacts. In fact, as reflected in examples noted elsewhere in this Complaint, SAC PMs and SAC RAs routinely consulted public company employees at various levels and recommended trading ideas to the SAC Owner expressly based on information obtained through contacts at these companies.

c. Notwithstanding that the SAC compliance department was apparently aware that expert networks presented a risk of insider trading, the SAC compliance department failed to effectively monitor SAC employees’ use of expert networking firms. For example, the SAC compliance department failed to detect or prevent Martoma from using an expert network for approximately 42 consultations with a doctor involved in an Alzheimer’s disease drug trial (the "Drug Trial"), even though some of the expert networking firm’s scheduling e-mails with Martoma — sent through the SAC e-mail system — expressly stated that (1) the doctor in question had confidential information about the Drug Trial; and (2) the purpose of the consultation was to ask the doctor about the experimental medicine being tested in the Drug Trial. The doctor in question in fact

20--- page 21 ---

provided Martoma with Inside Information about the Drug Trial
during many of these consultations.

d. On several occasions, SAC management failed to
refer trading recommendations that appeared to be based on
Inside Information to SAC's compliance department for
investigation. For example, on or about October 30, 2007,
Horvath's trading recommendation e-mailed to the SAC Owner
concerning Sun stated "[m]y edge is contacts at the company and
their distribution channel." Steinberg, who was copied on the
e-mail, forwarded it to the SIGMA CAPITAL Chief Operating
Officer (the "COO") with the comment: "I suspect the line about
contacts at the company may wake up some of our legal eagles."
The COO responded: "I think it might precipitate a general
inquiry to confirm we are not in possession of non public
information. This seems like an investment idea, not a trade
and my interpretation of his comment is just that he developed
good relationships with mgmt. that enhance his comfort level."
The COO arrived at this benign (and unsubstantiated)
interpretation without anyone interviewing Horvath about his e-
mail. In truth and in fact, Horvath's e-mail was based on
confidential information about Sun earnings that Horvath had
obtained from his contact at Sun.

e. The limited number of internal investigations by
the SAC compliance department of insider trading were generally
weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was just an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

f. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that a SAC PM at CR INTRINSIC ("CR Intrinsic PM-1") and a second SAC PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. Despite this, and despite the fact that it was the SAC Owner who had initially inquired about the trading, the consequences were limited. The SAC ENTITY DEFENDANTS imposed monetary fines on two the offenders, but allowed them to keep their jobs, and failed to report the insider trading to any regulatory or law enforcement personnel.

22

--- page 22 ---

38. At bottom, the encouragement by the SAC ENTITY DEFENDANTS of SAC PMs and SAC RAs to pursue aggressively an information "edge" overwhelmed limited SAC compliance systems. Further, the relentless pursuit of an information "edge" fostered a business culture within SAC in which there was no meaningful commitment to ensure that such "edge" came from legitimate research and not Inside Information. The predictable and foreseeable result was systematic insider trading by the SAC ENTITY DEFENDANTS resulting in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public. The illicit profits the SAC ENTITY DEFENDANTS gained from their insider trading scheme were substantially larger than any operating expenses reasonably attributable to their scheme.

Examples Of Insider Trading By Agents Of Each Of The SAC ENTITY DEFENDANTS

39. In connection with the scheme described above, the SAC ENTITY DEFENDANTS, through the conduct of their agents, sought to obtain and trade upon Inside Information on multiple occasions between 1999 and at least 2010. In some cases, instances of insider trading involved agents of multiple SAC ENTITY DEFENDANTS either because the relevant agents worked for different management companies or because the agents switched between management companies during the course of their

--- page 23 ---

employment. The specific instances of insider trading include but are not limited to — the conduct discussed below.

CR INTRINSIC: Trading By Martoma And The SAC Owner In Elan And Wyeth

40. As of mid-July 2008, the SAC Hedge Fund's largest equity securities position consisted of over $700 million worth of Elan American Depository Receipts ("ADRs") and Wyeth common stock. The SAC Owner had accumulated the position in large part on the recommendation of Martoma. On or about July 17, 2008, Martoma obtained negative Inside Information from a medical doctor involved in the Drug Trial being conducted by Elan and Wyeth. On or about Saturday, July 19, 2008, Martoma met with the doctor in person in Michigan. On or about the morning of Sunday, July 20, 2008, Martoma spoke by telephone to the SAC owner, who the next day began selling the entire $700 million position and shorting approximately $260 million worth of Elan and Wyeth stock prior to the public announcement of the Drug Trial results on or about July 29, 2008. The SAC Hedge Fund's profits and avoided losses from this illegal insider trading amounted to approximately $276 million.

CR INTRINSIC: Trading By Two SAC PMs And The SAC Owner Based On Information From CR Intrinsic RA-1

41. On various occasions in 2008 and 2009, a technology sector research analyst for CR Intrinsic ("CR Intrinsic RA-1") obtained Inside Information from contacts at various technology--- page 25 ---

companies, including earnings information from Dell (from the
same source who provided Inside Information to Horvath) and
acquisition-related information from Foundry Networks Inc. The
two SAC PMs to whom CR Intrinsic RA-1 reported and the SAC Owner
all placed profitable trades on one or more occasions shortly
after recommendations made on the basis of Inside Information
known to CR Intrinsic RA-1.

SIGMA CAPITAL: Trading By Steinberg And The SAC Owner Based On
Information From Horvath

42. On or about August 18, 2008, Horvath learned from a
contact in his network that an insider at Dell had disclosed
that Dell's earnings would be below market expectations and
provided that information to Steinberg, who immediately began
shorting shares of Dell stock in Steinberg's portfolio. On or
about August 26, 2008 at 12:37 p.m., Steinberg e-mailed Horvath
that he had been "talking to [the SAC Owner] about Dell earlier
today" and that the SAC Owner wanted Horvath to "compare notes"
with a different SAC PM who had taken a contrary, bullish
position on Dell. At approximately 1:09 p.m., Horvath responded
to Steinberg and the bullish SAC PM by e-mail: "I have a 2nd
hand read from someone at the company - this is 3rd quarter I
have gotten this read from them and it has been very good in the
last two quarters. . . . Please keep to yourselves as
obviously not well known." The e-mail further reported that the

--- page 26 ---

gross margin for Dell would fall short by "50-80 bps [basis points]." The bullish SAC PM then forwarded the Horvath e-mail to a "research trader" for the SAC Owner who assisted the SAC Owner in trading technology stocks. The research trader, in turn, forwarded Horvath's e-mail directly to the SAC Owner at approximately 1:29 p.m. and spoke by phone to the SAC Owner at 1:37 p.m. for approximately one minute. At approximately 1:39 p.m., the SAC Owner began selling Dell shares in his own portfolio, closing out his entire approximately $12.5 million position prior to the disappointing earnings announcement, avoiding losses of approximately $1.7 million. On or about August 28, 2008, after Dell had publicly announced earnings that, consistent with Horvath's Inside Information were below market expectations, the SAC Owner e-mailed Steinberg's group, including Horvath, "Nice job on dell."

SIGMA CAPITAL: Trading By Sigma PM-1 Based On Inside Information

43. Between approximately 2002 and 2005, in connection with his employment as a SAC RA, Wang recommended trades to Sigma PM-1 based on Inside Information that Wang obtained from a network of contacts at publicly-traded technology companies, including but not limited to TSMC, Cisco, Broadcom, Cypress, Polycom, QLogic, and Cirrus.

--- page 27 ---

SIGMA CAPITAL: Trading Based On Inside Information From CB Lee

44. Between approximately 2008 and 2009, former-SIGMA CAPITAL PM CB Lee, who by then was operating his own hedge fund, recommended trades based on Inside Information to Sigma PM-1. The Inside Information involved various technology sector stocks, including Dell and NVIDIA. For example, in a recorded call on or about January 16, 2009, CB Lee told Sigma PM-1, "between you and me," that "a friend of my cousin" who "works for Dell finance," is "telling me to avoid the stock for Q2, because Q2 is gonna be horrible." In a follow-up recorded call on or about January 23, 2009, CB Lee reiterated to Sigma PM-1 that "I do have a contact at Dell, he’s in finance" and that the contact was reporting that the "April quarter could see a problem with gross margins" because sales to businesses were "very weak and that’s where most of the profitability is."

SAC CAPITAL LP: Trading By Richard Lee

45. On various occasions between approximately April 2009 through approximately 2010, Richard Lee who had been hired by SAC CAPITAL LP despite a warning to the SAC Owner that he had been part of an "insider trading group" at a prior employer traded on Inside Information in the $1.25 billion "special situations" SAC portfolio Richard Lee jointly managed with a second SAC PM.

27

--- page 28 ---

46. For example, Richard Lee obtained, from a contact at a private equity firm with a stake in Yahoo, both early access to a Yahoo earnings report and information relating to a contemplated partnership with Microsoft, the latter of which ultimately took place in or around July 2009. Richard Lee — as well as other SAC PMs — also spoke to a technology analyst (the "Tech Analyst") from a research firm doing business with the SAC Hedge Funds about the potential Yahoo-Microsoft partnership. In a recorded call with Richard Lee on or about July 10, 2009, the Tech Analyst told Richard Lee that his "buddy," a "senior guy at Microsoft" who had been "very, very accurate in the past," told the Tech Analyst that a "senior team from Yahoo" had arrived at Microsoft to meet "the two senior-most people in [the] Microsoft internet business" to restart deal talks.

SAC CAPITAL LLC AND SIGMA CAPITAL: Trading Based On Inside Information From CB Lee

47. In connection with his employment as a SAC RA at SAC CAPITAL LLC and then SIGMA CAPITAL, CB Lee sought and obtained Inside Information through direct and indirect contacts at various technology companies between approximately 1999 and 2004, including but not limited to Intel, AMD, and Altera. CB Lee then recommended trades based on this Inside Information to the portfolio manager to whom he reported and in some instances to the SAC Owner directly. In these trading recommendations, CB--- page 29 ---

Lee typically described the source of the information as "my guy," "my contact," or "my check" "at" the company in question.

SAC CAPITAL LLC, SAC CAPITAL LP And CR INTRINSIC: Trading Based On Inside Information From Freeman And Longueuil

48. In connection with their employment, Freeman (employed first by SAC CAPITAL LLC and then SAC CAPITAL LP) and Longueuil (employed by CR INTRINSIC) obtained and traded on Inside Information between approximately 2008 and 2010 in a variety of technology companies, including but not limited to RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom, and Dell.

The Laundering Of Illicit Profits

49. The criminal conduct of the SAC ENTITY DEFENDANTS did not end with the execution of their insider trading scheme. It continued when the illicit profits from insider trading were knowingly commingled with other capital in the SAC INVESTMENT FUNDS; used to promote further trades based on Inside Information; and transferred to SAC employees, in the form of bonus payments, with the assistance of financial institutions. Through this course of conduct, the SAC ENTITY DEFENDANTS engaged in and were involved in money laundering, and involved the SAC INVESTMENT FUNDS in their money laundering scheme.

The Use Of Illicit Profits To Promote The Scheme To Defraud

50. At all times relevant to this Complaint, SAC PMs and SAC RAs of the SAC ENTITY DEFENDANTS generally knew that when

--- page 30 ---

profits were obtained from investment decisions using the capital of the SAC INVESTMENT FUNDS, those profits would not be immediately withdrawn from the SAC INVESTMENT FUNDS, but instead generally would be pooled with other assets of the SAC Hedge Fund and used in future investment decisions within the SAC Hedge Fund and with the assistance of prime brokers.

51. Despite their knowledge of the structure of the SAC Hedge Fund, employees of the SAC ENTITY DEFENDANTS designed their insider trading scheme to use, not their own capital, but the capital of the SAC Hedge Fund held by the SAC INVESTMENT FUNDS. As a result of the systematic and pervasive insider trading directed by employees of the SAC ENTITY DEFENDANTS over many years, illicit profits from insider trading were commingled with legitimate proceeds and formed at least part of the funding of additional insider trading. Illicit profits from insider trading were particularly likely to form at least part of the proceeds for future insider trading because, as described above, SAC Hedge Fund assets were frequently reallocated to strategies perceived by the SAC Owner and SAC PMs as potentially outperforming.

52. In addition, illicit profits from insider trading were likely to form at least part of the proceeds for future insider trading because of the magnitude of the insider trades directed by employees of the SAC ENTITY DEFENDANTS. For example, as

30

--- page 31 ---

alleged above, the SAC Hedge Fund in July 2008 began selling its entire $700 million position and shorted approximately $260 million worth of Elan and Wyeth stock based on Inside Information, and made profits and avoided losses in the amount of approximately $276 million.*

53. Through various acts and omissions alleged above, at all times relevant to this Complaint, the SAC ENTITY DEFENDANTS enabled and encouraged their SAC PMs and SAC RAs to use the capital of the SAC INVESTMENT FUNDS to engage in insider trading. The SAC ENTITY DEFENDANTS enabled and encouraged this conduct while intending that illicit profits from insider trading not be immediately withdrawn from the SAC INVESTMENT FUNDS, but instead be pooled with other assets of the SAC Hedge Fund and used in future investment decisions within the SAC Hedge Fund and with the assistance of prime brokers. In this manner, the SAC ENTITY DEFENDANTS caused transactions using the profits of insider trading that were intended at least in part to promote additional insider trading within the SAC Hedge Fund.

* Separately, the SAC Hedge Fund had an interest in $12 million worth of Wyeth shares through multi-year "swap" contracts the SAC Hedge Fund had entered into with other financial institutions in February and March of 2008. SAC did not, however, contact its swap counter-parties and seek to unwind the swaps, which would have risked disclosing that SAC was selling large portions in Wyeth in advance of the July 29, 2008 public announcement of the Drug Trial results.

31

--- page 32 ---

54. The SAC ENTITY DEFENDANTS engaged in other transactions using the profits of insider trading and designed to promote that unlawful conduct. Among other things, at various times relevant to this Complaint, the SAC ENTITY DEFENDANTS promoted the insider trading scheme of its employees through their practice of paying year-end bonuses — drawn from the SAC Hedge Fund's pool of capital that included the illicit profits — to the employees who engaged in insider trading. For example, at the end of 2008, after Mathew Martoma's insider trading in the securities of Elan and Wyeth, as described above, the SAC Hedge Fund paid him a bonus of approximately $9.3 million, drawn at least in part from the illicit profits of his insider trading. These bonuses were paid to the SAC ENTITY DEFENDANTS' employees as a reward for their insider trading and served as encouragement for future insider trading.

The Monetary Transactions Using The Illicit Profits

55. At various times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS allowed and directed the illicit profits from insider trading using the funds of the SAC INVESTMENT FUNDS to be reinvested in the SAC INVESTMENT FUNDS. The amount of profits obtained from insider trading was generally greater than $10,000. In directing the reinvestment of capital in the SAC INVESTMENT FUNDS, the SAC ENTITY DEFENDANTS used the services of one of several prime brokers.

32--- page 33 ---

56. At various times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS paid year-end bonuses to its employees, drawn from the SAC Hedge Fund’s pool of capital that included the illicit profits from insider trading. In making these bonus payments, the SAC ENTITY DEFENDANTS made wire transfers into the bank accounts of the employees of the SAC ENTITY DEFENDANTS, which accounts were held at financial institutions whose deposits were insured by the FDIC. The illicit profits distributed through these direct deposits were at certain times greater than $10,000.

57. The SAC ENTITY DEFENDANTS knew, or consciously avoided knowing, that at least some of the proceeds used to make reinvestments on behalf of the SAC INVESTMENT FUNDS, and at least some of the proceeds used to pay year-end bonuses to SAC PMs and SAC RAs, constituted illicit profits from the insider trading the SAC ENTITY DEFENDANTS had enabled and encouraged.

V. CLAIMS FOR FORFEITURE

FIRST CLAIM FOR RELIEF

Forfeiture Under 18 U.S.C. § 981(a) (1) (A) - Promotion Money Laundering And Conspiracy

58. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

59. Pursuant to 18 U.S.C. § 981(a) (1) (A), "[a]ny property, real or personal, involved in a transaction in violation of

33

--- page 34 ---

section 1956 . . of [title 18, relating to money laundering offenses]" is subject to forfeiture to the Government.

60. Pursuant to 18 U.S.C. § 1956(a) (1), commonly known as the "money laundering" statute, a crime is committed by any person who:

(a) (1) knowing that the property involved in a financial transaction involves the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity

(A) (i) with the intent to promote the carrying on of specified unlawful activity . . .

61. Pursuant to 18 U.S.C. § 1956(h), "[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy."

62. "Specified unlawful activity" is defined in 18 U.S.C. § 1956(c) (7), and the term includes any offense listed under 18 U.S.C. § 1961(1). Section 1961(1) (B) lists, among other offenses, violations of 18 U.S.C. § 1343 (relating to wire fraud) and "fraud in the sale of securities."

63. The Defendants in Rem are subject to forfeiture pursuant to 18 U.S.C. § 981(a) (1) (A) because they constitute property involved in financial transactions involving the

34

--- page 35 ---

proceeds of specified unlawful activity, namely the wire fraud and securities fraud charged in the Indictment, which transactions were intended to promote such specified unlawful activity and carried out with knowledge that the property represented the proceeds of illegal activity. The Defendants in Rem also constitute property involved in a conspiracy to undertake such transactions.

SECOND CLAIM FOR RELIEF

Forfeiture Under 18 U.S.C. § 981(a)(1)(A) - Money Laundering In Violation Of Section 1957 And Conspiracy

64. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

65. Pursuant to 18 U.S.C. § 981(a)(1)(A), "[a]ny property, real or personal, involved in a transaction in violation of section 1956 . . . of [title 18, relating to money laundering offenses]" is subject to forfeiture to the Government.

66. 18 U.S.C. § 1957 provides that "[w]hoever, [with such offense under this section taking place in the United States] knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity," shall guilty of a crime. A "monetary transaction" includes the "deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary

--- page 36 ---

instrument . . . by, through, or to a financial institution." 18 U.S.C. § 1957(f) (1).

67. Pursuant to 18 U.S.C. § 1956(h), "[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy."

68. "Specified unlawful activity" is defined in 18 U.S.C. § 1956(c) (7), and the term includes any offense listed under 18 U.S.C. § 1961 (1). Section 1961 (1) (B) lists, among other offenses, violations of 18 U.S.C. § 1343 (relating to wire fraud) and "fraud in the sale of securities."

69. The Defendants in Rem are subject to forfeiture pursuant to 18 U.S.C. § 981(a) (1) (A) because they constitute property involved in monetary transactions in criminally derived property of a value greater than $10,000 that was derived from specified unlawful activity, namely the wire fraud and securities fraud charged in the Indictment, and a conspiracy to engage in such transactions. The Defendants in Rem also constitute property involved in a conspiracy to undertake such transactions.

36--- page 37 ---

VI. CIVIL MONEY LAUNDERING PENALTIES

THIRD CLAIM FOR RELIEF

18 U.S.C. § 1956

70. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

71. Pursuant to 18 U.S.C. § 1956(b), "[w]hoever conducts or attempts to conduct a transaction described in subsection (a)(1) [of section 1956] ..., or section 1957, ..., is liable to the United States for a civil penalty of not more than the greater of (A) the value of the property, funds, or monetary instruments involved in the transaction; or (B) $10,000."

