On Wall Street, workers talk, CEOs walk «

    On Wall Street, workers talk, CEOs walk

    Whatever. What we do know is that for all of the troubles endured by the alleged insider trader, it’s a good life to have closed your firm to outside investors, paid a $1.2 billion fine and still ended up with a net worth estimated at more than $9 billion.

    Oh, and he still has his freedom. Freedom is nice to have especially if you and the firm that bears your name has a mountain of allegations against it the way Cohen’s SAC Capital Advisors LP does.

    Cohen’s relatively uninterrupted life in the midst of accusations, convictions and admitted wrongdoing underscore how the scales of justice aren’t merely tipped against the junior players on Wall Street, they’ve been run over by a Bentley.

    Ask Mathew Martoma, the former SAC portfolio manager who actually was charged with insider trading. He’s facing up to 45 years in prison if he is found guilty of the charges against him. And from the looks of the case against him, he might want to reach out to the Rajaratnam family about how to make the most of those weekend visitation schedules.

    Martoma’s trial, which began Jan. 7, got interesting last week. Dr. Sidney Gilman, 81, a former drug researcher at the University of Michigan, testified that he passed on confidential information about an important drug used to treat Alzheimer’s disease.

    “I revealed information that was confidential about a drug trial to Mathew Martoma inappropriately,” Gilman told jurors . Prosecutors argued that Martoma used that information to trade, and profits from those trades helped SAC to $279 million in allegedly illegal gains.

    That’s a pretty penny, or in Cohen’s world, a pretty painting. And isn’t that the problem with all of these Wall Street prosecutions? It seems that no matter the crime — mortgage fraud, foreclosure fraud, trading fraud, market manipulation, interest-rate fixing — not a single CEO, principal or founder ever goes on trial.

    The lone exception seems to be Bernie Madoff. And isn’t that sort of a pathetic commentary on Wall Street prosecution? He, at least, now has the dignity to say he was reasonably accountable for his crimes.

    What’s happening with Cohen and Martoma, however, is the more unfortunate status quo. Cohen endures a fine he can afford, a little bad press, some legal pressure, maybe he has to sell a painting. A junior player such as Martoma is looking at a grueling trial and, likely, time out of society and away from his family.

    Some of this is Martoma’s choice. He was offered a deal by prosecutors: give up Cohen, rat on the chronic pattern of insider trading at SAC. If he did that, he’d probably avoid time. Six of his SAC counterparts took the offer. Sure, Martoma’s career would be over. But it would have been anyway. He really shouldn’t have taken the risk. Then again, Martoma allegedly played the insider-trading game. That’s a game that essentially carries no risk. You know what’s coming.

    Last year the Securities and Exchange Commission brought 58 cases for insider trading against 131 individuals and entities. In the last three years, the commission has brought 168 cases against nearly 400 individuals and entities — the most in any three-year period in the commission’s history including the late 1980s and early 1990s.

    While it may appear the SEC isn’t reluctant to go after CEOs — at least five were charged or accused — the reality is few of them were leading big, influential firms. Only Arthur Samberg of Pequot Capital Management Inc. in 2010 and Raj Rajaratnam of Galleon Group in 2009 stand out. Rajat Gupta, the Goldman Sachs Group Inc. /quotes/zigman/188479/delayed/quotes/nls/gs GS -0.14% board member who aided Rajaratnam, also was found guilty but has been free on appeal.

    Ultimately, all of those SEC cases suggest that it’s the small fish that end up in the prosecutorial pan, not the big fish. Yes, not every CEO or principal at a firm is engaged in insider trading, but at least in the Cohen case, the evidence suggests SAC was awash in a culture of corner cutting and, at times, fraudulent behavior.

    That’s why it is fascinating to wonder what Cohen is up to as his loyal employee defends his life in court. For Cohen life is a painting, for Martoma it’s an ugly picture.

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