(Recasts first paragraph, adds details, background)
By Suzanne Barlyn
PHILADELPHIA Feb 7 A U.S. judge on Tuesday held
off ruling on whether to throw out a government complaint
against billionaire investor Leon Cooperman and his firm, Omega
Advisors Inc, after the defendant's attorneys requested a
dismissal, in a case that could set a legal precedent on insider
The case's outcome could affect the way traders across Wall
Street go about making investment decisions.
U.S. District Judge Juan Sánchez in Philadelphia said after 90
minutes of oral arguments that he would take the request by
Cooperman's lawyers to dismiss the U.S. Securities and Exchange
Commission civil case "under advisement."
An attorney for Cooperman, Theodore Wells Jr., also said his
client had invoked his constitutional 5th Amendment right
against self-incrimination and did not answer questions during
the SEC's investigation because of a separate criminal probe.
Wells said Cooperman would now be willing to be deposed by
The regulatory agency first filed the civil complaint in
September, charging Cooperman, 73, and his firm with illegal
trading in Atlas Pipeline Partners LP in 2010. The SEC alleged
that Omega had improperly traded in options after Cooperman
discovered the planned sale of a gas processing unit.
Cooperman's trades in Atlas earned roughly $4 million when
Omega Advisors invested before Atlas sold the unit. The SEC had
alleged that Cooperman was a big shareholder in the company and
used his position to obtain confidential information about the
sale that other investors did not know about.
In December, lawyers for Cooperman and Omega filed a motion
to dismiss the case.
Cooperman is one of the industry's best known stock-pickers.
The son of a plumber in New York's Bronx borough, he founded
Omega in 1991. He is now worth $3 billion, according to Forbes.
Sánchez's decision could set a legal precedent. At issue is
whether people who work outside a publicly traded company are
allowed to trade on confidential information if they say they
will not do so and at which point such individuals have a legal
duty to the company. Employees are already legally prohibited
from trading on such information.
As another lawyer for Cooperman, Daniel Kramer, put it, the
investor may have "broken a promise" to an Atlas executive, but
did not break insider trading laws.
"Not every broken promise is fraud," said Kramer, who was
repeatedly questioned by the judge.
The SEC has said Cooperman "misappropriated" information
from that executive about the sale of the pipeline unit.
A unit of Targa Resources Corp bought the Atlas
business in early 2015.
Even if Cooperman had made such an agreement, he did not
have a legal duty to the company at that time, Kramer said on
He said the SEC's case should be thrown out because it does
not establish that Cooperman had such a duty.
SEC lawyer Bridget Fitzpatrick said Cooperman's legal duties
to Atlas began when he made an agreement to keep the information
confidential, which she said happened during one of three phone
calls in July 2010. However, Fitzpatrick conceded the agency
could not definitively say when the agreement was made.
The hedge fund industry in particular has been the target of
insider trading cases by the U.S. Department of Justice and SEC
in recent years, an effort that has led to numerous convictions,
penalties, and legal challenges. But those cases, generally,
have focused on the individuals who received and traded on the
information, and not the company employees who gave it to them.
As the two sides battled in court on Tuesday, Judge Sánchez
at times grilled Kramer about his arguments.
"If a fraud is committed, why does it matter why the
agreement is made before or after?" Sánchez said.
(Reporting by Suzanne Barlyn in Philadelphia; Editing by Alan
Crosby and Jonathan Oatis)