72. The Defendants in Personam knowingly conducted financial transactions using the profits obtained from the wire fraud and securities fraud charged in the Indictment while intending the transactions to promote those specified unlawful activity.

73. The Defendants in Personam also knowingly engaged in monetary transactions involving profits obtained from these specified unlawful activities, and therefore involving criminally derived property which was derived from specified unlawful activity.

37

--- page 38 ---

74. Such transactions were made by, through, and to financial institutions and involved property of a value greater than $10,000.

75. Accordingly, the Defendants in Personam are liable to the United States for the value of the funds and monetary instruments involved in the transactions, in an amount to be determined at trial.

REQUEST FOR RELIEF

WHEREFORE plaintiff, the United States of America, requests that judgment be entered as follows:

A. Enter judgment against the Defendants in Rem, and in favor of the United States, on the first and second claims alleged in the Complaint.

B. Issue process to enforce the forfeiture of the Defendants in Rem, requiring that all persons having an interest in the Defendants in Rem be cited to appear and show cause why the forfeiture should not be decreed, and that this Court decree forfeiture of the Defendants in Rem to the United States of America for disposition according to law;

C. Award the United States civil money laundering penalties from the Defendants in Personam on the third claim alleged in the Complaint, in an amount to be

38

--- page 39 ---

proved at trial to a jury, plus prejudice and postjudgment interest.

D. Grant the Government such further relief as this Court may deem just and proper, together with the costs and disbursements in this action.

Dated: New York, New York July 25, 2013

PREET BHARARA United States Attorney for the Southern District of New York Attorney for the Plaintiff United States of America

By: Sharon Cohen Levin Micah W. J. Smith Assistant United States Attorneys One St. Andrew's Plaza New York, New York 10007 Telephone: (212) 637-1060 Facsimile: (212) 637-0421

--- page 40 ---

VERIFICATION

STATE OF NEW YORK
COUNTY OF NEW YORK
SOUTHERN DISTRICT OF NEW YORK

Gregory A. Coleman, being duly sworn, deposes and says that he is a Special Agent with the Federal Bureau of Investigation, and as such has responsibility for the within action; that he has read the foregoing Verified Complaint and knows the contents thereof, and that the same is true to the best of his knowledge, information, and belief.

The sources of deponent's information and the ground of his belief are official records and files of the United States, information obtained directly by the deponent, and information obtained by other law enforcement officials and representatives during an investigation of alleged violations of federal criminal laws.

Sworn to before me this 25th day of July, 2013:

NOTARY PUBLIC

MARCO DASILVA
Notary Public, State of New York
No. 01DA6145603
Qualified in Nassau County
My Commission Expires 10/01/2014

Gregory A. Coleman
Special Agent
Federal Bureau of Investigation

--- page 41 ---

Exhibit A

--- page 42 ---

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA
v.
S.A.C. CAPITAL ADVISORS, L.P., :
S.A.C. CAPITAL ADVISORS LLC, :
CR INTRINSIC INVESTORS, LLC, and :
SIGMA CAPITAL MANAGEMENT, LLC,
Defendants.
COUNT ONE
(Wire Fraud)
The Grand Jury charges:
1. As described below, this Indictment charges the corporate entities responsible for the management of a major hedge fund with criminal responsibility for insider trading offenses committed by numerous employees and made possible by institutional practices that encouraged the widespread solicitation and use of illegal inside information. Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry.
The SAC Capital Entities
2. At all times relevant to this Indictment, an individual residing in Greenwich, Connecticut (the "SAC Owner")--- page 43 ---

operated a group of affiliated hedge funds (collectively, the "SAC Hedge Fund" or "SAC"). The SAC Hedge Fund, founded by the SAC Owner in or around 1992, included, at its peak, over $15 billion of assets under management. The majority of the capital managed by the SAC Hedge Fund at all relevant times belonged to the SAC Owner himself, with the balance of capital provided by outside investors.

3. The SAC Owner operated the SAC Hedge Fund through his ownership of several fund management companies, which served as investment advisors for the SAC Hedge Fund. These management companies generally charged outside investors in the SAC Hedge Fund annual fees of approximately three percent of assets under management and up to 50 percent of investment returns. The principal management companies were as follows: (i) CR INTRINSIC INVESTORS, LLC ("CR INTRINSIC"), a Delaware limited liability company; (ii) SIGMA CAPITAL MANAGEMENT, LLC ("SIGMA CAPITAL"), a Delaware limited liability company; (iii) S.A.C. CAPITAL ADVISORS, LLC ("SAC CAPITAL LLC"), a Delaware limited liability company that actively managed investments in the SAC Hedge Fund through approximately 2008; and (iv) S.A.C. CAPITAL ADVISORS, L.P. ("SAC CAPITAL LP") a Delaware limited partnership that actively managed investments in the SAC Hedge Fund beginning in

--- page 44 ---

approximately 2009 (collectively, the "SAC ENTITY DEFENDANTS").

Overview of The Scheme

4. At various times between in or about 1999 through at least in or about 2010, employees and agents of SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC, and SIGMA CAPITAL, the defendants, obtained material, non-public information ("Inside Information") relating to publicly-traded companies and traded on that Inside Information in order to (i) increase the return on investment in the SAC Hedge Fund; and (ii) increase fees received by the SAC ENTITY DEFENDANTS.

5. The SAC ENTITY DEFENDANTS committed the insider trading scheme through the acts of, among others, numerous portfolio managers ("SAC PMs") and research analysts ("SAC RAs") who engaged in a pattern of obtaining Inside Information from dozens of publicly-traded companies across multiple industry sectors. Employees of the SAC ENTITY DEFENDANTS traded on Inside Information themselves and, at times, recommended trades to the SAC Owner based on Inside Information.

6. The SAC ENTITY DEFENDANTS enabled and promoted the Insider Trading scheme through several means detailed herein. First, the SAC ENTITY DEFENDANTS sought to hire SAC PMs and SAC RAs with proven access to public company contacts likely

--- page 45 ---

to possess Inside Information. Second, the SAC ENTITY DEFENDANTS' employees were financially incentivized to recommend to the SAC Owner "high conviction" trading ideas in which the SAC PM had an "edge" over other investors, but repeatedly were not questioned when making trading recommendations that appeared to be based on Inside Information. Third, on numerous occasions the SAC ENTITY DEFENDANTS failed to employ effective compliance procedures or practices to prevent SAC PMs and SAC RAs from engaging in insider trading.

7. At bottom, the encouragement by the SAC ENTITY DEFENDANTS of SAC PMs and SAC RAs to pursue aggressively an information "edge" overwhelmed limited SAC compliance systems. Further, the relentless pursuit of an information "edge" fostered a business culture within SAC in which there was no meaningful commitment to ensure that such "edge" came from legitimate research and not Inside Information. The predictable and foreseeable result, as charged herein, was systematic insider trading by the SAC ENTITY DEFENDANTS resulting in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public.

--- page 46 ---

The Operation Of The SAC Hedge Fund

8. The SAC Hedge Fund functioned as a collection of dozens of individual portfolios, each headed by a portfolio manager responsible for his or her portfolio's profit-and-loss results, and each charged with sharing the best trading ideas with the SAC Owner directly.

9. In particular, the SAC Owner allocated investment capital between and among up to approximately 100 internal portfolios, each of which was generally managed by a SAC PM who specialized in a particular investment sector, such as technology, health care, financial services, industrial, consumer, or energy. Each portfolio manager, in turn, typically employed one or more research analysts to assist with the development of investment ideas for the SAC PM's portfolio.

10. The SAC Hedge Fund portfolios were in many ways autonomous from each other. Each SAC PM had substantial discretion to make investment decisions in his or her portfolio, even if a position was contrary to a position taken by other SAC PMs operating a portfolio in the same sector. Each SAC PM was compensated principally based on the performance of his or her own portfolio, and without regard to the investment performance of other SAC PMs. Likewise, SAC RAs were compensated largely at--- page 47 ---

the discretion of the SAC PM to whom the SAC RA reported and based on the profitability of that PM's portfolio.

11. The largest portfolio in existence at the SAC Hedge Fund was, at all relevant times, a portfolio managed by the SAC Owner himself. The SAC Owner had sole trading discretion over his portfolio and made these decisions principally based on trading recommendations from SAC PMs. In particular, at all relevant times the SAC Owner required each SAC PM to share "high conviction" investment ideas - i.e., the investment recommendations in which the SAC PM had the greatest confidence - with the SAC Owner. In fact, providing such ideas to the SAC Owner was an express part of a SAC PM's duties and was emphasized to SAC PMs in the hiring process and once working at SAC.

12. In order to facilitate the collection of top trading ideas from the SAC PMs, the SAC ENTITY DEFENDANTS employed different systems at various times, including, for example, a template filled out on SAC's computer system and designated voicemail and e-mail boxes to collect trading ideas. In addition to these formal systems, the SAC Owner communicated with SAC PMs regularly through various means to ascertain their best trading ideas, including during semi-regular Sunday evening

--- page 48 ---

calls and in-person conversations. To assist in processing SAC PM ideas, the SAC Owner at times employed sector-focused "research traders" who, among other things, ensured that the ideas of SAC PMs in the sector were brought to the SAC Owner's attention and monitored the trading of the SAC PMs to ensure that the trading was consistent with recommendations made to the SAC Owner.

13. At all relevant times, the SAC ENTITY DEFENDANTS formally tracked trades made by the SAC Owner in the portfolio he personally managed in order to "tag" or credit the SAC PM responsible for the idea. At all relevant times, the SAC ENTITY DEFENDANTS paid SAC PMs an annual bonus - which could in some cases exceed all other components of compensation - based on a percentage of the net profits made by the SAC Owner on trades "tagged" to a particular SAC PM.

SAC PMs and SAC RAs Who Obtained Or Traded On Inside Information While Employed By The SAC ENTITY DEFENDANTS

14. Numerous SAC PMs and SAC RAs, not all of whom are identified herein, obtained or traded on Inside Information while employed by one or more of the SAC ENTITY DEFENDANTS. Each of the eight individual SAC PMs or SAC RAs identified by name below have been charged with and/or convicted of trading on Inside Information in connection with one or more of the SAC

7

--- page 49 ---

ENTITY DEFENDANTS:

a. Wes Wang ("Wang") was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2002 to 2005. While serving as a SAC RA, Wang obtained Inside Information with respect to various technology companies, including but not limited to Taiwan Semiconductor Manufacturing Company Limited ("TSMC"), Cisco Systems, Inc. ("Cisco"), Broadcom Corporation ("Broadcom"), eBay, Inc. ("eBay"), Cypress Semiconductor Corporation ("Cypress"), Polycom, Inc. ("Polycom"), QLogic Corporation ("QLogic") and Cirrus Logic Inc. ("Cirrus"). Wang provided trading ideas based on Inside Information to the portfolio manager to whom he reported ("Sigma PM-1"). On or about July 13, 2012, Wang pled guilty in federal court to two counts of conspiracy to commit securities fraud, one of which involved insider trading in connection with Wang's employment at SIGMA CAPITAL from 2002 to 2005. At his guilty plea, Wang admitted that, while at SIGMA CAPITAL, he had obtained Inside Information and provided it to Sigma PM-1 to be used for the purchase and sale of securities.

b. Richard Choo-Beng Lee ("CB Lee") was a SAC RA specializing in the technology sector employed by SAC CAPITAL LLC from approximately 1999 to 2003 and by SIGMA CAPITAL from

--- page 50 ---

approximately 2003 to 2004. While serving as a SAC RA, CB Lee obtained Inside Information with respect to various technology companies, including but not limited to Intel Corporation ("Intel"), Advance Micro Devices, Inc. ("AMD"), and Altera Corporation ("Altera"). CB Lee provided trading ideas based on Inside Information to the portfolio manager to whom he reported and the SAC Owner. On or about October 13, 2009, CB Lee pled guilty in federal court to, among other things, conspiracy to commit securities fraud and wire fraud relating to trading recommendations based on Inside Information that CB Lee had provided to Sigma PM-1 and others following CB Lee's departure from SIGMA CAPITAL. At his guilty plea, CB Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information.

c. Jon Horvath was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2006 through 2011. Horvath served as a research analyst for portfolio manager Michael Steinberg, who has been employed by SIGMA CAPITAL from approximately 2003 to the present, and as a portfolio manager for SAC CAPITAL LLC from approximately 1996 to 2003. On or about September 28, 2012, Horvath pled guilty in federal court to conspiracy and securities fraud for insider

9--- page 51 ---

trading Horvath committed while at SIGMA CAPITAL, including but not limited to insider trading in relation to Dell Inc. ("Dell") in August 2008 and NVIDIA Corporation ("NVIDIA") in May 2009. Horvath admitted at his guilty plea that he obtained Inside Information about Dell and NVIDIA and provided the Inside Information to Steinberg, who executed trades in these stocks based on that information. On or about March 28, 2013, a grand jury in the Southern District of New York returned an indictment charging Steinberg with insider trading at SIGMA CAPITAL.

d. Noah Freeman was a SAC PM specializing in the technology sector who was employed by SAC CAPITAL LLC in approximately 2008 and by SAC CAPITAL LP from approximately 2009 to early 2010. While serving as a portfolio manager, Noah Freeman obtained and/or traded on Inside Information from various technology companies, including but not limited to, Research in Motion, Ltd. ("RIMM"), NVIDIA, Marvell Technology Group, Ltd. ("Marvell"), Avnet, Inc. ("Avnet"), Fairchild Semiconductor ("Fairchild"), Atheros Communications, Inc. ("Atheros"), Broadcom and Dell. On or about February 7, 2011, Noah Freeman pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by SAC CAPITAL LLC and SAC CAPITAL LP.

10

--- page 52 ---

At his guilty plea, Freeman admitted that he obtained Inside Information, and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LLC and SAC CAPITAL LP.

e. Donald Longueuil was a SAC PM specializing in the technology sector who was employed by CR INTRINSIC from approximately 2008 through 2010. While serving as a portfolio manager, Longueuil obtained and/or traded on Inside Information from various technology companies, including but not limited to, RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom and Dell. On or about April 28, 2011, Longueuil pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by CR INTRINSIC. At his guilty plea, Longueuil admitted that, while he was employed by CR INTRINSIC, he received Inside Information for the purpose of trading on that information at CR INTRINSIC.

f. Matthew Martoma was a SAC PM specializing in the health care sector employed by CR INTRINSIC from approximately 2006 to 2010. On or about December 21, 2012, a grand jury in the Southern District of New York returned an indictment charging Martoma with insider trading at CR INTRINSIC relating to shares of Elan Corporation, plc ("Elan") and Wyeth.

11

--- page 53 ---

g. Richard Lee was a SAC PM employed by SAC CAPITAL LP between approximately April 2009 and June 2011, and again between approximately September 2012 and March 2013, who focused on "special situations" across industry sectors such as mergers, acquisitions, private equity buy-outs and corporate restructurings. While serving as a SAC PM, Richard Lee obtained Inside Information with respect to various securities, including but not limited to, Yahoo! Inc. ("Yahoo") and 3Com Corporation ("3COM"). On or about July 23, 2013, Richard Lee pled guilty in federal court to an information charging Lee with conspiracy and securities fraud in connection with his employment at SAC CAPITAL LP. At his guilty plea, Richard Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LP.

The Facilitation Of The Scheme By The SAC ENTITY DEFENDANTS

15. The insider trading scheme committed by the SAC ENTITY DEFENDANTS through the conduct of their agents was facilitated through practices employed by the SAC ENTITY DEFENDANTS that encouraged SAC PMs and SAC RAs to pursue industry contact networks to obtain an information "edge" unavailable to other investors, without effective corresponding

12

--- page 54 ---

controls to prevent that "edge" from consisting of Inside Information. In particular, as described herein: (1) the SAC ENTITY DEFENDANTS routinely sought to hire SAC PMs and SAC RAs with networks of contacts likely to have access to Inside Information; (2) SAC PMs and SAC RAs were required to share their best investment ideas with the SAC Owner while indications that those ideas were based on Inside Information were often ignored; and (3) the SAC ENTITY DEFENDANTS failed to employ the necessary compliance measures to detect or prevent trading on Inside Information.

16. In furtherance of the scheme, the SAC ENTITY DEFENDANTS sought to hire PMs and RAs believed by the SAC Owner and others in SAC management to have an "edge" based in part on networks of contacts with employees of public companies in the sector in which the SAC PM or SAC RA specialized. The focus on hiring employees with such networks was not balanced by any corresponding effort to ensure that prospective SAC PMs and SAC RAs did not use these contacts to obtain illegal Inside Information.

17. The first stage of SAC's hiring process was handled by the SAC "business development" department, which

13--- page 55 ---

sought to build relationships with and recruit SAC PMs and SAC RAs. E-mails from the business development team to the SAC Owner and others reflected an emphasis on hiring personnel with company contacts in their respective sectors. For example, a brief write-up of a SAC PM candidate specializing in the industrial sector forwarded to the SAC Owner on or about November 16, 2008, described the candidate as "the guy who knows the quarters cold, has a share house in the Hamptons with the CFO of [a Fortune 100 industrial sector company], tight with management."

18. After a SAC PM or SAC RA candidate was preliminarily approved for hiring, the SAC ENTITY DEFENDANTS subjected the candidate to a "due diligence" process that involved interviewing the candidate's references, prior employers and others, in part to identify the strength of the candidate's industry contact networks. For example, the due diligence report for Horvath — who obtained Inside Information from company insiders while employed at SIGMA CAPITAL — identified Horvath's "contacts with companies" as a "key strength" and noted that Horvath generated investment ideas by "mining his industry contact network for datapoints." Likewise, the due diligence report for Martoma — who is charged with

14

--- page 56 ---

trading based on Inside Information from doctors with access to confidential drug trial data while employed at CR INTRINSIC — referred to Martoma's health care "industry contacts beyond management," including through two expert networking firms and Martoma's personal "network of doctors in the field." There was no reference in the due diligence reports for Horvath or Martoma (or, generally, for other candidates) to ethics, integrity, compliance or whether the candidate had or was likely to use the referenced contacts to obtain or to make trades based on Inside Information.

19. In fact, on at least one occasion the SAC ENTITY DEFENDANTS hired a candidate despite a recognized reputation for insider trading. In particular, in or around the summer of 2008, the SAC Owner received a warning from an employee of another hedge fund ("Hedge Fund A") that Richard Lee, who previously had worked at Hedge Fund A, and was known for being part of Hedge Fund A's "insider trading group." A SAC business development employee subsequently informed Richard Lee that the SAC Owner had decided to hire Richard Lee as a SAC PM anyway, overruling objections from SAC's legal department. Richard Lee then proceeded to obtain and make trades based on Inside

--- page 57 ---

Information shortly after starting his employment at SAC Capital in approximately April 2009.

