Shakespeare on a new Wall Street Shylock

How quickly nature falls into revolt, When gold becomes her object!“How quickly nature falls into revolt,
When gold becomes her object!”

King Henry IV part 2, act 4, sc. 4

SAC Capital Advisors, one of the most profitable hedge funds in history, pleaded guilty to security and wire fraud charges last week.

SAC carried out insider trading “on a scale without known precedent”, according to the prosecution. The firm built its entire business model on carrying out massive bets on corporate securities, many of which were based on illegally obtained secrets. To cover-up illegal activities, instant message records were wiped out every 36 hours and emails deleted after one month.

No criminal charges have been filed against Steven A. Cohen, who wholly owns and manages the hedge fund group. The “fine” is $1.2 billion – for the reason justifying the inverted commas, please continue reading.

This system made SAC massively profitable, generating returns that averaged thirty percent per year over the past two decades. For comparison, the average hedge fund had returns of eight percent last year, while the Ponzi scheme operated by Bernard L. Madoff had returns of around ten percent—one third of those regularly obtained by SAC.

Just one of SAC’s transactions, conducted by a single portfolio manager on the basis of insider knowledge of clinical pharmaceutical trials, netted SAC $276 million, in what prosecutors called “the most lucrative insider trading scheme ever charged.”

Fraud has made Steven A. Cohen rich almost beyond description. With a 2012 net worth of $9.4 billion, Cohen’s hobbies include collecting palatial estates and mansions and hoarding over $700 million worth of art.

One of Cohen’s properties, in Greenwich, Connecticut, according to Forbes, occupies over 18 acres and “includes Cohen’s 35,000-square-foot main home plus a neighboring home purchased for $5 million in 2006, a full-size indoor basketball court, a glass-enclosed pool, a 6,700-square-foot ice skating rink, [and] a two-hole golf course.”

Cohen also occupies the only duplex in New York City’s Bloomberg Tower, a property worth $115 million, and two beach houses in the Hamptons, one of which is worth $62.5 million. Last year Cohen paid over $155 million for Picasso’s “La Rêve,” in one of the most expensive art purchases in history.

But listen to this! The $1.2 billion settlement is less than the $1.3 billion SAC earned last year, and the company is likely to turn a profit this year even after paying the settlement.

Since Cohen is the sole owner of the company, the settlement will diminish his personal fortune to just over $7 billion, which will remain under management by SAC. The Wall Street Journal reported that, “according to people familiar with the probe… Prosecutors, despite having long had Mr. Cohen in their sights, won’t charge him personally with any crime unless new evidence surfaces.”

The net result is that, after obtaining billions of dollars through fraudulent means, Cohen remains not only free from criminal charges, but also retains four-fifths of his fortune intact.

This is an example of the perversion and exorbitance of legal authority in reverse.

SAC was investigated and charged only because its daily insider trading activities became too massive to be conveniently disregarded. The settlement—the largest insider trading penalty in history—is evidence of the magnitude of the crimes – though to the criminal it is but a nuisance.

The immunity given to Cohen notwithstanding such massive illegal activity may have a reason. The US nucleus of power and its political representatives recognize in him one of their own.

Just as in previous cases,  crime-primadonnas like Cohen and, earlier on,    JPMorgan’s Jamie Dimon are an expression of who dominates society.

Every group has its own values. Every group protects itself against the intrusions of alien and inconvenient values, which it brands by opprobrious epithets such as “socialist” and/or un-American.

Cohen is a XXIth century Shylock who would put the original Shylock to shame. In the “Merchant of Venice” justice (as we know it), prevailed. Among the Merchants of Wall Street, Shylocks are heroes.

They go scot-free and are immune from prosecution. Compare the case to the results of one survey by the American Bar Association.  There were 360 people serving life sentences for shoplifting small amounts of merchandise in California alone, as a result of the state’s draconian three strikes law.

Or to the poor and old, arrested, tried and jailed for stealing a loaf of bread at the supermarket. Unless blinded by ideology, prejudice or plain stupidity, the contrast should provide sufficient allegorical material for meditation.

And to the die-hard backers of this type of capitalism, the only possible advice is f… yourselves – where the dots stand for a verb which I will forbear to mention out of my inviolable respect for the ladies.

NOTE. This is the 400th article since the inception of the site. And to quote Dr. Johnson…. “if it be pleasing to hear of the preferment and dismission of statesmen, the birth of heirs, and the marriage of beauties, the humble author of journals and gazettes must be considered as a liberal dispenser of beneficial knowledge.”
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In the Play.    The ailing King Henry thinks that P. Henry stole the crown and considers himself king

Image Source, a painting by George Buchel (1895-1935)

painting by Charles Buchel (1895-1935)

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