The Work

April 6, 2010 5:24 PM

In Amended Complaint, Ex-Wife of SAC Capital's Cohen Targets New Defendants

Posted by Brian Baxter

The twisting tale of the civil racketeering suit against Steven Cohen took another turn Tuesday when the new lawyer for his ex-wife filed an amended complaint in federal court against the hedge fund billionaire and six other defendants.

Patricia Cohen (née Finke) first sued her former husband in December, seeking $300 million in assets that Cohen allegedly hid from her during divorce proceedings 20 years ago. As reported by The Am Law Daily at the time, Finke turned to noted RICO lawyer Paul Batista for the suit. From the start, Cohen has labeled his ex-wife's claims meritless--and did so again Tuesday.

"These recycled allegations are ridiculous," says Jonathan Gasthalter, a spokesman for Cohen and SAC Capital, the group of hedge funds founded by Cohen. "They are nothing more than a blatant extortion attempt arising from a divorce that was finalized over 20 years ago."

In January, Finke changed lawyers, dumping Batista in favor of former McCarter & English international practice chair Gaytri Kachroo, known for her work representing Bernard Madoff whistle-blower Harry Markopolos. (Kachroo left McCarter last summer over potential conflicts that might arise out of her Madoff work; she formed her own firm, Boston-based Kachroo Legal Services, a few months later.)

Once Batista was off the case, Kachroo claims, he tried to have Finke's complaint dismissed without her approval. Last week, Batista sued Kachroo and Finke, seeking unpaid legal fees and a lien on any potential recovery Finke might receive from Cohen and SAC Capital.

Kachroo told The Am Law Daily on Monday that she intended to vigorously defend herself against Batista's suit, and added that she was in the process of getting her client's case against Cohen back on track. Kachroo says she filed an amended complaint rather than a new complaint because the initial RICO suit is still pending. (A status conference to take up Batista's request to dismiss that suit is scheduled for April 30.)

While many of the allegations in the 32-page amended complaint filed by Kachroo and senior associate John Ray III mirror those filed by Batista, Finke has added common law fraud to her claims against Cohen, broadening the suit beyond its original RICO scope. According to the complaint, Cohen used $4 million that Finke earned from a real estate transaction to help grow Stamford, Conn.-based SAC Capital. As a result, Finke claims she's now entitled to a substantial stake in the $16 billion group of SAC Capital hedge funds.

Kachroo has also added four new defendants to the case, to the three included in the initial suit, SAC Capital, Steven Cohen, and Cohen's accountant brother, Donald. New to the mix: Gruntal & Co., LLC, the now-defunct brokerage firm where Cohen once worked, former Gruntal senior executive Edward Bao, Cohen's former business associate and attorney Brett Lurie, and Donald Cohen's accounting firm.

According to the complaint, the additional defendants were part of a "criminal syndicate" that helped hide Cohen's assets and deprive Finke of her rightful share in the divorce case. Kachroo claims Gruntal received 50 percent of Cohen's proceeds from insider trading violations that Finke accuses the SAC Capital founder of engaging in when he worked at the firm during the 1980s.

Both Bao and Lurie are convicted felons. Bao was charged in 1996 as part of an embezzlement scam at Gruntal dating back to 1984, and pleaded guilty a year later to falsifying the firm's books and records. He  subsequently served three years in prison. Lurie, a disbarred lawyer, was apprehended in Costa Rica in 2005 almost a decade after he was charged in New York with real estate fraud. After serving nearly three years in state prison, Lurie was released on parole last October.

Finke accuses both Bao and Lurie of engaging in shady business transactions with Cohen that helped him disguise his true net worth at the time of their divorce and build his business empire. (For more from Finke's perspective, see this recent New York magazine story.)

Willkie Farr & Gallagher litigation partners Martin Klotz, John Oller, and Tariq Mundiya are representing Cohen, his brother, and SAC Capital in the case. Attorneys for the other defendants were not immediately available by the time of this story.

Make a comment

Comments (0)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions


Report offensive comments to The Am Law Daily.

The comments to this entry are closed.

By: TwitterButtons.com

From the Newswire

Sign up to receive Legal Blog Watch by email
View a Sample