The Failure By The SAC Owner And Others To Question SAC Trading Recommendations Bearing Indicia Of Being Based On Inside Information

20. Furthering the scheme, the SAC Owner encouraged SAC PMs and SAC RAs, through financial incentives and otherwise, to share "high conviction" trading ideas — including ideas developed through industry contacts — while often ignoring indications that trading recommendations were based on Inside Information.

21. In particular, on multiple occasions SAC PMs and SAC RAs communicated to the SAC Owner trading recommendations sourced to information from a contact "at" a public company or with similar language. In these cases, the SAC Owner failed to inquire whether the contact was permitted to disclose the company information or to take other steps to ensure that the trade was not based on Inside Information. For example:

a. In an e-mail dated June 11, 2008, a SAC PM employed by CR INTRINSIC ("CR Intrinsic PM-1") wrote to the SAC Owner that "my guy at [company name]" had explained why certain anticipated acquisitions had not occurred. In a second e-mail, dated May 3, 2009, CR-Intrinsic PM-1 wrote to the SAC Owner,

--- page 58 ---

referring to the same company: "I am very comfortable that this qtr is going to be solid vs current consensus and guidance. I am getting coffee on Tues afternoon with the guy who runs North American generics business." The SAC Owner replied: "Let's talk later."

b. On or about October 30, 2007, Horvath e-mailed a trading recommendation concerning Sun Microsystems, Inc. ("Sun") to an e-mail address used by the SAC Owner to receive investment ideas from SAC PMs and SAC RAs. Horvath wrote: "My edge is contacts at the company and their distribution channel." The SAC Owner did not ask Horvath whether his "contacts at the company" were permitted to share the information that had provided Horvath with his "edge." Similarly, on or about August 26, 2008, Horvath wrote an e-mail to Steinberg, which was forwarded to the SAC Owner, stating that his recommendation to sell Dell stock in advance of a quarterly earnings announcement was based on a "2nd hand read from someone at the company" who had "been very good in the last two quarters." The SAC Owner did not question Horvath about his contact but did begin selling off his approximately $12.5 million Dell position approximately 10 minutes after receiving the e-mail.

17thought
--- page 59 ---

c. On or about February 26, 2007, Martoma initiated a chat with the SAC Owner via instant message relating to a drug approval announcement by a major pharmaceutical company ("Pharma Company 1") that had taken the financial market by surprise. Martoma advised the SAC Owner that Martoma had a "better edge" with respect to upcoming news about a second drug in development by Pharma Company 1 because "the second product is partnered with a small biotech company, while first was internal to [Pharma Company 1] only." The SAC Owner responded: "and I would think u have a line into small co," to which Martoma responded "yes."

d. On or about April 11, 2008 and April 12, 2008, the SAC Owner exchanged several e-mails with two CR INTRINSIC health care analysts ("Analyst 1" and "Analyst 2") about information they had obtained through a paid consultation with a clinical investigator (the "Clinical Investigator") for a drug trial being conducted by Elan and Wyeth for an Alzheimer's disease drug (the "Drug Trial"). Analyst 2 e-mailed the SAC Owner that the Clinical Investigator had told Analyst 2 that he "had seen the data as of December" for the Drug Trial, and that "it was not stat significant." In a second e-mail to the SAC Owner, Analyst 1 added that the Clinical Investigator had told

18

--- page 60 ---

them that the data from an "interim look" was "close" to significant" in some cases and that it "was possible but unlikely" that the "final data" would be statistically significant. In a third e-mail, Analyst 1 responded to the SAC Owner's question about whether it was likely that the Clinical Investigator had seen this data by reiterating that the Clinical Investigator "said he saw the data before agreeing to be in the study" and that it would not be "unreasonable" for the Clinical Investigator to be among the "small # of ppl [who] have seen the [Drug Trial] data." The SAC Owner did not question or express concern that Analyst 1 or Analyst 2 were paying a doctor involved in a drug trial for a consultation about non-public drug trial data seen by only a "small # of ppl." Instead, the SAC Owner directed Martoma to follow-up with the Clinical Investigator, which Martoma did and reported back.

e. Indeed, the SAC Owner expressed confidence in Martoma on the grounds that Martoma was "close" to sources of information about the Drug Trial while failing to express concern about the potential for Martoma to receive Inside Information from these sources. For example, in an instant message exchange on or about April 6, 2008, the SAC Owner responded to Analyst 2's inquiry as to whether the SAC Owner had

--- page 61 ---

"been able to get a better sense of why Martoma thinks" the Drug Trial data would be statistically significant as follows: "seems like Mat [Martoma] has a lot of good relationships in this arena." In another instant message, on or about March 26, 2008, the SAC Owner responded to Analyst 1's question as to whether Martoma and a second person "know something or do they have a very strong feeling" as follows: "tough one[.] I think Mat [Martoma] is closest to it." Analyst 1 and Analyst 2 complained in e-mails between themselves that Martoma was "telling ppl he has black edge" - a phrase meaning Inside Information - with respect to the outcome of the Drug Trial. Analyst 1 and Analyst 2 expressed no concern in these e-mails about the legality of Martoma proposing to trade on the Inside Information, focusing instead on whether Martoma was being "intellectually honest" in telling people he had "black edge" when Analyst 1 and Analyst 2 believed it was not yet possible to know the Drug Trial results.

22. Similarly, in connection with the hiring process, the SAC Owner failed to question candidates who at minimum implied that their "edge" was based on sources of Inside Information. For example, on several occasions in June 2009, CB Lee spoke to the SAC Owner about the possibility of providing the SAC Owner with trading ideas on particular companies in

--- page 62 ---

return for a payout on the SAC Owner's profits. CB Lee told the SAC Owner that he had people in sales and in finance at NVIDIA who gave him information relating to quarterly earnings and a contact at TSMC who provided him with wafer data. The SAC Owner did not express any concern about CB Lee's proposed sources of information during these conversations.

23. Also furthering the scheme, the SAC Owner fostered a culture that focused on not discussing Inside Information too openly, rather than not seeking or trading on such information in the first place. For example, on or about July 29, 2009, a recently hired SAC PM (the "New PM") sent an instant message to the SAC Owner and relayed that, due to some "recent research," the New PM planned to short Nokia when he started work 10 days later. The New PM apologized for being "cryptic" but noted that the head of SAC compliance "was giving me Rules 101 yesterday - so I won't be saying much[.] [T]oo scary." The SAC Owner did not react or respond in the instant message to the New PM's proposal to trade securities based on information that the New PM was "scar[ed]" to tell the SAC Owner for fear of violating compliance rules.

21--- page 63 ---

Ineffective Compliance Programs That Failed To Detect Or Thwart Insider Trading

24. Furthering the scheme, the SAC ENTITY DEFENDANTS employed limited compliance measures designed to detect or prevent insider trading by SAC PMs or SAC RAs. As an initial matter, the SAC ENTITY DEFENDANTS automatically purged all instant messages after 36 hours and all e-mails not affirmatively saved after 30 days until adopting a revised document retention policy in September 2008. In addition, prior to approximately late 2009, SAC's compliance department rarely reviewed electronic communications by SAC employees for suspicious terms suggesting potential insider trading, notwithstanding the fact that the head of SAC compliance had recommended such searches to SAC management as early as 2005.

25. Although the SAC compliance department, beginning in approximately 2006, prohibited the use of expert networks to make payments to public company employees for industry information, SAC encouraged direct contact with public company employees at various levels outside of these networks. For example, in or around 2006, when Richard Lee initially interviewed for a job at SAC and told a senior SAC executive that his investment process involved, among other things, consultations through an expert network, the SAC executive responded in substance that most SAC PMs relied on their own personal networks of industry contacts. In fact, as reflected in examples noted elsewhere in this Indictment, SAC PMs and SAC RAs routinely consulted public company employees at various levels and recommended trading ideas to the SAC Owner expressly based on information obtained through contacts at these companies.

26. Moreover, notwithstanding that the SAC compliance department was apparently aware that expert networks presented a risk of insider trading, the SAC compliance department failed to effectively monitor SAC employees' use of expert networking firms. For example, the SAC compliance department failed to detect or prevent Martoma from using an expert network for approximately 42 consultations with a doctor involved in the Drug Trial, even though some of the expert networking firm's scheduling e-mails with Martoma — sent through the SAC e-mail system — expressly stated that (1) the doctor in question had confidential information about the Drug Trial; and (2) the purpose of the consultation was to ask the doctor about the experimental medicine being tested in the Drug Trial. The doctor in question in fact provided Martoma with Inside Information about the Drug Trial during many of these consultations.

--- page 64 ---

27. Also furthering the scheme, on several occasions SAC management failed to refer trading recommendations that appeared to be based on Inside Information to SAC's compliance department for investigation. For example, on or about October 30, 2007, Horvath's trading recommendation emailed to the SAC Owner concerning Sun stated "[m]y edge is contacts at the company and their distribution channel." Steinberg, who was copied on the e-mail, forwarded it to the SIGMA CAPITAL Chief Operating Officer (the "COO") with the comment: "I suspect the line about contacts at the company may wake up some of our legal eagles." The COO responded: "I think it might precipitate a general inquiry to confirm we are not in possession of nonpublic information. This seems like an investment idea, not a trade and my interpretation of his comment is just that he developed good relationships with mgmt. that enhance his comfort level." The COO arrived at this benign (and unsubstantiated) interpretation without anyone interviewing Horvath about his e-mail. In truth and in fact, Horvath's e-mail was based on confidential information about Sun earnings that Horvath had obtained from his contact at Sun.

28. Also furthering the scheme, the limited number of internal investigations by the SAC compliance department of insider trading were generally weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

29. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that CR Intrinsic PM-1 and a second PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. In particular, evidence reviewed by the SAC compliance department reflected that on the evening of July 27, 2009, the Health Care Analyst

--- page 65 ---

Information about the Drug Trial during many of these consultations.

27. Also furthering the scheme, on several occasions SAC management failed to refer trading recommendations that appeared to be based on Inside Information to SAC's compliance department for investigation. For example, on or about October 30, 2007, Horvath's trading recommendation emailed to the SAC Owner concerning Sun stated "[m]y edge is contacts at the company and their distribution channel." Steinberg, who was copied on the e-mail, forwarded it to the SIGMA CAPITAL Chief Operating Officer (the "COO") with the comment: "I suspect the line about contacts at the company may wake up some of our legal eagles." The COO responded: "I think it might precipitate a general inquiry to confirm we are not in possession of nonpublic information. This seems like an investment idea, not a trade and my interpretation of his comment is just that he developed good relationships with mgmt. that enhance his comfort level." The COO arrived at this benign (and unsubstantiated) interpretation without anyone interviewing Horvath about his e-mail. In truth and in fact, Horvath's e-mail was based on confidential information about Sun earnings that Horvath had obtained from his contact at Sun.

28. Also furthering the scheme, the limited number of internal investigations by the SAC compliance department of insider trading were generally weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

29. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that CR Intrinsic PM-1 and a second PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. In particular, evidence reviewed by the SAC compliance department reflected that on the evening of July 27, 2009, the Health Care Analyst

--- page 66 ---

[End of provided text]--- page 67 ---

communicated to CR Intrinsic PM-1 that his firm would publicly release a negative research report the next day about health care company Medicis, Inc. ("Medicis"). CR Intrinsic PM-1 then told this to the research analyst for SAC PM-1. SAC PM-1's research analyst then admitted - as corroborated by e-mails and phone records - that he had, at SAC PM-1's direction, called the Health Care Analyst and learned that the negative research report would be publicly released in the "pm" of July 28, 2009. Both CR Intrinsic PM-1 and SAC PM-1 shorted the stock of Medicis before the report was released that evening. Despite this, and despite the fact that it was the SAC Owner who had initially inquired about the trading, the consequences were limited. The SAC ENTITY DEFENDANTS imposed monetary fines on the two offenders, but allowed them to keep their jobs, and failed to report the insider trading to any regulatory or law enforcement personnel.

Examples Of Insider Trading By Agents Of Each Of The SAC ENTITY DEFENDANTS

30. In connection with the scheme described above, SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC and SIGMA CAPITAL, the defendants, through the conduct of their agents, sought to obtain and trade upon Inside Information on multiple occasions

26

--- page 68 ---

between 1999 and at least 2010. This trading includes - but is not limited to - the conduct described below.

Insider Trading By Agents Of CR INTRINSIC

31. Agents of CR INTRINSIC, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Martoma And The SAC Owner In Elan And Wyeth. As of mid-July 2008, the SAC Hedge Fund's largest equity securities position consisted of over $700 million worth of Elan American Depository Receipts ("ADRs") and Wyeth common stock. The SAC Owner had accumulated the position in large part on the recommendation of Martoma. On or about July 17, 2008, Martoma obtained negative Inside Information from a medical doctor involved in the Drug Trial being conducted by Elan and Wyeth. On or about Saturday, July 19, 2008, Martoma met with the doctor in person in Michigan. On or about the morning of Sunday, July 20, 2008, Martoma spoke by telephone to the SAC Owner, who the next day began selling the entire $700 million position and shorting approximately $260 million worth of Elan and Wyeth stock prior to the public announcement of the Drug Trial results on or about July 29, 2008. The SAC Hedge Fund's profits and

27

--- page 69 ---

avoided losses from this illegal insider trading amounted to approximately $276 million.

b. Trading By Two SAC PMs And The SAC Owner Based On Information From CR Intrinsic RA-1. On various occasions in 2008 and 2009, a technology sector research analyst for CR Intrinsic ("CR Intrinsic RA-1") obtained Inside Information from contacts at various technology companies, including earnings information from Dell (from the same source who provided Inside Information to Horvath) and acquisition-related information from Foundry Networks Inc. ("Foundry"). The two SAC PMs to whom CR Intrinsic RA-1 reported and the SAC Owner all placed profitable trades on one or more occasions shortly after recommendations made on the basis of Inside Information known to CR Intrinsic RA-1.

Insider Trading By Agents Of SIGMA CAPITAL

32. Agents of SIGMA CAPITAL, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Steinberg And The SAC Owner Based On Information From Horvath. On or about August 18, 2008, Horvath learned from a contact in his network that an insider at Dell had disclosed that Dell's earnings would be below market

--- page 70 ---

expectations and provided that information to Steinberg, who immediately began shorting shares of Dell stock in Steinberg's portfolio. On or about August 26, 2008 at 12:37 p.m., Steinberg e-mailed Horvath that he had been "talking to [the SAC Owner] about Dell earlier today" and that the SAC Owner wanted Horvath to "compare notes" with a different SAC PM who had taken a contrary, bullish position on Dell. At approximately 1:09 p.m., Horvath responded to Steinberg and the bullish SAC PM by e-mail: "I have a 2nd hand read from someone at the company - this is 3rd quarter I have gotten this read from them and it has been very good in the last two quarters. . . . Please keep to yourselves as obviously not well known." The e-mail further reported that the gross margin for Dell would fall short by "50- 80 bps [basis points]." The bullish SAC PM then forwarded the Horvath e-mail to a "research trader" for the SAC Owner who assisted the SAC Owner in trading technology stocks. The research trader, in turn, forwarded Horvath's e-mail directly to the SAC Owner at approximately 1:29 p.m. and spoke by phone to the SAC Owner at 1:37 p.m. for approximately one minute. At approximately 1:39 p.m., the SAC Owner began selling Dell shares in his own portfolio, closing out his entire approximately $12.5 million position prior to the disappointing earnings

29--- page 71 ---

announcement, avoiding losses of approximately $1.7 million. On or about August 28, 2008, after Dell had publicly announced earnings that, consistent with Horvath's Inside Information, were below market expectations, the SAC Owner e-mailed Steinberg's group, including Horvath: "Nice job on dell."

b. Trading By Sigma PM-1 Based On Inside Information From Wang. Between approximately 2002 and 2005, in connection with his employment as a SAC RA, Wang recommended trades to Sigma PM-1 based on Inside Information that Wang obtained from a network of contacts at publicly-traded technology companies, including but not limited to TSMC, Cisco, Broadcom, eBay, Cypress, Polycom, QLogic and Cirrus.

c. Trading Based On Inside Information From CB Lee. Between approximately 2008 and 2009, former SIGMA CAPITAL PM CB Lee, who by then was operating his own hedge fund, recommended trades based on Inside Information to Sigma PM-1. The Inside Information involved various technology sector stocks, including Dell and NVIDIA. For example, in a recorded call on or about January 16, 2009, CB Lee told Sigma PM-1, "between you and me," that "a friend of my cousin" who "works for Dell finance," is "telling me to avoid the stock for Q2, because Q2 is gonna be horrible." In a follow-up recorded call on or about January 23, 2009, CB Lee reiterated to Sigma PM-1 that "I do have a contact at Dell, he's in finance" and that the contact was reporting that the "April quarter could see a problem with gross margins" because sales to businesses were "very weak and that's where most of the profitability is."

--- page 72 ---

Insider Trading By Agents Of SAC CAPITAL LP

33. Agents of SAC CAPITAL LP, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Richard Lee. On various occasions between approximately April 2009 through approximately 2010, Richard Lee - who had been hired by SAC CAPITAL LP despite a warning to the SAC Owner that he had been part of an "insider trading group" at a prior employer - traded on Inside Information in the $1.25 billion "special situations" SAC portfolio Richard Lee jointly managed with a second SAC PM. For example, Richard Lee obtained, from a contact at a private equity firm with a stake in Yahoo, both early access to a Yahoo earnings report and information relating to a contemplated partnership with Microsoft, the latter of which ultimately took place in or around July 2009. Richard Lee - as well as other SAC PMs - also spoke to a technology analyst (the "Tech Analyst") from a research firm doing business with the SAC Hedge Funds about the potential Yahoo-Microsoft partnership. In a recorded call with Richard Lee on or about July 10, 2009, the Tech Analyst told Richard Lee that his "buddy," a "senior guy at Microsoft" who had been "very, very accurate in the past," told the Tech Analyst that a "senior team from Yahoo" had arrived at Microsoft to meet "the two senior-most people in [the] Microsoft internet business" to restart deal talks.

34. In some cases, such as the examples described herein, instances of insider trading involved agents of multiple SAC ENTITY DEFENDANTS either because different employees involved in the trading worked for different SAC management companies or because the employees switched between management companies during the course of their employment. Examples of such trading include but are not limited to the following:

a. Trading At SAC CAPITAL LLC And SIGMA CAPITAL Based On Inside Information From CB Lee. In connection with his employment as a SAC RA at SAC CAPITAL LLC and then SIGMA CAPITAL, CB Lee sought and obtained Inside Information through direct and indirect contacts at various technology companies between approximately 1999 and 2004, including but not limited to Intel, AMD, and Altera. CB Lee then recommended trades based on this Inside Information to the portfolio manager to whom he reported and in some instances to the SAC Owner directly. In these trading recommendations, CB Lee typically described the source of the information as being from "my guy," "my contact," or "my check" "at" the company in question.

b. Trading At SAC CAPITAL LLC, SAC CAPITAL LP And CR INTRINSIC Based On Inside Information From Freeman And Longueuil. In connection with their employment, Freeman (employed first by SAC CAPITAL LLC and then SAC CAPITAL LP) and Longueuil (employed by CR INTRINSIC) obtained and traded on Inside Information between approximately 2008 and 2010 in a variety of technology companies, including but not limited to RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom and Dell.

