The criminal indictment of SAC Capital, the hedge fund founded and run by Steve Cohen, left, is a seminal moment on Wall Street. It is also a relief that prosecutors and the Securities and Exchange Commission have not backed down.
It looked dicey for a while, after SAC reached one of its infuriating “neither admit nor deny” civil settlements with the SEC on insider trading charges. The distinctive feature was that SAC paid $616m to settle, which a judge described as “counterintuitive and incongruous.” Read more
After six years of scrutiny, and repeated legal action against those around him, Steve Cohen remains a free man. His $15bn hedge fund SAC Capital is still in business and he still firmly maintains his innocence, despite the evident disbelief of regulators and prosecutors. It is time to prosecute him.
Unless KPMG is now publicly ditched by a raft of big clients (which is unlikely), we may never know the damage inflicted on its reputation by the insider trading scandal involving the former head of its Los Angeles audit practice.
But for the firm’s chairman Michael Andrew to dismiss it already as “a one-day wonder” in “a slow news week” was silly and premature. There may come a time when Mr Andrew should come out fighting, but it is not yet. Read more
The conviction of Raj Rajaratnam for insider trading means McKinsey can breathe again. For now, the drip-drip of courtroom revelations about what Rajat Gupta, ex-head of the consulting firm, or Anil Kumar, a former partner, told the hedge fund billionaire, has stopped.
Mr Kumar has already pleaded guilty to insider trading. Mr Gupta, who denies wrongdoing, faces Securities and Exchange Commission civil charges. (A third McKinsey partner, David Palecek, who died last year, was mentioned in the trial, but his widow’s lawyer has said that he never agreed to “play ball” with Rajaratnam.)
Pending any action against Mr Gupta, the consulting world is wondering what will be the fall-out from the case – and not just for McKinsey. Read more
If you read anybody on the reputational threats facing McKinsey, it should probably be Walter Kiechel. As author of the definitive history of strategy consulting, The Lords of Strategy, he knows a lot about what goes on inside consultants’ heads.
On the Harvard Business Review blog, he’s used his knowledge and the latest revelations from the Galleon insider trading trial to explore “the beguilements…. beckoning to consultants over the last two decades”, in search of a better understanding of how Rajat Gupta, former head of McKinsey, “could have gotten himself into the current mess”.
(Gupta, who left McKinsey in 2007, is accused of sharing information, acquired in 2008 when he was a director of Goldman Sachs and Procter & Gamble , with Galleon founder Raj Rajaratnam. His lawyer has said the Securities and Exchange Commission’s civil charges of insider trading are “baseless”.) Read more