- Thomson Reuters
Leon Cooperman, who was charged with insider trading earlier Wednesday, has sent a five-page letter to investors defending himself.
“We are highly disappointed with the [Securities and Exchange Commission]’s decision to file charges, and we strongly disagree with the Commission that either the firm or I have engaged in any unlawful conduct,” Cooperman wrote to investors in a letter viewed by Business Insider.
“We have done nothing improper and categorically deny the Commission’s allegations.”
Cooperman and Omega were charged with insider trading in securities related to Atlas Pipeline.
Here are some of the key points Cooperman made in the letter (emphasis added):
- “As I wrote last year when we first received the subpoenas, I have throughout my fifty-year career in the securities business firmly believed in detailed, fundamental research. As I explained then, that approach has long contemplated direct, face-to-face interactions with company management. Such exchanges of information with company management are appropriate, well-established in the industry, and even necessary. As a Wall Street Journal op-ed put it just last year, ‘information is not a crime.’ Although we don’t think it would be productive to state here our views on what we believe to be a seriously misguided effort by the authorities in these matters, we would refer anyone who is interested to Three Felonies a Day: How the Feds Target the Innocent by Harvey A. Silvergate and Licensed to Lie: Exposing Corruption in the Department of Justice by Sidney Powell, both of which provide fascinating insights in the machinations of our country’s criminal justice system.” The stock purchases of Atlas Pipeline cited in the SEC complaint were made in two managed accounts separate from the commingled fund. “Omega did not purchase Atlas Pipeline shares in July 2010 for any of the Omega funds in which I had my own capital invested.” “Omega’s $3.8 million investment in Atlas Pipeline in July 2010 represented less than 0.008% of Omega’s assets under management at the time.” “The allegations based on trades in APL call options in July 2010 are equally unfounded. Between February and May 2010, Omega sold 11,230 APL call options for premiums totaling approximately $1,160,000. The options had strike prices of $15.00 and $17.50, and expiration dates of August and November 2010, respectively…[I]n July 2010, as the price of the August $15.00 options declined to as low as $0.05 per option, Omega purchased the exact number of APL $15.00 call options it had sold earlier in the year, which offset its existing APL options position. As a result of flattening out its options position, Omega didn’t realize any gain from the increase in Atlas Pipeline’s stock price following the Elk City announcement. It is illogical, and defies common sense, that the SEC would bring an insider trading case based on that trading pattern.” “Significantly, because its APL options purchased in July offset all of Omega’s earlier sales of the same options, Omega was never long any Atlas Pipeline calls prior to the Elk City announcement. If Omega had established a long position in APL call options at $0.05 rather than flattening out its position, it would have stood to make an undefined profit from the increase in the stock price following the announcement. Omega didn’t do that.” Cooperman also says that he was, at the time, the largest investor in his son Wayne’s hedge fund, Cobalt Capital. “In July 2010, Cobalt was short APL stock. As such, Cobalt (and by extension, I) stood to lose money if APL’s stock price rose. But, as my son is prepared to testify if need be, I didn’t share with him any information concerning the Elk City transaction or even know what position Cobalt had in APL securities at the time.” “In short, none of the APL trading at issue is indicative of someone trying to position themselves ahead of an anticipated market-moving announcement, or to reap profits from inside information.” “We continue to be fully committed to managing our clients’ money and delivering superior risk-adjusted returns, and we continue to have full confidence that these matters will not affect our ability to continue to serve your best interests.”
In addition, Cooperman wrote that the U.S. Attorney’s Office has not completed its investigation into Omega “but has determined not to pursue charges for the time being pending the U.S Supreme Court’s decision in Salman v. United States.”