35. At various times from in or about 1999, through at least in or about 2010, in the Southern District of New York and elsewhere, SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC, and SIGMA CAPITAL, the defendants, willfully and knowingly, having devised and intending to devise a scheme and artifice to defraud, and for obtaining money and property by means of false--- page 75 ---

and fraudulent pretenses, representations and promises, did
transmit and cause to be transmitted by means of wire, radio and
television communication in interstate and foreign commerce,
writings, signs, signals, pictures, and sounds for the purpose
of executing such scheme and artifice, to wit, SAC ENTITY
DEFENDANT employees and agents obtained by telephone, e-mail and
other electronic forms of interstate communication, while
located in SAC ENTITY DEFENDANT offices in Manhattan, New York
and elsewhere, Inside Information concerning various public
company stocks, some of which were publicly-traded on a stock
exchange in Manhattan, New York, for the purpose of executing
securities transactions based in whole or in part on that Inside
Information.

(Title 18, United States Code, Sections 1343 and 2.)

COUNT TWO

(Securities Fraud: SAC CAPITAL LP)

The Grand Jury further charges:

36. The allegations contained in paragraphs 1 through
34 are repeated and realleged as though fully set forth herein.

37. From in or about 2009, up through and including
at least in or about 2010, in the Southern District of New York
and elsewhere, SAC CAPITAL LP, the defendant, willfully and

34

--- page 76 ---

knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SAC CAPITAL LP, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)

COUNT THREE

(Securities Fraud: SAC CAPITAL LLC)

The Grand Jury further charges:

38. The allegations contained in paragraphs 1 through 34 are repeated and realleged as though fully set forth herein.

35

--- page 77 ---

39. From in or about 1999, up through and including 2008, in the Southern District of New York and elsewhere, SAC CAPITAL LLC, the defendant, willfully and knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SAC CAPITAL LLC, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)

36

--- page 78 ---

COUNT FOUR

(Securities Fraud: CR INTRINSIC)

The Grand Jury further charges:

40. The allegations contained in paragraphs 1 through 34 are repeated and realleged as though fully set forth herein.

41. From in or about 2006 up through and including at least in or about 2009, in the Southern District of New York and elsewhere, CR INTRINSIC, the defendant, willfully and knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, CR INTRINSIC, through its employees and agents, engaged in a scheme to obtain and trade

37--- page 79 ---

upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff;  
Title 17, Code of Federal Regulations, Section 240.10b-5 &  
240.10b5-2; and Title 18, United States Code, Section 2.)

COUNT FIVE  

(Securities Fraud: SIGMA CAPITAL)  

The Grand Jury further charges:  

42. The allegations contained in paragraphs 1 through  
34 are repeated and realleged as though fully set forth herein.  

43. From in or about 2002, up through and including  
at least in or about 2009, in the Southern District of New York  
and elsewhere, SIGMA CAPITAL, the defendant, willfully and  
knowingly, directly and indirectly, by the use of means and  
instrumentalities of interstate commerce, the mails and the  
facilities of national securities exchanges, in connection with  
the purchase and sale of securities, did use and employ  
manipulative and deceptive devices and contrivances, in  
violation of Title 17, Code of Federal Regulations, Section  
240.10b-5, by (a) employing devices, schemes and artifices to  
defraud; (b) making untrue statements of material facts and  
omitting to state material facts necessary in order to make the  
statements made, in light of the circumstances under which they  
were made, not misleading; and (c) engaging in acts, practices  

--- page 80 ---

and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SIGMA CAPITAL, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.  

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)  

FORFEITURE ALLEGATION  

44. As a result of committing the offenses alleged in Counts One through Five of this Indictment, the SAC ENTITY DEFENDANTS shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United States Code, Section 2461, all property, real and personal, which constitutes or is derived from proceeds traceable to the commission of those offenses.  

Substitute Assets Provision  

45. If any of the above-described forfeitable property, as a result of any act or omission of the defendants:  

a. cannot be located upon the exercise of due diligence;  

b. has been transferred or sold to, or deposited with, a third party;  

--- page 81 ---

c. has been placed beyond the jurisdiction of the court;  
d. has been substantially diminished in value;  
or  
e. has been commingled with other property  
which cannot be divided without difficulty;  
it is the intent of the United States, pursuant to Title 21,  
United States Code, Section 853(p), to seek forfeiture of any  
other property of said defendant up to the value of the  
forfeitable property described above.  

(Title 18, United States Code, Section 981; Title 21, United States Code, Section 853(p); Title 28, United States Code, Section 2461.)  

Preet Bharara  
United States Attorney  

--- page 82 ---

Form No. USA-33s-274 (Ed. 9-25-58)  

UNITED STATES DISTRICT COURT  
SOUTHERN DISTRICT OF NEW YORK  

UNITED STATES OF AMERICA  

- v. -  

S.A.C. CAPITAL ADVISORS, L.P.,  
S.A.C. CAPITAL ADVISORS, LLC,  
CR INTRINSIC INVESTORS, LLC, and  
SIGMA CAPITAL MANAGEMENT, LLC,  

Defendants.  

INDICTMENT  

13 Cr.  

(18 U.S.C. §§ 2, 1343; Title 15, United States Code, Sections 78j(b) & 78ff;  
Title 17, Code of Federal Regulations, Section 240.10b-5)  

PREET BHARARA  
United States Attorney.

JUDGE FAILLA
13 CV 5182

PREET BHARARA
United States Attorney for the
Southern District of New York
By: SHARON COHEN LEVIN
MICAH W. J. SMITH
Assistant United States Attorneys
One Saint Andrew's Plaza
New York, New York 10007
Telephone: (212) 637-1060
Facsimile: (212) 637-0421

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA
Plaintiff,
v.
S.A.C. CAPITAL ADVISORS, L.P.;
S.A.C. CAPITAL ADVISORS, LLC;
CR INTRINSIC INVESTMENTS, LLC; and
SIGMA CAPITAL MANAGEMENT, LLC,
Defendants,

ANY AND ALL ASSETS OF S.A.C.
CAPITAL ADVISORS, L.P.; S.A.C.
CAPITAL ADVISORS, LLC; CR
INTRINSIC INVESTMENTS, LLC; and
SIGMA CAPITAL MANAGEMENT, LLC,

ANY AND ALL ASSETS OF S.A.C.
OFFSHORE CAPITAL FUNDING, LTD.;
S.A.C. SPECTRUM FUND, LLC; S.A.C.
GLOBAL MACRO FUND, LLC; S.A.C.
ARBITRAGE FUND, LLC; S.A.C.
MULTIQUANT FUND, L.P.; S.A.C.
GLOBAL INVESTMENTS, L.P.; S.A.C.
PRIVATE EQUITY INVESTORS, L.P.;
S.A.C. DOMESTIC INVESTMENTS, L.P.;
S.A.C. DOMESTIC CAPITAL FUNDING,
LTD.; CANVAS CAPITAL ASSOCIATES,
LLC; SIGMA CAPITAL ASSOCIATES,
LLC; S.A.C. CAPITAL ASSOCIATES,

VERIFIED COMPLAINT
13 Civ.
ECF Case

[illegible]
JUL 25 2013
U.S.D.C. S.D. N.Y.
CASHIERS

--- page 2 ---

LLC; S.A.C. STRATEGIC INVESTMENTS, LLC; S.A.C. MERIDIAN FUND, LLC; S.A.C. INTERNATIONAL EQUITIES, LLC; CR INTRINSIC INVESTMENTS, LLC; INTERNATIONAL EQUITIES (S.A.C. ASIA), LTD.; S.A.C. STRUCTURED INVESTMENTS, L.P.; SIGMA FIXED INCOME FUND, LTD.; S.A.C. SELECT FUND, LLC; S.A.C. ENERGY INVESTMENTS, L.P.; S.A.C. GENESIS FUND, LLC; S.A.C. HEALTHCO FUND, LLC; and S.A.C. DOMESTIC INVESTMENTS (CA), LLC, Defendants in Rem. -x

Plaintiff the United States of America (the "Government"), by its attorney, Preet Bharara, United States Attorney for the Southern District of New York, for its complaint ("Complaint") alleges, upon information and belief, as follows:

I. NATURE OF THE ACTION

1. This action is brought by the Government pursuant to 18 U.S.C. §§ 981(a)(1)(A), 1956, and 1957, seeking the forfeiture of certain property involved in laundering the proceeds of insider trading offenses and the imposition of civil money laundering penalties.

2. As set forth in more detail below, insider trading offenses were committed by numerous employees of corporate entities responsible for the management of a major hedge fund. This insider trading was substantial, pervasive, and on a scale without known precedent in the hedge fund industry. It resulted

--- page 3 ---

in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public. The illegal profits from this criminal conduct were then commingled with other assets, used to promote additional insider trading, and transferred with the assistance of financial institutions.

3. On or about July 23, 2013, a Grand Jury sitting in the Southern District of New York returned a sealed five-count Indictment, 13 Cr. 541 (the "Indictment") charging S.A.C. CAPITAL ADVISORS, L.P. ("SAC CAPITAL LP"); S.A.C. CAPITAL ADVISORS, LLC ("SAC CAPITAL LLC"); CR INTRINSIC INVESTMENTS, LLC ("CR INTRINSIC"); and SIGMA CAPITAL MANAGEMENT, LLC ("SIGMA CAPITAL") (collectively, the "SAC ENTITY DEFENDANTS" or "Defendants in Personam") with committing wire fraud, in violation of 18 U.S.C. §§ 1343 and 2, and securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff; 17 C.F.R. § 240.10b-5 and 240.10b5-2; and 18 U.S.C. § 2. A true and correct copy of the Indictment, which was unsealed today, is attached hereto as Exhibit A and is incorporated by reference as if fully set forth herein.

4. By this Complaint, the Government seeks forfeiture of all right, title and interest in the following property (collectively, the "Defendants in Rem"):

--- page 4 ---

(a) ANY AND ALL ASSETS OF THE SAC ENTITY DEFENDANTS; and

(b) ANY AND ALL ASSETS OF S.A.C. OFFSHORE CAPITAL FUNDING, LTD.; S.A.C. SPECTRUM FUND, LLC; S.A.C. GLOBAL MACRO FUND, LLC; S.A.C. ARBITRAGE FUND, LLC; S.A.C. MULTICUANT FUND, L.P.; S.A.C. GLOBAL INVESTMENTS, L.P.; S.A.C. PRIVATE EQUITY INVESTORS, L.P.; S.A.C. DOMESTIC INVESTMENTS, L.P.; S.A.C. DOMESTIC CAPITAL FUNDING, LTD.; CANVAS CAPITAL ASSOCIATES, LLC; SIGMA CAPITAL ASSOCIATES, LLC; S.A.C. CAPITAL ASSOCIATES, LLC; S.A.C. STRATEGIC INVESTMENTS, LLC; S.A.C. MERIDIAN FUND, LLC; S.A.C. INTERNATIONAL EQUITIES, LLC; CR INTRINSIC INVESTMENTS, LLC; INTERNATIONAL EQUITIES (S.A.C. ASIA), LTD.; S.A.C. STRUCTURED INVESTMENTS, L.P.; SIGMA FIXED INCOME FUND, LTD.; S.A.C. SELECT FUND, LLC; S.A.C. ENERGY INVESTMENTS, L.P.; S.A.C. GENESIS FUND, LLC; S.A.C. HEALTHCO FUND, LLC; and S.A.C. DOMESTIC INVESTMENTS (CA), LLC (collectively, the "SAC INVESTMENT FUNDS").

5. The Government also seeks civil money laundering penalties against the SAC ENTITY DEFENDANTS in an amount to be determined at trial.

II. JURISDICTION AND VENUE

6. This Court has jurisdiction over this action pursuant to 28 U.S.C. §§ 1345 and 1355.

7. Venue is proper pursuant to 28 U.S.C. § 1355(b)(1)(A) because acts and omissions giving rise to forfeiture took place in the Southern District of New York.--- page 5 ---

III. THE DEFENDANTS

The Defendants in Personam

8. At various times relevant to this Complaint, the SAC ENTITY DEFENDANTS were affiliated corporate entities responsible for managing a group of affiliated hedge funds ("SAC" or "SAC Hedge Fund").

9. SAC CAPITAL LP is a Delaware limited partnership with its principal business office in Stamford, Connecticut. SAC CAPITAL LP has actively managed investments in the SAC Hedge Fund since in or about 2009, when it was assigned the employment and investment management contracts of SAC CAPITAL LLC and became the parent company to CR INTRINSIC and SIGMA CAPITAL.

10. SAC CAPITAL LLC is a Delaware limited liability company that was incorporated in or around 1995. From at least in or around 1999, up to and including in or around 2008, SAC CAPITAL LLC actively managed investments in the SAC Hedge Fund. SAC CAPITAL LLC's principal business office was in Stamford, Connecticut.

11. CR INTRINSIC is a Delaware limited liability company that was incorporated in or around 2004. From at least in or around 2006, up to and including in or around 2013, CR INTRINSIC has actively managed investments in the SAC Hedge Fund. CR INTRINSIC's principal business office is in Stamford, Connecticut.

5

--- page 6 ---

12. SIGMA CAPITAL is a Delaware limited liability company that was incorporated in or around 2001. From at least in or around 2002, up to and including in or around 2013, SIGMA CAPITAL has actively managed investments in the SAC Hedge Fund. SIGMA CAPITAL's principal business office is in Manhattan, New York.

The Defendants in Rem

13. In addition to seeking the forfeiture of any and all assets of the SAC ENTITY DEFENDANTS, this Complaint seeks the forfeiture of any and all assets of the SAC INVESTMENT FUNDS. The SAC INVESTMENT FUNDS are limited partnerships and limited liability companies organized in the United States and elsewhere, including the Cayman Islands and Anguilla, that were in existence since at least in or around 2008 or that are successors to investment funds in existence in or around 2008.

14. At various times relevant to this Complaint, the SAC INVESTMENT FUNDS held most of the SAC Hedge Fund's assets and received investment management services from one or more of the SAC ENTITY DEFENDANTS or other SAC fund management companies.

IV. FACTUAL ALLEGATIONS

The Structure Of The SAC Hedge Fund

15. At all times relevant to this Complaint, an individual residing in Greenwich, Connecticut (the "SAC Owner") operated the SAC Hedge Fund. At its peak, the SAC Hedge Fund included

--- page 7 ---

approximately $15 billion of assets under management. The majority of the capital managed by the SAC Hedge Fund belonged to the SAC Owner himself, with the balance of capital provided by outside investors. At all times relevant to this Complaint, the assets of the SAC Hedge Fund were held primarily by the SAC INVESTMENT FUNDS.

16. At all times relevant to this Complaint, the SAC Owner operated the SAC Hedge Fund through his ownership of several fund management companies, which served as investment advisors for the SAC Hedge Fund. These management companies generally charged outside investors annual fees of approximately three percent of assets under management and up to 50 percent of investment returns. At all times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS were the principal management companies of the SAC Hedge Fund.

17. At most times relevant to this Complaint, the SAC Hedge Fund’s structure included “feeder funds” (“SAC Feeder Funds”) that allocated capital to the various SAC INVESTMENT FUNDS, either directly or through an intermediate holding company, and at the direction of the SAC ENTITY DEFENDANTS. As a result of this investment structure, outside investors generally did not invest directly in the SAC ENTITY DEFENDANTS or the SAC INVESTMENT FUNDS. Instead, outside investors generally invested in the SAC Feeder Funds, from which they

--- page 8 ---

purchased shares or partnership interests. The capital obtained by the SAC Feeder Funds from the sale of these shares or partnerships was allocated to the various SAC INVESTMENT FUNDS and pooled with the capital provided by the SAC Owner himself.

The Allocation Of Capital Within The SAC Hedge Fund

18. At most times relevant to this Complaint, the SAC ENTITY DEFENDANTS were active investment advisors and directed the SAC INVESTMENT FUNDS to use significant leverage, engage in short-sale transactions, and exercise various options and arbitrage strategies. At the direction of the SAC ENTITY DEFENDANTS, the SAC INVESTMENT FUNDS frequently invested in equities, secured and unsecured debt, futures, forward contracts, options, convertible bonds and preferred stock, derivative instruments, contracts for differences, currencies, and commodities.

19. At all times relevant to this Complaint, the SAC Hedge Fund placed restrictions on investors’ ability to make withdrawals from the SAC INVESTMENT FUNDS. Any profits the SAC Hedge Fund earned from the execution of securities transactions were not immediately withdrawn from the SAC INVESTMENT FUNDS, but rather were generally used to make new investments on behalf of the SAC INVESTMENT FUNDS. At all times relevant to this Complaint, the SAC Hedge Fund made reinvestments of any profitsfrom its sales of securities with the assistance of multiple prime brokers.

20. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS retained and exercised the authority to direct that capital be transferred between and among the SAC INVESTMENT FUNDS. For example, in a private offering memorandum from 2009 for the largest SAC Feeder Fund, the SAC Hedge Fund explained that SAC CAPITAL LP "may, from time to time in its sole discretion, refine or change its investment methods and strategies" and "allocate whatever amount of [the SAC Feeder Fund's] capital to any" of the SAC INVESTMENT FUNDS "in its sole discretion." The private offering memorandum added that "[s]uch allocations of capital will vary, often materially, over time."

21. At most times relevant to this Complaint, the SAC ENTITY DEFENDANTS followed an investment management approach in which SAC Hedge Fund assets were frequently reallocated to potentially outperforming strategies.

The SAC Portfolios

22. The SAC ENTITY DEFENDANTS and other management companies affiliated with the SAC Hedge Fund employed dozens of portfolio managers ("SAC PMs") to manage the capital of the various SAC INVESTMENT FUNDS. SAC PMs were allocated investment capital from the SAC INVESTMENT FUNDS and were responsible for the profit-and-loss results of their portfolios.

9

--- page 10 ---

23. SAC PMs specialized in particular investment sectors, such as technology, health care, financial services, industrial, consumer, or energy. Each SAC PM, in turn, typically employed one or more research analysts ("SAC RAs") to assist with the development of investment ideas for the SAC PM's portfolio.

24. At all times relevant to this Complaint, the SAC Hedge Fund portfolios were in many ways autonomous from each other. Each SAC PM had substantial discretion to make investment decisions in his or her portfolio, even if a position was contrary to a position taken by other SAC PMs operating a portfolio in the same sector. SAC PMs were compensated principally based on the performance of their own portfolios, and without regard to the investment performance of other SAC PMs. Likewise, SAC RAs were compensated largely at the discretion of the SAC PM to whom they reported and based on the profitability of that PM's portfolio.

25. At all times relevant to this Complaint, the largest portfolio in existence at the SAC Hedge Fund was a portfolio managed by the SAC Owner himself. The SAC Owner had sole trading discretion over his portfolio and made these decisions principally based on trading recommendations from SAC PMs.

