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The U.S. Securities and Exchange Commission announced charges against hedge fund CEO Leon Cooperman on Thursday for insider trades conducted on the basis of non-public corporate information he had learned from a senior-level executive at Atlas Pipeline Partners (APL).
The commission’s press statement on the issue alleges that Cooperman reaped “illicit profits” when he bought APL shares en masse ahead of the firm’s sale of a natural gas processing facility in Elk City, Oklahoma.
After the announcement of the facility’s sale, APL’s stock price rose by 31 percent, the SEC reported.
Cooperman – who heads the well-known hedge fund Omega Advisors - was unavailable for comment at the request of The Wall Street Journal.
He wrote a memo to clients on Wednesday, in which he said: “We are disappointed with the commission’s decision to file charges, and we strongly disagree with the commission that either the firm or I have engaged in unlawful conduct.”
Prior to completing the stock purchases, the commission says Cooperman, a Florida resident, had received non-public information about the terms of the sale from an unidentified executive and had explicitly agreed with said executive that he would not use the information for future trades.
“We allege that hedge fund manager Cooperman, who as a large APL shareholder obtained access to confidential corporate information, abused that access by trading on this information,” Andrew J. Ceresney, Director of the SEC’s Division of Enforcement, said in the official statement. “By doing so, he allegedly undermined the public confidence in the securities markets and took advantage of other investors who did not have this information.”
The government agency filed a complaint against Cooperman in a federal district court in Philadelphia, seeking fines equal to all ill-gotten gains plus interest and other penalties, as well as a permanent bar on officer and director-level positions for the accused.
The SEC said Cooperman contacted the executive to concoct a false alibi when the commission sent Cooperman’s Delaware-based hedge fund a subpoena regarding the matter 1.5 years after the incident.
“The executive was shocked and angered when he learned that Cooperman traded in advance of the public announcement,” the statement says.
Over the course of this scandal, the SEC says Cooperman also violated securities laws more than 40 times by failing to issue timely reports regarding holdings and transactions in financial assets of publicly-traded corporations he owned.
Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…