Insurer Fairfax Appeals SAC’s Dismissal From New Jersey Suit

By David Voreacos, Bloomberg | June 4, 2013

Insurer Fairfax Financial Holdings Ltd. asked a New Jersey appeals court to reinstate its lawsuit against Steven A. Cohen’s SAC Capital Advisors LP claiming a campaign of false negative information.

The appeal, filed May 31, asked the New Jersey Appellate Division to reverse the decision to dismiss SAC in 2011 from the case filed in state court in Morristown. All eight of the hedge funds that Toronto-based Fairfax sued won dismissals. Fairfax has also asked the appeals court to reinstate other defendants.

“The trial court thoroughly rejected Fairfax’s claims, and we are confident its decision will be upheld,” Jonathan Gasthalter, a spokesman for Stamford, Connecticut-based SAC Capital at Sard Verbinnen & Co., said in an e-mail.

The appeal comes as investors are pulling their money out of Cohen’s fund and the U.S. is intensifying its probe of insider trading at SAC Capital, once one of the most successful in the hedge-fund industry, with returns averaging 25 percent since 1992.

In September, Superior Court Judge Donald Coburn dismissed Fairfax’s commercial-disparagement lawsuit just before a trial was set to begin against broker-dealer Morgan Keegan & Co. and Exis Capital Management.

Fairfax, which owns stakes in Canadian and U.S. insurers, claimed that Exis and Morgan Keegan, now known as Raymond James Morgan Keegan, coordinated with stock analysts to drive down its share price by spreading false rumors. The purpose of the so- called bear raid was to enable investors to profit from short sales.

‘Equity Securities’

The appeal claims that the judge erred in ruling that SAC “did not sell Fairfax equity securities short and would ‘stand to lose’ money if the scheme was successful,” according to a 120-page filing.

Rather, Fairfax claims, “there was substantial direct and circumstantial evidence that SAC participated in the enterprise for economic purposes.”

In September, Coburn signed a consent judgment between Fairfax and Spyro Contogouris, an independent analyst who allegedly harassed company officials with phone calls and a visit to Fairfax offices.

The judgment said Contogouris and his research firm, MI4 Reconnaissance, are liable to Fairfax. It also said he may not call, visit, e-mail or text message any executives at Fairfax. Nor may he post anything on the Internet about Fairfax or trade its stock. Fairfax’s complaint against Contogouris was dismissed and could be filed again, according to the judgment.

The case is Fairfax Financial Holdings Ltd. v. SAC Capital Management LLC, L-2032-06, Superior Court of New Jersey, Morris County (Morristown).

With assistance from Saijel Kishan and Sheelah Kolhatkar in New York and Anthony Effinger in Portland, Oregon. Editors: Andrew Dunn, Charles Carter

©2013 Bloomberg News

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