26. At all times relevant to this Complaint, the SAC Owner required each SAC PM to share "high conviction" investment ideas — i.e., the investment recommendations in which the SAC PM had

--- page 11 ---

the greatest confidence with the SAC Owner. In fact, providing such ideas to the SAC Owner was an express part of a SAC PM's duties and was emphasized to SAC PMs in the hiring process and once working at SAC.

Bonus Payments To SAC Employees

27. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS formally tracked trades made by the SAC Owner in the portfolio he personally managed in order to "tag" or credit the SAC PM responsible for the idea. At all times relevant to this Complaint, the SAC ENTITY DEFENDANTS paid SAC PMs an annual bonus - which could in some cases exceed all other components of compensation - based on a percentage of the net profits made by the SAC Owner on trades "tagged" to a particular SAC PM.

28. At certain times relevant to this Complaint, the SAC Hedge Fund made bonus payments to its SAC PMs and SAC RAs through wire transfers. These wire transfers were deposited into the bank accounts of the SAC PMs and SAC RAs, which accounts were held at financial institutions whose deposits were at all relevant times insured by the Federal Deposit Insurance Corporation ("FDIC").

Overview Of The Insider Trading Scheme

29. At various times between in or 1999 through at least in or about 2010, employees and agents of the SAC ENTITY

--- page 12 ---

DEFENDANTS obtained material, non-public information ("Inside Information") relating to publicly-traded companies and, on behalf of the SAC ENTITY DEFENDANTS and using the capital of the SAC INVESTMENT FUNDS, traded on that Inside Information.

30. The SAC ENTITY DEFENDANTS committed this insider trading scheme through the acts of, among others, numerous SAC PMs and SAC RAs who engaged in a pattern of obtaining Inside Information from dozens of publicly-traded companies across multiple industry sectors. Employees of the SAC ENTITY DEFENDANTS traded on Inside Information for the portfolios they managed and, at times, recommended trades to the SAC Owner based on Inside Information.

31. While engaging in this insider trading scheme, SAC ENTITY DEFENDANTS obtained the Inside Information by telephone, e-mail and other electronic forms of interstate communication, while located in SAC ENTITY DEFENDANT offices in Manhattan, New York and elsewhere.

32. The following individual SAC PMs or SAC RAs, identified by name, have been charged with and/or convicted of insider trading in connection with one or more of the SAC ENTITY DEFENDANTS:

a. Wes Wang ("Wang") was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2002 to 2005. While serving as a SAC RA, Wang

12thought
--- page 13 ---

obtained Inside Information with respect to various technology companies, including but not limited to Taiwan Semiconductor Manufacturing Company ("TSMC"), Cisco Systems, Inc. ("Cisco"), Broadcom Corporation ("Broadcom"), eBay, Inc. ("eBay"), Cypress Semiconductor Corporation ("Cypress"), Polycom, Inc. ("Polycom"), QLogic Corporation ("QLogic"), and Cirrus Logic Inc. ("Cirrus"). Wang provided trading ideas based on Inside Information to the SAC PM to whom he reported ("Sigma PM-1"). On or about July 13, 2013, Wang pled guilty in federal court to two counts of conspiracy to commit securities fraud, one of which involved insider trading in connection with Wang's employment at SIGMA CAPITAL from 2002 to 2005. At his guilty plea, Wang admitted that, while at SIGMA CAPITAL, he obtained Inside Information and provided it to Sigma PM-1 to be used for the purchase and sale of securities.

b. Richard Choo-Beng Lee ("CB Lee") was a SAC RA specializing in the technology sector employed by SAC CAPITAL LLC from approximately 1999 to 2003 and by SIGMA CAPITAL from approximately 2003 to 2004. While serving as a SAC RA, CB Lee obtained Inside Information with respect to various technology companies, including but not limited to Intel Corporation ("Intel"), Advance Micro Devices, Inc ("AMD"), and Altera Corporation ("Altera"). CB Lee provided trading ideas based on Inside Information to the portfolio manager to whom he reported

--- page 14 ---

and the SAC Owner. On or about October 13, 2009, CB Lee pled guilty in federal court to, among other things, conspiracy to commit securities fraud and wire fraud relating to trading recommendations based on Inside Information that CB Lee had provided to Sigma PM-1 and others following CB Lee’s departure from SIGMA CAPITAL. At his guilty plea, CB Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information.

c. Jon Horvath was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2006 through 2011. Horvath served as a research analyst for portfolio manager Michael Steinberg, who has been employed by SIGMA CAPITAL from approximately 2003 to the present, and as a portfolio manager for SAC CAPITAL LLC from approximately 1996 to 2003. On or about September 28, 2012, Horvath pled guilty in federal court to conspiracy and securities fraud for insider trading Horvath committed while at SIGMA CAPITAL, including but not limited to insider trading in relation to Dell Inc. (“Dell”) in August 2008 and NVIDIA Corporation (“NVIDIA”) in May 2009. Horvath admitted at his guilty plea that he obtained Inside Information about Dell and NVIDIA and provided the Inside Information to Steinberg, who executed trades in these stocks based on that information. On or about March 28, 2013, a grand

14

--- page 15 ---

jury in the Southern District of New York returned an indictment
charging Steinberg with insider trading at SIGMA CAPITAL.

d. Noah Freeman was a SAC PM specializing in the
technology sector who was employed by SAC CAPITAL LLC in
approximately 2008 and by SAC CAPITAL LP from approximately 2009
to early 2010. While serving as a portfolio manager, Noah
Freeman obtained and/or traded on Inside Information from
various technology companies, including but not limited to,
Research in Motion, Ltd. ("RIMM"), NVIDIA, Marvell Technology
Group, Ltd. ("Marvell"), Avnet, Inc. ("Avnet"), Fairchild
Semiconductor ("Fairchild"), Atheros Communications, Inc.
("Atheros"), Broadcom, and Dell. On or about February 7, 2011,
Noah Freeman pled guilty in federal court to, among other
things, conspiracy and securities fraud for insider trading he
committed while employed by SAC CAPITAL LLC and SAC CAPITAL LP.
At his guilty plea, Freeman admitted that he obtained Inside
Information, and that he purchased and sold securities based in
part on such Inside Information in connection with his
employment at SAC CAPITAL LLC and SAC CAPITAL LP.

e. Donald Longueuil was a SAC PM specializing in the
technology sector who was employed by CR INTRINSIC from
approximately 2008 through 2010. While serving as a portfolio
manager, Longueuil obtained and/or traded on Inside Information
from various technology companies, including but not limited to,

--- page 16 ---

RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom, and Dell. On or about April 28, 2011, Longueuil pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by CR INTRINSIC. At his guilty plea, Longueuil admitted that, while he was employed by CR INTRINSIC, he received Inside Information for the purpose of trading on that information at CR INTRINSIC.

f. Mathew Martoma was a SAC PM specializing in the health care sector employed by CR INTRINSIC from approximately 2006 to 2010. On or about December 21, 2012, a grand jury in the Southern District of New York returned an indictment charging Martoma with insider trading at CR INTRINSIC relating to shares of Elan Corporation, plc (“Elan”) and Wyeth.

g. Richard Lee was a SAC PM employed by SAC CAPITAL LP between approximately April 2009 and June 2011, and again between approximately September 2012 and March 2013, who focused on “special situations” across industry sectors such as mergers, acquisitions, private equity buy-outs and corporate restructurings. While serving as a SAC PM, Richard Lee obtained Inside Information with respect to various securities, including but not limited to Yahoo! Inc. (“Yahoo”) and 3Com Corporation (“3COM”). On or about July 23, 2013, Richard Lee pled guilty in federal court to an information charging Lee with conspiracy and securities fraud in connection with his employment at SAC

16thought
--- page 17 ---

CAPITAL LP. At his guilty plea, Richard Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LP.

33. The SAC ENTITY DEFENDANTS enabled and promoted the insider trading scheme by seeking to hire PMs and RAs believed by the SAC Owner and others in SAC management to have an "edge" based in part on networks of contacts with employees of public companies, who were likely to possess Inside Information, in the sector in which the SAC PM or SAC RA specialized. The focus on hiring employees with such networks was not balanced by any corresponding effort to ensure that prospective SAC PMs and SAC RAs candidates did not use these contacts to obtain illegal Inside Information.

34. The SAC Owner also enabled and promoted the insider trading scheme by ignoring indications that trading recommendations were based on Inside Information, and instead encouraging SAC PMs and SAC RAs through financial incentives and otherwise to share "high conviction" trading ideas - including ideas developed through industry contacts likely to possess Inside Information. In particular, on multiple occasions SAC PMs and SAC RAs communicated to the SAC Owner trading recommendations sourced to information from a contact "at" a public company or with similar language. In these cases, the

17

--- page 18 ---

SAC Owner failed to inquire whether the contact was permitted to disclose the company information or to take other steps to ensure that the trade was not based on Inside Information.

35. Similarly, in connection with the hiring process, the SAC Owner failed to question candidates who at minimum implied that their "edge" was based on sources of Inside Information. For example, on several occasions in June 2009, CB Lee spoke to the SAC Owner about the possibility of providing the SAC Owner with trading ideas on particular companies in return for a payout on the SAC Owner's profits. CB Lee told the SAC Owner that he had people in sales and in finance at NVIDIA who gave him information relating to quarterly earnings and a contact at TSMC who provided him with wafer data. The SAC Owner did not express any concern about CB Lee's proposed sources of information during these conversations.

36. The SAC Owner also furthered the insider trading scheme by fostering a culture that focused on not discussing Inside Information too openly, rather than not seeking or trading on such information in the first place. For example, on or about July 29, 2009, a recently hired SAC PM (the "New PM") sent an instant message to the SAC Owner and relayed that, due to some "recent research," the New PM planned to short Nokia when he started work ten days later. The New PM apologized for being "cryptic" but noted that the head of SAC compliance "was

18

--- page 19 ---

giving me Rules 101 yesterday — so I won't be saying much. Too scary." The SAC Owner did not react or respond in the instant message to the New PM's proposal to trade securities based on information that the New PM was "scared" to tell the SAC Owner for fear of violating compliance rules.

37. The SAC ENTITY DEFENDANTS further enabled and promoted the insider trading scheme by employing limited compliance measures designed to detect or prevent insider trading by SAC PMs or SAC RAs. For example:

a. The SAC ENTITY DEFENDANTS automatically purged all instant messages after 36 hours and all e-mails not affirmatively saved after 30 days until adopting a revised document retention policy in September 2008. In addition, prior to approximately late 2009, SAC's compliance department rarely reviewed electronic communications by SAC employees for suspicious terms suggesting potential insider trading, notwithstanding the fact that the head of SAC compliance had recommended such searches to SAC management as early as 2005.

b. Although the SAC compliance department, beginning in approximately 2006, prohibited the use of expert networks to make payments to public company employees for industry information, SAC encouraged direct contact with public company employees at various levels outside of these networks. For example, in or around 2006, when Richard Lee initially

19

--- page 20 ---

interviewed for a job at SAC and told a senior SAC executive that his investment process involved, among other things, consultations through an expert network, the SAC executive responded in substance that most SAC PMs relied on their own personal networks of industry contacts. In fact, as reflected in examples noted elsewhere in this Complaint, SAC PMs and SAC RAs routinely consulted public company employees at various levels and recommended trading ideas to the SAC Owner expressly based on information obtained through contacts at these companies.

c. Notwithstanding that the SAC compliance department was apparently aware that expert networks presented a risk of insider trading, the SAC compliance department failed to effectively monitor SAC employees’ use of expert networking firms. For example, the SAC compliance department failed to detect or prevent Martoma from using an expert network for approximately 42 consultations with a doctor involved in an Alzheimer’s disease drug trial (the "Drug Trial"), even though some of the expert networking firm’s scheduling e-mails with Martoma — sent through the SAC e-mail system — expressly stated that (1) the doctor in question had confidential information about the Drug Trial; and (2) the purpose of the consultation was to ask the doctor about the experimental medicine being tested in the Drug Trial. The doctor in question in fact

20--- page 21 ---

provided Martoma with Inside Information about the Drug Trial
during many of these consultations.

d. On several occasions, SAC management failed to
refer trading recommendations that appeared to be based on
Inside Information to SAC's compliance department for
investigation. For example, on or about October 30, 2007,
Horvath's trading recommendation e-mailed to the SAC Owner
concerning Sun stated "[m]y edge is contacts at the company and
their distribution channel." Steinberg, who was copied on the
e-mail, forwarded it to the SIGMA CAPITAL Chief Operating
Officer (the "COO") with the comment: "I suspect the line about
contacts at the company may wake up some of our legal eagles."
The COO responded: "I think it might precipitate a general
inquiry to confirm we are not in possession of non public
information. This seems like an investment idea, not a trade
and my interpretation of his comment is just that he developed
good relationships with mgmt. that enhance his comfort level."
The COO arrived at this benign (and unsubstantiated)
interpretation without anyone interviewing Horvath about his e-
mail. In truth and in fact, Horvath's e-mail was based on
confidential information about Sun earnings that Horvath had
obtained from his contact at Sun.

e. The limited number of internal investigations by
the SAC compliance department of insider trading were generally
weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was just an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

f. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that a SAC PM at CR INTRINSIC ("CR Intrinsic PM-1") and a second SAC PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. Despite this, and despite the fact that it was the SAC Owner who had initially inquired about the trading, the consequences were limited. The SAC ENTITY DEFENDANTS imposed monetary fines on two the offenders, but allowed them to keep their jobs, and failed to report the insider trading to any regulatory or law enforcement personnel.

22

--- page 22 ---

38. At bottom, the encouragement by the SAC ENTITY DEFENDANTS of SAC PMs and SAC RAs to pursue aggressively an information "edge" overwhelmed limited SAC compliance systems. Further, the relentless pursuit of an information "edge" fostered a business culture within SAC in which there was no meaningful commitment to ensure that such "edge" came from legitimate research and not Inside Information. The predictable and foreseeable result was systematic insider trading by the SAC ENTITY DEFENDANTS resulting in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public. The illicit profits the SAC ENTITY DEFENDANTS gained from their insider trading scheme were substantially larger than any operating expenses reasonably attributable to their scheme.

Examples Of Insider Trading By Agents Of Each Of The SAC ENTITY DEFENDANTS

39. In connection with the scheme described above, the SAC ENTITY DEFENDANTS, through the conduct of their agents, sought to obtain and trade upon Inside Information on multiple occasions between 1999 and at least 2010. In some cases, instances of insider trading involved agents of multiple SAC ENTITY DEFENDANTS either because the relevant agents worked for different management companies or because the agents switched between management companies during the course of their

--- page 23 ---

employment. The specific instances of insider trading include but are not limited to — the conduct discussed below.

CR INTRINSIC: Trading By Martoma And The SAC Owner In Elan And Wyeth

40. As of mid-July 2008, the SAC Hedge Fund's largest equity securities position consisted of over $700 million worth of Elan American Depository Receipts ("ADRs") and Wyeth common stock. The SAC Owner had accumulated the position in large part on the recommendation of Martoma. On or about July 17, 2008, Martoma obtained negative Inside Information from a medical doctor involved in the Drug Trial being conducted by Elan and Wyeth. On or about Saturday, July 19, 2008, Martoma met with the doctor in person in Michigan. On or about the morning of Sunday, July 20, 2008, Martoma spoke by telephone to the SAC owner, who the next day began selling the entire $700 million position and shorting approximately $260 million worth of Elan and Wyeth stock prior to the public announcement of the Drug Trial results on or about July 29, 2008. The SAC Hedge Fund's profits and avoided losses from this illegal insider trading amounted to approximately $276 million.

CR INTRINSIC: Trading By Two SAC PMs And The SAC Owner Based On Information From CR Intrinsic RA-1

41. On various occasions in 2008 and 2009, a technology sector research analyst for CR Intrinsic ("CR Intrinsic RA-1") obtained Inside Information from contacts at various technology--- page 25 ---

companies, including earnings information from Dell (from the
same source who provided Inside Information to Horvath) and
acquisition-related information from Foundry Networks Inc. The
two SAC PMs to whom CR Intrinsic RA-1 reported and the SAC Owner
all placed profitable trades on one or more occasions shortly
after recommendations made on the basis of Inside Information
known to CR Intrinsic RA-1.

SIGMA CAPITAL: Trading By Steinberg And The SAC Owner Based On
Information From Horvath

42. On or about August 18, 2008, Horvath learned from a
contact in his network that an insider at Dell had disclosed
that Dell's earnings would be below market expectations and
provided that information to Steinberg, who immediately began
shorting shares of Dell stock in Steinberg's portfolio. On or
about August 26, 2008 at 12:37 p.m., Steinberg e-mailed Horvath
that he had been "talking to [the SAC Owner] about Dell earlier
today" and that the SAC Owner wanted Horvath to "compare notes"
with a different SAC PM who had taken a contrary, bullish
position on Dell. At approximately 1:09 p.m., Horvath responded
to Steinberg and the bullish SAC PM by e-mail: "I have a 2nd
hand read from someone at the company - this is 3rd quarter I
have gotten this read from them and it has been very good in the
last two quarters. . . . Please keep to yourselves as
obviously not well known." The e-mail further reported that the

--- page 26 ---

gross margin for Dell would fall short by "50-80 bps [basis points]." The bullish SAC PM then forwarded the Horvath e-mail to a "research trader" for the SAC Owner who assisted the SAC Owner in trading technology stocks. The research trader, in turn, forwarded Horvath's e-mail directly to the SAC Owner at approximately 1:29 p.m. and spoke by phone to the SAC Owner at 1:37 p.m. for approximately one minute. At approximately 1:39 p.m., the SAC Owner began selling Dell shares in his own portfolio, closing out his entire approximately $12.5 million position prior to the disappointing earnings announcement, avoiding losses of approximately $1.7 million. On or about August 28, 2008, after Dell had publicly announced earnings that, consistent with Horvath's Inside Information were below market expectations, the SAC Owner e-mailed Steinberg's group, including Horvath, "Nice job on dell."

SIGMA CAPITAL: Trading By Sigma PM-1 Based On Inside Information

43. Between approximately 2002 and 2005, in connection with his employment as a SAC RA, Wang recommended trades to Sigma PM-1 based on Inside Information that Wang obtained from a network of contacts at publicly-traded technology companies, including but not limited to TSMC, Cisco, Broadcom, Cypress, Polycom, QLogic, and Cirrus.

--- page 27 ---

SIGMA CAPITAL: Trading Based On Inside Information From CB Lee

44. Between approximately 2008 and 2009, former-SIGMA CAPITAL PM CB Lee, who by then was operating his own hedge fund, recommended trades based on Inside Information to Sigma PM-1. The Inside Information involved various technology sector stocks, including Dell and NVIDIA. For example, in a recorded call on or about January 16, 2009, CB Lee told Sigma PM-1, "between you and me," that "a friend of my cousin" who "works for Dell finance," is "telling me to avoid the stock for Q2, because Q2 is gonna be horrible." In a follow-up recorded call on or about January 23, 2009, CB Lee reiterated to Sigma PM-1 that "I do have a contact at Dell, he’s in finance" and that the contact was reporting that the "April quarter could see a problem with gross margins" because sales to businesses were "very weak and that’s where most of the profitability is."

