The U.S. Securities and Exchange Commission (SEC) announced insider trading charges against hedge fund manager Leon G. Cooperman and his firm Omega Advisors. Essentially, the agency is alleging that Cooperman learned material nonpublic information in confidence from a corporate executive and then traded on it.
In the complaint, the SEC alleged that Cooperman generated substantial illicit profits by purchasing securities in Atlas Pipeline Partners (APL) in advance of the sale of its natural gas processing facility in Elk City, Oklahoma. Cooperman allegedly used his status as one of Atlas’s largest shareholders to gain access to the executive and obtain confidential details about the sale of this substantial company asset.
Cooperman and Omega Advisors allegedly accumulated Atlas securities despite explicitly agreeing not to use the material nonpublic information for trading purposes, and when APL publicly announced the asset sale its stock price jumped over 31%.
When Omega Advisors received a subpoena nearly a year-and-half later about its trading in APL securities, Cooperman contacted the executive and tried to fabricate a story to tell if questioned about this trading activity, according to the SEC. The executive was shocked and angered when he learned that Cooperman traded in advance of the public announcement.
The complaint further charges Cooperman with failing to timely report information about holdings and transactions in securities of publicly traded companies that he beneficially owned, alleging that he violated federal securities laws more than 40 times in this regard.
Andrew J. Ceresney, director of the SEC’s Division of Enforcement, commented:
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. 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.