SAC CAPITAL LP: Trading By Richard Lee

45. On various occasions between approximately April 2009 through approximately 2010, Richard Lee who had been hired by SAC CAPITAL LP despite a warning to the SAC Owner that he had been part of an "insider trading group" at a prior employer traded on Inside Information in the $1.25 billion "special situations" SAC portfolio Richard Lee jointly managed with a second SAC PM.

27

--- page 28 ---

46. For example, Richard Lee obtained, from a contact at a private equity firm with a stake in Yahoo, both early access to a Yahoo earnings report and information relating to a contemplated partnership with Microsoft, the latter of which ultimately took place in or around July 2009. Richard Lee — as well as other SAC PMs — also spoke to a technology analyst (the "Tech Analyst") from a research firm doing business with the SAC Hedge Funds about the potential Yahoo-Microsoft partnership. In a recorded call with Richard Lee on or about July 10, 2009, the Tech Analyst told Richard Lee that his "buddy," a "senior guy at Microsoft" who had been "very, very accurate in the past," told the Tech Analyst that a "senior team from Yahoo" had arrived at Microsoft to meet "the two senior-most people in [the] Microsoft internet business" to restart deal talks.

SAC CAPITAL LLC AND SIGMA CAPITAL: Trading Based On Inside Information From CB Lee

47. In connection with his employment as a SAC RA at SAC CAPITAL LLC and then SIGMA CAPITAL, CB Lee sought and obtained Inside Information through direct and indirect contacts at various technology companies between approximately 1999 and 2004, including but not limited to Intel, AMD, and Altera. CB Lee then recommended trades based on this Inside Information to the portfolio manager to whom he reported and in some instances to the SAC Owner directly. In these trading recommendations, CB--- page 29 ---

Lee typically described the source of the information as "my guy," "my contact," or "my check" "at" the company in question.

SAC CAPITAL LLC, SAC CAPITAL LP And CR INTRINSIC: Trading Based On Inside Information From Freeman And Longueuil

48. In connection with their employment, Freeman (employed first by SAC CAPITAL LLC and then SAC CAPITAL LP) and Longueuil (employed by CR INTRINSIC) obtained and traded on Inside Information between approximately 2008 and 2010 in a variety of technology companies, including but not limited to RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom, and Dell.

The Laundering Of Illicit Profits

49. The criminal conduct of the SAC ENTITY DEFENDANTS did not end with the execution of their insider trading scheme. It continued when the illicit profits from insider trading were knowingly commingled with other capital in the SAC INVESTMENT FUNDS; used to promote further trades based on Inside Information; and transferred to SAC employees, in the form of bonus payments, with the assistance of financial institutions. Through this course of conduct, the SAC ENTITY DEFENDANTS engaged in and were involved in money laundering, and involved the SAC INVESTMENT FUNDS in their money laundering scheme.

The Use Of Illicit Profits To Promote The Scheme To Defraud

50. At all times relevant to this Complaint, SAC PMs and SAC RAs of the SAC ENTITY DEFENDANTS generally knew that when

--- page 30 ---

profits were obtained from investment decisions using the capital of the SAC INVESTMENT FUNDS, those profits would not be immediately withdrawn from the SAC INVESTMENT FUNDS, but instead generally would be pooled with other assets of the SAC Hedge Fund and used in future investment decisions within the SAC Hedge Fund and with the assistance of prime brokers.

51. Despite their knowledge of the structure of the SAC Hedge Fund, employees of the SAC ENTITY DEFENDANTS designed their insider trading scheme to use, not their own capital, but the capital of the SAC Hedge Fund held by the SAC INVESTMENT FUNDS. As a result of the systematic and pervasive insider trading directed by employees of the SAC ENTITY DEFENDANTS over many years, illicit profits from insider trading were commingled with legitimate proceeds and formed at least part of the funding of additional insider trading. Illicit profits from insider trading were particularly likely to form at least part of the proceeds for future insider trading because, as described above, SAC Hedge Fund assets were frequently reallocated to strategies perceived by the SAC Owner and SAC PMs as potentially outperforming.

52. In addition, illicit profits from insider trading were likely to form at least part of the proceeds for future insider trading because of the magnitude of the insider trades directed by employees of the SAC ENTITY DEFENDANTS. For example, as

30

--- page 31 ---

alleged above, the SAC Hedge Fund in July 2008 began selling its entire $700 million position and shorted approximately $260 million worth of Elan and Wyeth stock based on Inside Information, and made profits and avoided losses in the amount of approximately $276 million.*

53. Through various acts and omissions alleged above, at all times relevant to this Complaint, the SAC ENTITY DEFENDANTS enabled and encouraged their SAC PMs and SAC RAs to use the capital of the SAC INVESTMENT FUNDS to engage in insider trading. The SAC ENTITY DEFENDANTS enabled and encouraged this conduct while intending that illicit profits from insider trading not be immediately withdrawn from the SAC INVESTMENT FUNDS, but instead be pooled with other assets of the SAC Hedge Fund and used in future investment decisions within the SAC Hedge Fund and with the assistance of prime brokers. In this manner, the SAC ENTITY DEFENDANTS caused transactions using the profits of insider trading that were intended at least in part to promote additional insider trading within the SAC Hedge Fund.

* Separately, the SAC Hedge Fund had an interest in $12 million worth of Wyeth shares through multi-year "swap" contracts the SAC Hedge Fund had entered into with other financial institutions in February and March of 2008. SAC did not, however, contact its swap counter-parties and seek to unwind the swaps, which would have risked disclosing that SAC was selling large portions in Wyeth in advance of the July 29, 2008 public announcement of the Drug Trial results.

31

--- page 32 ---

54. The SAC ENTITY DEFENDANTS engaged in other transactions using the profits of insider trading and designed to promote that unlawful conduct. Among other things, at various times relevant to this Complaint, the SAC ENTITY DEFENDANTS promoted the insider trading scheme of its employees through their practice of paying year-end bonuses — drawn from the SAC Hedge Fund's pool of capital that included the illicit profits — to the employees who engaged in insider trading. For example, at the end of 2008, after Mathew Martoma's insider trading in the securities of Elan and Wyeth, as described above, the SAC Hedge Fund paid him a bonus of approximately $9.3 million, drawn at least in part from the illicit profits of his insider trading. These bonuses were paid to the SAC ENTITY DEFENDANTS' employees as a reward for their insider trading and served as encouragement for future insider trading.

The Monetary Transactions Using The Illicit Profits

55. At various times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS allowed and directed the illicit profits from insider trading using the funds of the SAC INVESTMENT FUNDS to be reinvested in the SAC INVESTMENT FUNDS. The amount of profits obtained from insider trading was generally greater than $10,000. In directing the reinvestment of capital in the SAC INVESTMENT FUNDS, the SAC ENTITY DEFENDANTS used the services of one of several prime brokers.

32--- page 33 ---

56. At various times relevant to this Complaint, one or more of the SAC ENTITY DEFENDANTS paid year-end bonuses to its employees, drawn from the SAC Hedge Fund’s pool of capital that included the illicit profits from insider trading. In making these bonus payments, the SAC ENTITY DEFENDANTS made wire transfers into the bank accounts of the employees of the SAC ENTITY DEFENDANTS, which accounts were held at financial institutions whose deposits were insured by the FDIC. The illicit profits distributed through these direct deposits were at certain times greater than $10,000.

57. The SAC ENTITY DEFENDANTS knew, or consciously avoided knowing, that at least some of the proceeds used to make reinvestments on behalf of the SAC INVESTMENT FUNDS, and at least some of the proceeds used to pay year-end bonuses to SAC PMs and SAC RAs, constituted illicit profits from the insider trading the SAC ENTITY DEFENDANTS had enabled and encouraged.

V. CLAIMS FOR FORFEITURE

FIRST CLAIM FOR RELIEF

Forfeiture Under 18 U.S.C. § 981(a) (1) (A) - Promotion Money Laundering And Conspiracy

58. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

59. Pursuant to 18 U.S.C. § 981(a) (1) (A), "[a]ny property, real or personal, involved in a transaction in violation of

33

--- page 34 ---

section 1956 . . of [title 18, relating to money laundering offenses]" is subject to forfeiture to the Government.

60. Pursuant to 18 U.S.C. § 1956(a) (1), commonly known as the "money laundering" statute, a crime is committed by any person who:

(a) (1) knowing that the property involved in a financial transaction involves the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity

(A) (i) with the intent to promote the carrying on of specified unlawful activity . . .

61. Pursuant to 18 U.S.C. § 1956(h), "[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy."

62. "Specified unlawful activity" is defined in 18 U.S.C. § 1956(c) (7), and the term includes any offense listed under 18 U.S.C. § 1961(1). Section 1961(1) (B) lists, among other offenses, violations of 18 U.S.C. § 1343 (relating to wire fraud) and "fraud in the sale of securities."

63. The Defendants in Rem are subject to forfeiture pursuant to 18 U.S.C. § 981(a) (1) (A) because they constitute property involved in financial transactions involving the

34

--- page 35 ---

proceeds of specified unlawful activity, namely the wire fraud and securities fraud charged in the Indictment, which transactions were intended to promote such specified unlawful activity and carried out with knowledge that the property represented the proceeds of illegal activity. The Defendants in Rem also constitute property involved in a conspiracy to undertake such transactions.

SECOND CLAIM FOR RELIEF

Forfeiture Under 18 U.S.C. § 981(a)(1)(A) - Money Laundering In Violation Of Section 1957 And Conspiracy

64. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

65. Pursuant to 18 U.S.C. § 981(a)(1)(A), "[a]ny property, real or personal, involved in a transaction in violation of section 1956 . . . of [title 18, relating to money laundering offenses]" is subject to forfeiture to the Government.

66. 18 U.S.C. § 1957 provides that "[w]hoever, [with such offense under this section taking place in the United States] knowingly engages or attempts to engage in a monetary transaction in criminally derived property of a value greater than $10,000 and is derived from specified unlawful activity," shall guilty of a crime. A "monetary transaction" includes the "deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary

--- page 36 ---

instrument . . . by, through, or to a financial institution." 18 U.S.C. § 1957(f) (1).

67. Pursuant to 18 U.S.C. § 1956(h), "[a]ny person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy."

68. "Specified unlawful activity" is defined in 18 U.S.C. § 1956(c) (7), and the term includes any offense listed under 18 U.S.C. § 1961 (1). Section 1961 (1) (B) lists, among other offenses, violations of 18 U.S.C. § 1343 (relating to wire fraud) and "fraud in the sale of securities."

69. The Defendants in Rem are subject to forfeiture pursuant to 18 U.S.C. § 981(a) (1) (A) because they constitute property involved in monetary transactions in criminally derived property of a value greater than $10,000 that was derived from specified unlawful activity, namely the wire fraud and securities fraud charged in the Indictment, and a conspiracy to engage in such transactions. The Defendants in Rem also constitute property involved in a conspiracy to undertake such transactions.

36--- page 37 ---

VI. CIVIL MONEY LAUNDERING PENALTIES

THIRD CLAIM FOR RELIEF

18 U.S.C. § 1956

70. The Government incorporates by reference paragraphs 1 through 57 above as if fully set forth herein.

71. Pursuant to 18 U.S.C. § 1956(b), "[w]hoever conducts or attempts to conduct a transaction described in subsection (a)(1) [of section 1956] ..., or section 1957, ..., is liable to the United States for a civil penalty of not more than the greater of (A) the value of the property, funds, or monetary instruments involved in the transaction; or (B) $10,000."

72. The Defendants in Personam knowingly conducted financial transactions using the profits obtained from the wire fraud and securities fraud charged in the Indictment while intending the transactions to promote those specified unlawful activity.

73. The Defendants in Personam also knowingly engaged in monetary transactions involving profits obtained from these specified unlawful activities, and therefore involving criminally derived property which was derived from specified unlawful activity.

37

--- page 38 ---

74. Such transactions were made by, through, and to financial institutions and involved property of a value greater than $10,000.

75. Accordingly, the Defendants in Personam are liable to the United States for the value of the funds and monetary instruments involved in the transactions, in an amount to be determined at trial.

REQUEST FOR RELIEF

WHEREFORE plaintiff, the United States of America, requests that judgment be entered as follows:

A. Enter judgment against the Defendants in Rem, and in favor of the United States, on the first and second claims alleged in the Complaint.

B. Issue process to enforce the forfeiture of the Defendants in Rem, requiring that all persons having an interest in the Defendants in Rem be cited to appear and show cause why the forfeiture should not be decreed, and that this Court decree forfeiture of the Defendants in Rem to the United States of America for disposition according to law;

C. Award the United States civil money laundering penalties from the Defendants in Personam on the third claim alleged in the Complaint, in an amount to be

38

--- page 39 ---

proved at trial to a jury, plus prejudice and postjudgment interest.

D. Grant the Government such further relief as this Court may deem just and proper, together with the costs and disbursements in this action.

Dated: New York, New York July 25, 2013

PREET BHARARA United States Attorney for the Southern District of New York Attorney for the Plaintiff United States of America

By: Sharon Cohen Levin Micah W. J. Smith Assistant United States Attorneys One St. Andrew's Plaza New York, New York 10007 Telephone: (212) 637-1060 Facsimile: (212) 637-0421

--- page 40 ---

VERIFICATION

STATE OF NEW YORK
COUNTY OF NEW YORK
SOUTHERN DISTRICT OF NEW YORK

Gregory A. Coleman, being duly sworn, deposes and says that he is a Special Agent with the Federal Bureau of Investigation, and as such has responsibility for the within action; that he has read the foregoing Verified Complaint and knows the contents thereof, and that the same is true to the best of his knowledge, information, and belief.

The sources of deponent's information and the ground of his belief are official records and files of the United States, information obtained directly by the deponent, and information obtained by other law enforcement officials and representatives during an investigation of alleged violations of federal criminal laws.

Sworn to before me this 25th day of July, 2013:

NOTARY PUBLIC

MARCO DASILVA
Notary Public, State of New York
No. 01DA6145603
Qualified in Nassau County
My Commission Expires 10/01/2014

Gregory A. Coleman
Special Agent
Federal Bureau of Investigation

--- page 41 ---

Exhibit A

--- page 42 ---

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA
v.
S.A.C. CAPITAL ADVISORS, L.P., :
S.A.C. CAPITAL ADVISORS LLC, :
CR INTRINSIC INVESTORS, LLC, and :
SIGMA CAPITAL MANAGEMENT, LLC,
Defendants.
COUNT ONE
(Wire Fraud)
The Grand Jury charges:
1. As described below, this Indictment charges the corporate entities responsible for the management of a major hedge fund with criminal responsibility for insider trading offenses committed by numerous employees and made possible by institutional practices that encouraged the widespread solicitation and use of illegal inside information. Unlawful conduct by individual employees and an institutional indifference to that unlawful conduct resulted in insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry.
The SAC Capital Entities
2. At all times relevant to this Indictment, an individual residing in Greenwich, Connecticut (the "SAC Owner")--- page 43 ---

operated a group of affiliated hedge funds (collectively, the "SAC Hedge Fund" or "SAC"). The SAC Hedge Fund, founded by the SAC Owner in or around 1992, included, at its peak, over $15 billion of assets under management. The majority of the capital managed by the SAC Hedge Fund at all relevant times belonged to the SAC Owner himself, with the balance of capital provided by outside investors.

3. The SAC Owner operated the SAC Hedge Fund through his ownership of several fund management companies, which served as investment advisors for the SAC Hedge Fund. These management companies generally charged outside investors in the SAC Hedge Fund annual fees of approximately three percent of assets under management and up to 50 percent of investment returns. The principal management companies were as follows: (i) CR INTRINSIC INVESTORS, LLC ("CR INTRINSIC"), a Delaware limited liability company; (ii) SIGMA CAPITAL MANAGEMENT, LLC ("SIGMA CAPITAL"), a Delaware limited liability company; (iii) S.A.C. CAPITAL ADVISORS, LLC ("SAC CAPITAL LLC"), a Delaware limited liability company that actively managed investments in the SAC Hedge Fund through approximately 2008; and (iv) S.A.C. CAPITAL ADVISORS, L.P. ("SAC CAPITAL LP") a Delaware limited partnership that actively managed investments in the SAC Hedge Fund beginning in

--- page 44 ---

approximately 2009 (collectively, the "SAC ENTITY DEFENDANTS").

Overview of The Scheme

4. At various times between in or about 1999 through at least in or about 2010, employees and agents of SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC, and SIGMA CAPITAL, the defendants, obtained material, non-public information ("Inside Information") relating to publicly-traded companies and traded on that Inside Information in order to (i) increase the return on investment in the SAC Hedge Fund; and (ii) increase fees received by the SAC ENTITY DEFENDANTS.

5. The SAC ENTITY DEFENDANTS committed the insider trading scheme through the acts of, among others, numerous portfolio managers ("SAC PMs") and research analysts ("SAC RAs") who engaged in a pattern of obtaining Inside Information from dozens of publicly-traded companies across multiple industry sectors. Employees of the SAC ENTITY DEFENDANTS traded on Inside Information themselves and, at times, recommended trades to the SAC Owner based on Inside Information.

6. The SAC ENTITY DEFENDANTS enabled and promoted the Insider Trading scheme through several means detailed herein. First, the SAC ENTITY DEFENDANTS sought to hire SAC PMs and SAC RAs with proven access to public company contacts likely

--- page 45 ---

to possess Inside Information. Second, the SAC ENTITY DEFENDANTS' employees were financially incentivized to recommend to the SAC Owner "high conviction" trading ideas in which the SAC PM had an "edge" over other investors, but repeatedly were not questioned when making trading recommendations that appeared to be based on Inside Information. Third, on numerous occasions the SAC ENTITY DEFENDANTS failed to employ effective compliance procedures or practices to prevent SAC PMs and SAC RAs from engaging in insider trading.

7. At bottom, the encouragement by the SAC ENTITY DEFENDANTS of SAC PMs and SAC RAs to pursue aggressively an information "edge" overwhelmed limited SAC compliance systems. Further, the relentless pursuit of an information "edge" fostered a business culture within SAC in which there was no meaningful commitment to ensure that such "edge" came from legitimate research and not Inside Information. The predictable and foreseeable result, as charged herein, was systematic insider trading by the SAC ENTITY DEFENDANTS resulting in hundreds of millions of dollars of illegal profits and avoided losses at the expense of members of the investing public.

--- page 46 ---

The Operation Of The SAC Hedge Fund

8. The SAC Hedge Fund functioned as a collection of dozens of individual portfolios, each headed by a portfolio manager responsible for his or her portfolio's profit-and-loss results, and each charged with sharing the best trading ideas with the SAC Owner directly.

9. In particular, the SAC Owner allocated investment capital between and among up to approximately 100 internal portfolios, each of which was generally managed by a SAC PM who specialized in a particular investment sector, such as technology, health care, financial services, industrial, consumer, or energy. Each portfolio manager, in turn, typically employed one or more research analysts to assist with the development of investment ideas for the SAC PM's portfolio.

10. The SAC Hedge Fund portfolios were in many ways autonomous from each other. Each SAC PM had substantial discretion to make investment decisions in his or her portfolio, even if a position was contrary to a position taken by other SAC PMs operating a portfolio in the same sector. Each SAC PM was compensated principally based on the performance of his or her own portfolio, and without regard to the investment performance of other SAC PMs. Likewise, SAC RAs were compensated largely at--- page 47 ---

the discretion of the SAC PM to whom the SAC RA reported and based on the profitability of that PM's portfolio.

11. The largest portfolio in existence at the SAC Hedge Fund was, at all relevant times, a portfolio managed by the SAC Owner himself. The SAC Owner had sole trading discretion over his portfolio and made these decisions principally based on trading recommendations from SAC PMs. In particular, at all relevant times the SAC Owner required each SAC PM to share "high conviction" investment ideas - i.e., the investment recommendations in which the SAC PM had the greatest confidence - with the SAC Owner. In fact, providing such ideas to the SAC Owner was an express part of a SAC PM's duties and was emphasized to SAC PMs in the hiring process and once working at SAC.

12. In order to facilitate the collection of top trading ideas from the SAC PMs, the SAC ENTITY DEFENDANTS employed different systems at various times, including, for example, a template filled out on SAC's computer system and designated voicemail and e-mail boxes to collect trading ideas. In addition to these formal systems, the SAC Owner communicated with SAC PMs regularly through various means to ascertain their best trading ideas, including during semi-regular Sunday evening

--- page 48 ---

calls and in-person conversations. To assist in processing SAC PM ideas, the SAC Owner at times employed sector-focused "research traders" who, among other things, ensured that the ideas of SAC PMs in the sector were brought to the SAC Owner's attention and monitored the trading of the SAC PMs to ensure that the trading was consistent with recommendations made to the SAC Owner.

13. At all relevant times, the SAC ENTITY DEFENDANTS formally tracked trades made by the SAC Owner in the portfolio he personally managed in order to "tag" or credit the SAC PM responsible for the idea. At all relevant times, the SAC ENTITY DEFENDANTS paid SAC PMs an annual bonus - which could in some cases exceed all other components of compensation - based on a percentage of the net profits made by the SAC Owner on trades "tagged" to a particular SAC PM.

SAC PMs and SAC RAs Who Obtained Or Traded On Inside Information While Employed By The SAC ENTITY DEFENDANTS

14. Numerous SAC PMs and SAC RAs, not all of whom are identified herein, obtained or traded on Inside Information while employed by one or more of the SAC ENTITY DEFENDANTS. Each of the eight individual SAC PMs or SAC RAs identified by name below have been charged with and/or convicted of trading on Inside Information in connection with one or more of the SAC

7

--- page 49 ---

ENTITY DEFENDANTS:

a. Wes Wang ("Wang") was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2002 to 2005. While serving as a SAC RA, Wang obtained Inside Information with respect to various technology companies, including but not limited to Taiwan Semiconductor Manufacturing Company Limited ("TSMC"), Cisco Systems, Inc. ("Cisco"), Broadcom Corporation ("Broadcom"), eBay, Inc. ("eBay"), Cypress Semiconductor Corporation ("Cypress"), Polycom, Inc. ("Polycom"), QLogic Corporation ("QLogic") and Cirrus Logic Inc. ("Cirrus"). Wang provided trading ideas based on Inside Information to the portfolio manager to whom he reported ("Sigma PM-1"). On or about July 13, 2012, Wang pled guilty in federal court to two counts of conspiracy to commit securities fraud, one of which involved insider trading in connection with Wang's employment at SIGMA CAPITAL from 2002 to 2005. At his guilty plea, Wang admitted that, while at SIGMA CAPITAL, he had obtained Inside Information and provided it to Sigma PM-1 to be used for the purchase and sale of securities.

b. Richard Choo-Beng Lee ("CB Lee") was a SAC RA specializing in the technology sector employed by SAC CAPITAL LLC from approximately 1999 to 2003 and by SIGMA CAPITAL from

--- page 50 ---

approximately 2003 to 2004. While serving as a SAC RA, CB Lee obtained Inside Information with respect to various technology companies, including but not limited to Intel Corporation ("Intel"), Advance Micro Devices, Inc. ("AMD"), and Altera Corporation ("Altera"). CB Lee provided trading ideas based on Inside Information to the portfolio manager to whom he reported and the SAC Owner. On or about October 13, 2009, CB Lee pled guilty in federal court to, among other things, conspiracy to commit securities fraud and wire fraud relating to trading recommendations based on Inside Information that CB Lee had provided to Sigma PM-1 and others following CB Lee's departure from SIGMA CAPITAL. At his guilty plea, CB Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information.

c. Jon Horvath was a SAC RA specializing in the technology sector employed by SIGMA CAPITAL from approximately 2006 through 2011. Horvath served as a research analyst for portfolio manager Michael Steinberg, who has been employed by SIGMA CAPITAL from approximately 2003 to the present, and as a portfolio manager for SAC CAPITAL LLC from approximately 1996 to 2003. On or about September 28, 2012, Horvath pled guilty in federal court to conspiracy and securities fraud for insider

9--- page 51 ---

trading Horvath committed while at SIGMA CAPITAL, including but not limited to insider trading in relation to Dell Inc. ("Dell") in August 2008 and NVIDIA Corporation ("NVIDIA") in May 2009. Horvath admitted at his guilty plea that he obtained Inside Information about Dell and NVIDIA and provided the Inside Information to Steinberg, who executed trades in these stocks based on that information. On or about March 28, 2013, a grand jury in the Southern District of New York returned an indictment charging Steinberg with insider trading at SIGMA CAPITAL.

d. Noah Freeman was a SAC PM specializing in the technology sector who was employed by SAC CAPITAL LLC in approximately 2008 and by SAC CAPITAL LP from approximately 2009 to early 2010. While serving as a portfolio manager, Noah Freeman obtained and/or traded on Inside Information from various technology companies, including but not limited to, Research in Motion, Ltd. ("RIMM"), NVIDIA, Marvell Technology Group, Ltd. ("Marvell"), Avnet, Inc. ("Avnet"), Fairchild Semiconductor ("Fairchild"), Atheros Communications, Inc. ("Atheros"), Broadcom and Dell. On or about February 7, 2011, Noah Freeman pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by SAC CAPITAL LLC and SAC CAPITAL LP.

10

--- page 52 ---

At his guilty plea, Freeman admitted that he obtained Inside Information, and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LLC and SAC CAPITAL LP.

e. Donald Longueuil was a SAC PM specializing in the technology sector who was employed by CR INTRINSIC from approximately 2008 through 2010. While serving as a portfolio manager, Longueuil obtained and/or traded on Inside Information from various technology companies, including but not limited to, RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom and Dell. On or about April 28, 2011, Longueuil pled guilty in federal court to, among other things, conspiracy and securities fraud for insider trading he committed while employed by CR INTRINSIC. At his guilty plea, Longueuil admitted that, while he was employed by CR INTRINSIC, he received Inside Information for the purpose of trading on that information at CR INTRINSIC.

f. Matthew Martoma was a SAC PM specializing in the health care sector employed by CR INTRINSIC from approximately 2006 to 2010. On or about December 21, 2012, a grand jury in the Southern District of New York returned an indictment charging Martoma with insider trading at CR INTRINSIC relating to shares of Elan Corporation, plc ("Elan") and Wyeth.

11

--- page 53 ---

g. Richard Lee was a SAC PM employed by SAC CAPITAL LP between approximately April 2009 and June 2011, and again between approximately September 2012 and March 2013, who focused on "special situations" across industry sectors such as mergers, acquisitions, private equity buy-outs and corporate restructurings. While serving as a SAC PM, Richard Lee obtained Inside Information with respect to various securities, including but not limited to, Yahoo! Inc. ("Yahoo") and 3Com Corporation ("3COM"). On or about July 23, 2013, Richard Lee pled guilty in federal court to an information charging Lee with conspiracy and securities fraud in connection with his employment at SAC CAPITAL LP. At his guilty plea, Richard Lee admitted that he obtained Inside Information and that he purchased and sold securities based in part on such Inside Information in connection with his employment at SAC CAPITAL LP.

The Facilitation Of The Scheme By The SAC ENTITY DEFENDANTS

15. The insider trading scheme committed by the SAC ENTITY DEFENDANTS through the conduct of their agents was facilitated through practices employed by the SAC ENTITY DEFENDANTS that encouraged SAC PMs and SAC RAs to pursue industry contact networks to obtain an information "edge" unavailable to other investors, without effective corresponding

12

--- page 54 ---

controls to prevent that "edge" from consisting of Inside Information. In particular, as described herein: (1) the SAC ENTITY DEFENDANTS routinely sought to hire SAC PMs and SAC RAs with networks of contacts likely to have access to Inside Information; (2) SAC PMs and SAC RAs were required to share their best investment ideas with the SAC Owner while indications that those ideas were based on Inside Information were often ignored; and (3) the SAC ENTITY DEFENDANTS failed to employ the necessary compliance measures to detect or prevent trading on Inside Information.

16. In furtherance of the scheme, the SAC ENTITY DEFENDANTS sought to hire PMs and RAs believed by the SAC Owner and others in SAC management to have an "edge" based in part on networks of contacts with employees of public companies in the sector in which the SAC PM or SAC RA specialized. The focus on hiring employees with such networks was not balanced by any corresponding effort to ensure that prospective SAC PMs and SAC RAs did not use these contacts to obtain illegal Inside Information.

17. The first stage of SAC's hiring process was handled by the SAC "business development" department, which

13--- page 55 ---

sought to build relationships with and recruit SAC PMs and SAC RAs. E-mails from the business development team to the SAC Owner and others reflected an emphasis on hiring personnel with company contacts in their respective sectors. For example, a brief write-up of a SAC PM candidate specializing in the industrial sector forwarded to the SAC Owner on or about November 16, 2008, described the candidate as "the guy who knows the quarters cold, has a share house in the Hamptons with the CFO of [a Fortune 100 industrial sector company], tight with management."

18. After a SAC PM or SAC RA candidate was preliminarily approved for hiring, the SAC ENTITY DEFENDANTS subjected the candidate to a "due diligence" process that involved interviewing the candidate's references, prior employers and others, in part to identify the strength of the candidate's industry contact networks. For example, the due diligence report for Horvath — who obtained Inside Information from company insiders while employed at SIGMA CAPITAL — identified Horvath's "contacts with companies" as a "key strength" and noted that Horvath generated investment ideas by "mining his industry contact network for datapoints." Likewise, the due diligence report for Martoma — who is charged with

14

--- page 56 ---

trading based on Inside Information from doctors with access to confidential drug trial data while employed at CR INTRINSIC — referred to Martoma's health care "industry contacts beyond management," including through two expert networking firms and Martoma's personal "network of doctors in the field." There was no reference in the due diligence reports for Horvath or Martoma (or, generally, for other candidates) to ethics, integrity, compliance or whether the candidate had or was likely to use the referenced contacts to obtain or to make trades based on Inside Information.

19. In fact, on at least one occasion the SAC ENTITY DEFENDANTS hired a candidate despite a recognized reputation for insider trading. In particular, in or around the summer of 2008, the SAC Owner received a warning from an employee of another hedge fund ("Hedge Fund A") that Richard Lee, who previously had worked at Hedge Fund A, and was known for being part of Hedge Fund A's "insider trading group." A SAC business development employee subsequently informed Richard Lee that the SAC Owner had decided to hire Richard Lee as a SAC PM anyway, overruling objections from SAC's legal department. Richard Lee then proceeded to obtain and make trades based on Inside

--- page 57 ---

Information shortly after starting his employment at SAC Capital in approximately April 2009.

The Failure By The SAC Owner And Others To Question SAC Trading Recommendations Bearing Indicia Of Being Based On Inside Information

20. Furthering the scheme, the SAC Owner encouraged SAC PMs and SAC RAs, through financial incentives and otherwise, to share "high conviction" trading ideas — including ideas developed through industry contacts — while often ignoring indications that trading recommendations were based on Inside Information.

21. In particular, on multiple occasions SAC PMs and SAC RAs communicated to the SAC Owner trading recommendations sourced to information from a contact "at" a public company or with similar language. In these cases, the SAC Owner failed to inquire whether the contact was permitted to disclose the company information or to take other steps to ensure that the trade was not based on Inside Information. For example:

a. In an e-mail dated June 11, 2008, a SAC PM employed by CR INTRINSIC ("CR Intrinsic PM-1") wrote to the SAC Owner that "my guy at [company name]" had explained why certain anticipated acquisitions had not occurred. In a second e-mail, dated May 3, 2009, CR-Intrinsic PM-1 wrote to the SAC Owner,

--- page 58 ---

referring to the same company: "I am very comfortable that this qtr is going to be solid vs current consensus and guidance. I am getting coffee on Tues afternoon with the guy who runs North American generics business." The SAC Owner replied: "Let's talk later."

b. On or about October 30, 2007, Horvath e-mailed a trading recommendation concerning Sun Microsystems, Inc. ("Sun") to an e-mail address used by the SAC Owner to receive investment ideas from SAC PMs and SAC RAs. Horvath wrote: "My edge is contacts at the company and their distribution channel." The SAC Owner did not ask Horvath whether his "contacts at the company" were permitted to share the information that had provided Horvath with his "edge." Similarly, on or about August 26, 2008, Horvath wrote an e-mail to Steinberg, which was forwarded to the SAC Owner, stating that his recommendation to sell Dell stock in advance of a quarterly earnings announcement was based on a "2nd hand read from someone at the company" who had "been very good in the last two quarters." The SAC Owner did not question Horvath about his contact but did begin selling off his approximately $12.5 million Dell position approximately 10 minutes after receiving the e-mail.

17thought
--- page 59 ---

c. On or about February 26, 2007, Martoma initiated a chat with the SAC Owner via instant message relating to a drug approval announcement by a major pharmaceutical company ("Pharma Company 1") that had taken the financial market by surprise. Martoma advised the SAC Owner that Martoma had a "better edge" with respect to upcoming news about a second drug in development by Pharma Company 1 because "the second product is partnered with a small biotech company, while first was internal to [Pharma Company 1] only." The SAC Owner responded: "and I would think u have a line into small co," to which Martoma responded "yes."

d. On or about April 11, 2008 and April 12, 2008, the SAC Owner exchanged several e-mails with two CR INTRINSIC health care analysts ("Analyst 1" and "Analyst 2") about information they had obtained through a paid consultation with a clinical investigator (the "Clinical Investigator") for a drug trial being conducted by Elan and Wyeth for an Alzheimer's disease drug (the "Drug Trial"). Analyst 2 e-mailed the SAC Owner that the Clinical Investigator had told Analyst 2 that he "had seen the data as of December" for the Drug Trial, and that "it was not stat significant." In a second e-mail to the SAC Owner, Analyst 1 added that the Clinical Investigator had told

18

--- page 60 ---

them that the data from an "interim look" was "close" to significant" in some cases and that it "was possible but unlikely" that the "final data" would be statistically significant. In a third e-mail, Analyst 1 responded to the SAC Owner's question about whether it was likely that the Clinical Investigator had seen this data by reiterating that the Clinical Investigator "said he saw the data before agreeing to be in the study" and that it would not be "unreasonable" for the Clinical Investigator to be among the "small # of ppl [who] have seen the [Drug Trial] data." The SAC Owner did not question or express concern that Analyst 1 or Analyst 2 were paying a doctor involved in a drug trial for a consultation about non-public drug trial data seen by only a "small # of ppl." Instead, the SAC Owner directed Martoma to follow-up with the Clinical Investigator, which Martoma did and reported back.

e. Indeed, the SAC Owner expressed confidence in Martoma on the grounds that Martoma was "close" to sources of information about the Drug Trial while failing to express concern about the potential for Martoma to receive Inside Information from these sources. For example, in an instant message exchange on or about April 6, 2008, the SAC Owner responded to Analyst 2's inquiry as to whether the SAC Owner had

--- page 61 ---

"been able to get a better sense of why Martoma thinks" the Drug Trial data would be statistically significant as follows: "seems like Mat [Martoma] has a lot of good relationships in this arena." In another instant message, on or about March 26, 2008, the SAC Owner responded to Analyst 1's question as to whether Martoma and a second person "know something or do they have a very strong feeling" as follows: "tough one[.] I think Mat [Martoma] is closest to it." Analyst 1 and Analyst 2 complained in e-mails between themselves that Martoma was "telling ppl he has black edge" - a phrase meaning Inside Information - with respect to the outcome of the Drug Trial. Analyst 1 and Analyst 2 expressed no concern in these e-mails about the legality of Martoma proposing to trade on the Inside Information, focusing instead on whether Martoma was being "intellectually honest" in telling people he had "black edge" when Analyst 1 and Analyst 2 believed it was not yet possible to know the Drug Trial results.

22. Similarly, in connection with the hiring process, the SAC Owner failed to question candidates who at minimum implied that their "edge" was based on sources of Inside Information. For example, on several occasions in June 2009, CB Lee spoke to the SAC Owner about the possibility of providing the SAC Owner with trading ideas on particular companies in

--- page 62 ---

return for a payout on the SAC Owner's profits. CB Lee told the SAC Owner that he had people in sales and in finance at NVIDIA who gave him information relating to quarterly earnings and a contact at TSMC who provided him with wafer data. The SAC Owner did not express any concern about CB Lee's proposed sources of information during these conversations.

23. Also furthering the scheme, the SAC Owner fostered a culture that focused on not discussing Inside Information too openly, rather than not seeking or trading on such information in the first place. For example, on or about July 29, 2009, a recently hired SAC PM (the "New PM") sent an instant message to the SAC Owner and relayed that, due to some "recent research," the New PM planned to short Nokia when he started work 10 days later. The New PM apologized for being "cryptic" but noted that the head of SAC compliance "was giving me Rules 101 yesterday - so I won't be saying much[.] [T]oo scary." The SAC Owner did not react or respond in the instant message to the New PM's proposal to trade securities based on information that the New PM was "scar[ed]" to tell the SAC Owner for fear of violating compliance rules.

21--- page 63 ---

Ineffective Compliance Programs That Failed To Detect Or Thwart Insider Trading

24. Furthering the scheme, the SAC ENTITY DEFENDANTS employed limited compliance measures designed to detect or prevent insider trading by SAC PMs or SAC RAs. As an initial matter, the SAC ENTITY DEFENDANTS automatically purged all instant messages after 36 hours and all e-mails not affirmatively saved after 30 days until adopting a revised document retention policy in September 2008. In addition, prior to approximately late 2009, SAC's compliance department rarely reviewed electronic communications by SAC employees for suspicious terms suggesting potential insider trading, notwithstanding the fact that the head of SAC compliance had recommended such searches to SAC management as early as 2005.

25. Although the SAC compliance department, beginning in approximately 2006, prohibited the use of expert networks to make payments to public company employees for industry information, SAC encouraged direct contact with public company employees at various levels outside of these networks. For example, in or around 2006, when Richard Lee initially interviewed for a job at SAC and told a senior SAC executive that his investment process involved, among other things, consultations through an expert network, the SAC executive responded in substance that most SAC PMs relied on their own personal networks of industry contacts. In fact, as reflected in examples noted elsewhere in this Indictment, SAC PMs and SAC RAs routinely consulted public company employees at various levels and recommended trading ideas to the SAC Owner expressly based on information obtained through contacts at these companies.

26. Moreover, notwithstanding that the SAC compliance department was apparently aware that expert networks presented a risk of insider trading, the SAC compliance department failed to effectively monitor SAC employees' use of expert networking firms. For example, the SAC compliance department failed to detect or prevent Martoma from using an expert network for approximately 42 consultations with a doctor involved in the Drug Trial, even though some of the expert networking firm's scheduling e-mails with Martoma — sent through the SAC e-mail system — expressly stated that (1) the doctor in question had confidential information about the Drug Trial; and (2) the purpose of the consultation was to ask the doctor about the experimental medicine being tested in the Drug Trial. The doctor in question in fact provided Martoma with Inside Information about the Drug Trial during many of these consultations.

--- page 64 ---

27. Also furthering the scheme, on several occasions SAC management failed to refer trading recommendations that appeared to be based on Inside Information to SAC's compliance department for investigation. For example, on or about October 30, 2007, Horvath's trading recommendation emailed to the SAC Owner concerning Sun stated "[m]y edge is contacts at the company and their distribution channel." Steinberg, who was copied on the e-mail, forwarded it to the SIGMA CAPITAL Chief Operating Officer (the "COO") with the comment: "I suspect the line about contacts at the company may wake up some of our legal eagles." The COO responded: "I think it might precipitate a general inquiry to confirm we are not in possession of nonpublic information. This seems like an investment idea, not a trade and my interpretation of his comment is just that he developed good relationships with mgmt. that enhance his comfort level." The COO arrived at this benign (and unsubstantiated) interpretation without anyone interviewing Horvath about his e-mail. In truth and in fact, Horvath's e-mail was based on confidential information about Sun earnings that Horvath had obtained from his contact at Sun.

28. Also furthering the scheme, the limited number of internal investigations by the SAC compliance department of insider trading were generally weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

29. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that CR Intrinsic PM-1 and a second PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. In particular, evidence reviewed by the SAC compliance department reflected that on the evening of July 27, 2009, the Health Care Analyst

--- page 65 ---

Information about the Drug Trial during many of these consultations.

27. Also furthering the scheme, on several occasions SAC management failed to refer trading recommendations that appeared to be based on Inside Information to SAC's compliance department for investigation. For example, on or about October 30, 2007, Horvath's trading recommendation emailed to the SAC Owner concerning Sun stated "[m]y edge is contacts at the company and their distribution channel." Steinberg, who was copied on the e-mail, forwarded it to the SIGMA CAPITAL Chief Operating Officer (the "COO") with the comment: "I suspect the line about contacts at the company may wake up some of our legal eagles." The COO responded: "I think it might precipitate a general inquiry to confirm we are not in possession of nonpublic information. This seems like an investment idea, not a trade and my interpretation of his comment is just that he developed good relationships with mgmt. that enhance his comfort level." The COO arrived at this benign (and unsubstantiated) interpretation without anyone interviewing Horvath about his e-mail. In truth and in fact, Horvath's e-mail was based on confidential information about Sun earnings that Horvath had obtained from his contact at Sun.

28. Also furthering the scheme, the limited number of internal investigations by the SAC compliance department of insider trading were generally weak, with a focus on "confirming" with a SAC PM or SAC RA in an interview that an e-mail implying access to Inside Information was an inartfully drafted e-mail. In fact, despite numerous documented cases of insider trading at SAC — established by, among other things, guilty pleas of six former SAC PMs and RAs who each committed insider trading on numerous occasions and over a substantial period of time while employed at SAC — SAC's compliance department contemporaneously identified only a single instance of suspected insider trading by its employees in its history.

29. SAC's resolution of the one case in which it identified suspected insider trading also reflected a lack of commitment to address the issue. On this occasion, information reviewed by SAC's compliance department demonstrated that CR Intrinsic PM-1 and a second PM ("SAC PM-1") had received and then traded based on an advance tip from an outside health care analyst (the "Health Care Analyst") at a research firm doing business with the SAC ENTITY DEFENDANTS. In particular, evidence reviewed by the SAC compliance department reflected that on the evening of July 27, 2009, the Health Care Analyst

--- page 66 ---

[End of provided text]--- page 67 ---

communicated to CR Intrinsic PM-1 that his firm would publicly release a negative research report the next day about health care company Medicis, Inc. ("Medicis"). CR Intrinsic PM-1 then told this to the research analyst for SAC PM-1. SAC PM-1's research analyst then admitted - as corroborated by e-mails and phone records - that he had, at SAC PM-1's direction, called the Health Care Analyst and learned that the negative research report would be publicly released in the "pm" of July 28, 2009. Both CR Intrinsic PM-1 and SAC PM-1 shorted the stock of Medicis before the report was released that evening. Despite this, and despite the fact that it was the SAC Owner who had initially inquired about the trading, the consequences were limited. The SAC ENTITY DEFENDANTS imposed monetary fines on the two offenders, but allowed them to keep their jobs, and failed to report the insider trading to any regulatory or law enforcement personnel.

Examples Of Insider Trading By Agents Of Each Of The SAC ENTITY DEFENDANTS

30. In connection with the scheme described above, SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC and SIGMA CAPITAL, the defendants, through the conduct of their agents, sought to obtain and trade upon Inside Information on multiple occasions

26

--- page 68 ---

between 1999 and at least 2010. This trading includes - but is not limited to - the conduct described below.

Insider Trading By Agents Of CR INTRINSIC

31. Agents of CR INTRINSIC, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Martoma And The SAC Owner In Elan And Wyeth. As of mid-July 2008, the SAC Hedge Fund's largest equity securities position consisted of over $700 million worth of Elan American Depository Receipts ("ADRs") and Wyeth common stock. The SAC Owner had accumulated the position in large part on the recommendation of Martoma. On or about July 17, 2008, Martoma obtained negative Inside Information from a medical doctor involved in the Drug Trial being conducted by Elan and Wyeth. On or about Saturday, July 19, 2008, Martoma met with the doctor in person in Michigan. On or about the morning of Sunday, July 20, 2008, Martoma spoke by telephone to the SAC Owner, who the next day began selling the entire $700 million position and shorting approximately $260 million worth of Elan and Wyeth stock prior to the public announcement of the Drug Trial results on or about July 29, 2008. The SAC Hedge Fund's profits and

27

--- page 69 ---

avoided losses from this illegal insider trading amounted to approximately $276 million.

b. Trading By Two SAC PMs And The SAC Owner Based On Information From CR Intrinsic RA-1. On various occasions in 2008 and 2009, a technology sector research analyst for CR Intrinsic ("CR Intrinsic RA-1") obtained Inside Information from contacts at various technology companies, including earnings information from Dell (from the same source who provided Inside Information to Horvath) and acquisition-related information from Foundry Networks Inc. ("Foundry"). The two SAC PMs to whom CR Intrinsic RA-1 reported and the SAC Owner all placed profitable trades on one or more occasions shortly after recommendations made on the basis of Inside Information known to CR Intrinsic RA-1.

Insider Trading By Agents Of SIGMA CAPITAL

32. Agents of SIGMA CAPITAL, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Steinberg And The SAC Owner Based On Information From Horvath. On or about August 18, 2008, Horvath learned from a contact in his network that an insider at Dell had disclosed that Dell's earnings would be below market

--- page 70 ---

expectations and provided that information to Steinberg, who immediately began shorting shares of Dell stock in Steinberg's portfolio. On or about August 26, 2008 at 12:37 p.m., Steinberg e-mailed Horvath that he had been "talking to [the SAC Owner] about Dell earlier today" and that the SAC Owner wanted Horvath to "compare notes" with a different SAC PM who had taken a contrary, bullish position on Dell. At approximately 1:09 p.m., Horvath responded to Steinberg and the bullish SAC PM by e-mail: "I have a 2nd hand read from someone at the company - this is 3rd quarter I have gotten this read from them and it has been very good in the last two quarters. . . . Please keep to yourselves as obviously not well known." The e-mail further reported that the gross margin for Dell would fall short by "50- 80 bps [basis points]." The bullish SAC PM then forwarded the Horvath e-mail to a "research trader" for the SAC Owner who assisted the SAC Owner in trading technology stocks. The research trader, in turn, forwarded Horvath's e-mail directly to the SAC Owner at approximately 1:29 p.m. and spoke by phone to the SAC Owner at 1:37 p.m. for approximately one minute. At approximately 1:39 p.m., the SAC Owner began selling Dell shares in his own portfolio, closing out his entire approximately $12.5 million position prior to the disappointing earnings

29--- page 71 ---

announcement, avoiding losses of approximately $1.7 million. On or about August 28, 2008, after Dell had publicly announced earnings that, consistent with Horvath's Inside Information, were below market expectations, the SAC Owner e-mailed Steinberg's group, including Horvath: "Nice job on dell."

b. Trading By Sigma PM-1 Based On Inside Information From Wang. Between approximately 2002 and 2005, in connection with his employment as a SAC RA, Wang recommended trades to Sigma PM-1 based on Inside Information that Wang obtained from a network of contacts at publicly-traded technology companies, including but not limited to TSMC, Cisco, Broadcom, eBay, Cypress, Polycom, QLogic and Cirrus.

c. Trading Based On Inside Information From CB Lee. Between approximately 2008 and 2009, former SIGMA CAPITAL PM CB Lee, who by then was operating his own hedge fund, recommended trades based on Inside Information to Sigma PM-1. The Inside Information involved various technology sector stocks, including Dell and NVIDIA. For example, in a recorded call on or about January 16, 2009, CB Lee told Sigma PM-1, "between you and me," that "a friend of my cousin" who "works for Dell finance," is "telling me to avoid the stock for Q2, because Q2 is gonna be horrible." In a follow-up recorded call on or about January 23, 2009, CB Lee reiterated to Sigma PM-1 that "I do have a contact at Dell, he's in finance" and that the contact was reporting that the "April quarter could see a problem with gross margins" because sales to businesses were "very weak and that's where most of the profitability is."

--- page 72 ---

Insider Trading By Agents Of SAC CAPITAL LP

33. Agents of SAC CAPITAL LP, the defendant, obtained and traded upon Inside Information on multiple occasions, including but not limited to the examples described below:

a. Trading By Richard Lee. On various occasions between approximately April 2009 through approximately 2010, Richard Lee - who had been hired by SAC CAPITAL LP despite a warning to the SAC Owner that he had been part of an "insider trading group" at a prior employer - traded on Inside Information in the $1.25 billion "special situations" SAC portfolio Richard Lee jointly managed with a second SAC PM. For example, Richard Lee obtained, from a contact at a private equity firm with a stake in Yahoo, both early access to a Yahoo earnings report and information relating to a contemplated partnership with Microsoft, the latter of which ultimately took place in or around July 2009. Richard Lee - as well as other SAC PMs - also spoke to a technology analyst (the "Tech Analyst") from a research firm doing business with the SAC Hedge Funds about the potential Yahoo-Microsoft partnership. In a recorded call with Richard Lee on or about July 10, 2009, the Tech Analyst told Richard Lee that his "buddy," a "senior guy at Microsoft" who had been "very, very accurate in the past," told the Tech Analyst that a "senior team from Yahoo" had arrived at Microsoft to meet "the two senior-most people in [the] Microsoft internet business" to restart deal talks.

34. In some cases, such as the examples described herein, instances of insider trading involved agents of multiple SAC ENTITY DEFENDANTS either because different employees involved in the trading worked for different SAC management companies or because the employees switched between management companies during the course of their employment. Examples of such trading include but are not limited to the following:

a. Trading At SAC CAPITAL LLC And SIGMA CAPITAL Based On Inside Information From CB Lee. In connection with his employment as a SAC RA at SAC CAPITAL LLC and then SIGMA CAPITAL, CB Lee sought and obtained Inside Information through direct and indirect contacts at various technology companies between approximately 1999 and 2004, including but not limited to Intel, AMD, and Altera. CB Lee then recommended trades based on this Inside Information to the portfolio manager to whom he reported and in some instances to the SAC Owner directly. In these trading recommendations, CB Lee typically described the source of the information as being from "my guy," "my contact," or "my check" "at" the company in question.

b. Trading At SAC CAPITAL LLC, SAC CAPITAL LP And CR INTRINSIC Based On Inside Information From Freeman And Longueuil. In connection with their employment, Freeman (employed first by SAC CAPITAL LLC and then SAC CAPITAL LP) and Longueuil (employed by CR INTRINSIC) obtained and traded on Inside Information between approximately 2008 and 2010 in a variety of technology companies, including but not limited to RIMM, NVIDIA, Marvell, Avnet, Fairchild, Atheros, Broadcom and Dell.

35. At various times from in or about 1999, through at least in or about 2010, in the Southern District of New York and elsewhere, SAC CAPITAL LP, SAC CAPITAL LLC, CR INTRINSIC, and SIGMA CAPITAL, the defendants, willfully and knowingly, having devised and intending to devise a scheme and artifice to defraud, and for obtaining money and property by means of false--- page 75 ---

and fraudulent pretenses, representations and promises, did
transmit and cause to be transmitted by means of wire, radio and
television communication in interstate and foreign commerce,
writings, signs, signals, pictures, and sounds for the purpose
of executing such scheme and artifice, to wit, SAC ENTITY
DEFENDANT employees and agents obtained by telephone, e-mail and
other electronic forms of interstate communication, while
located in SAC ENTITY DEFENDANT offices in Manhattan, New York
and elsewhere, Inside Information concerning various public
company stocks, some of which were publicly-traded on a stock
exchange in Manhattan, New York, for the purpose of executing
securities transactions based in whole or in part on that Inside
Information.

(Title 18, United States Code, Sections 1343 and 2.)

COUNT TWO

(Securities Fraud: SAC CAPITAL LP)

The Grand Jury further charges:

36. The allegations contained in paragraphs 1 through
34 are repeated and realleged as though fully set forth herein.

37. From in or about 2009, up through and including
at least in or about 2010, in the Southern District of New York
and elsewhere, SAC CAPITAL LP, the defendant, willfully and

34

--- page 76 ---

knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SAC CAPITAL LP, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)

COUNT THREE

(Securities Fraud: SAC CAPITAL LLC)

The Grand Jury further charges:

38. The allegations contained in paragraphs 1 through 34 are repeated and realleged as though fully set forth herein.

35

--- page 77 ---

39. From in or about 1999, up through and including 2008, in the Southern District of New York and elsewhere, SAC CAPITAL LLC, the defendant, willfully and knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SAC CAPITAL LLC, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)

36

--- page 78 ---

COUNT FOUR

(Securities Fraud: CR INTRINSIC)

The Grand Jury further charges:

40. The allegations contained in paragraphs 1 through 34 are repeated and realleged as though fully set forth herein.

41. From in or about 2006 up through and including at least in or about 2009, in the Southern District of New York and elsewhere, CR INTRINSIC, the defendant, willfully and knowingly, directly and indirectly, by the use of means and instrumentalities of interstate commerce, the mails and the facilities of national securities exchanges, in connection with the purchase and sale of securities, did use and employ manipulative and deceptive devices and contrivances, in violation of Title 17, Code of Federal Regulations, Section 240.10b-5, by (a) employing devices, schemes and artifices to defraud; (b) making untrue statements of material facts and omitting to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; and (c) engaging in acts, practices and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, CR INTRINSIC, through its employees and agents, engaged in a scheme to obtain and trade

37--- page 79 ---

upon Inside Information.

(Title 15, United States Code, Sections 78j(b) & 78ff;  
Title 17, Code of Federal Regulations, Section 240.10b-5 &  
240.10b5-2; and Title 18, United States Code, Section 2.)

COUNT FIVE  

(Securities Fraud: SIGMA CAPITAL)  

The Grand Jury further charges:  

42. The allegations contained in paragraphs 1 through  
34 are repeated and realleged as though fully set forth herein.  

43. From in or about 2002, up through and including  
at least in or about 2009, in the Southern District of New York  
and elsewhere, SIGMA CAPITAL, the defendant, willfully and  
knowingly, directly and indirectly, by the use of means and  
instrumentalities of interstate commerce, the mails and the  
facilities of national securities exchanges, in connection with  
the purchase and sale of securities, did use and employ  
manipulative and deceptive devices and contrivances, in  
violation of Title 17, Code of Federal Regulations, Section  
240.10b-5, by (a) employing devices, schemes and artifices to  
defraud; (b) making untrue statements of material facts and  
omitting to state material facts necessary in order to make the  
statements made, in light of the circumstances under which they  
were made, not misleading; and (c) engaging in acts, practices  

--- page 80 ---

and courses of business which operated and would operate as a fraud and deceit upon persons, to wit, SIGMA CAPITAL, through its employees and agents, engaged in a scheme to obtain and trade upon Inside Information.  

(Title 15, United States Code, Sections 78j(b) & 78ff; Title 17, Code of Federal Regulations, Section 240.10b-5 & 240.10b5-2; and Title 18, United States Code, Section 2.)  

FORFEITURE ALLEGATION  

44. As a result of committing the offenses alleged in Counts One through Five of this Indictment, the SAC ENTITY DEFENDANTS shall forfeit to the United States, pursuant to Title 18, United States Code, Section 981(a)(1)(C), and Title 28, United States Code, Section 2461, all property, real and personal, which constitutes or is derived from proceeds traceable to the commission of those offenses.  

Substitute Assets Provision  

45. If any of the above-described forfeitable property, as a result of any act or omission of the defendants:  

a. cannot be located upon the exercise of due diligence;  

b. has been transferred or sold to, or deposited with, a third party;  

--- page 81 ---

c. has been placed beyond the jurisdiction of the court;  
d. has been substantially diminished in value;  
or  
e. has been commingled with other property  
which cannot be divided without difficulty;  
it is the intent of the United States, pursuant to Title 21,  
United States Code, Section 853(p), to seek forfeiture of any  
other property of said defendant up to the value of the  
forfeitable property described above.  

(Title 18, United States Code, Section 981; Title 21, United States Code, Section 853(p); Title 28, United States Code, Section 2461.)  

Preet Bharara  
United States Attorney  

--- page 82 ---

Form No. USA-33s-274 (Ed. 9-25-58)  

UNITED STATES DISTRICT COURT  
SOUTHERN DISTRICT OF NEW YORK  

UNITED STATES OF AMERICA  

- v. -  

S.A.C. CAPITAL ADVISORS, L.P.,  
S.A.C. CAPITAL ADVISORS, LLC,  
CR INTRINSIC INVESTORS, LLC, and  
SIGMA CAPITAL MANAGEMENT, LLC,  

Defendants.  

INDICTMENT  

13 Cr.  

(18 U.S.C. §§ 2, 1343; Title 15, United States Code, Sections 78j(b) & 78ff;  
Title 17, Code of Federal Regulations, Section 240.10b-5)  

PREET BHARARA  
United States Attorney.