| Leon Cooperman, Omega Advisors (Bloomberg) |
Media reports about Leon Cooperman’s alleged securities violations have mostly focused on the hedge fund titan’s insider trading charges. And why not?
The public is generally fascinated with insider trading cases. And the Securities and Exchange Commission’s 34-page complaint against the 73-year-old Cooperman and his firm, Omega Advisors, is a doozy — packed with shocking and detailed allegations concerning Cooperman’s trading of the securities of Atlas Pipeline Partners and his alleged attempts to circumvent securities laws and cover up his actions by trying to coax others to lie on his behalf. Among the more astonishing details: One of Cooperman’s intended beneficiaries was a minor child, which Cooperman explained in a separate letter to investors is his grandson. Also, Cooperman’s son Wayne, founder of hedge fund firm Cobalt Capital Management, was so irked by the unexplained movement in the stock that he actually looked into becoming a whistle-blower, according to the SEC’s complaint (which did not identify Wayne by name). You can’t make this stuff up.
Cooperman has vowed to fight the charges, telling investors yesterday that he refuses to settle with the SEC because the allegations are unfounded. And he laid out a detailed explanation of the trades in question in a five-page letter, offering a point-by-point rebuttal of the insider trading charges.
But the insider trading details in the SEC’s complaint caused many to overlook another series of charges brought by the SEC in the same complaint that are just as disturbing — and which account for roughly half of the complaint. The regulator has also accused Cooperman and Omega of failing to file in a timely manner securities disclosures and trading reports, on more than 40 occasions, involving the securities of eight different companies since August 2010. These violations concern a series of beneficial ownership reports required when an investor owns more than 5 percent or 10 percent of a stock.
“The delay in filing or failure to file altogether allowed Cooperman and Omega to continue to trade in the securities of a given company and potentially obtain advantageous prices by removing the risk that the public announcement of Cooperman’s holdings or transactions would impact the price of the securities,” the SEC states. Keep in mind that August 10, 2010, happens to be the first month after the questionable trades in Atlas took place.
The SEC cites, for example, Omega’s investment in Altisource Portfolio Solutions, the Luxembourg-based real estate and mortgage financing company. On April 21, 2014, Omega bought 50,000 shares of the company, pushing Cooperman’s firm over the 5 percent ownership threshold. This required the hedge fund to file a 13G disclosure form within ten days of passing this hurdle, which would have been May 1, 2014.
However, Cooperman did not get around to making this filing until January 23, 2015, according to the complaint. What’s more, Omega bought additional shares during the intervening period without making any filings.
Additional purchases on December 18, 2014, boosted Omega’s stake to 10.8 percent of Altisource, the government notes. This required Omega to file a form 3 within ten days, or by December 29, 2014. However, Cooperman did not make this filing until January 21, 2015. What’s more, three Omega funds sold shares of Altisource on December 23, 2014, while Cooperman still owned more than 10 percent of the shares, which would have required a filing on form 4 or form 5, the SEC explains. But to this date he has still not made the filing.
More recently, on July 29, 2016, while Cooperman was still a beneficial owner of more than 10 percent of the shares, three Omega funds bought additional shares. However, Cooperman did not report these transactions until August 12, which was ten days after the required filing date. During that period, Omega bought even more shares.
Another example cited by the SEC is Omega’s stake in Atlas Resource Partners, a Pittsburgh developer of natural gas, crude oil and natural gas liquids whose stock was delisted over the summer of 2016. The SEC did note that Omega initially made several timely filings. However, as a beneficial owner of 11.2 percent of the shares, Cooperman engaged in a number of trades in 2014 that required him to file an amended disclosure by February 16, 2015. However, he did not make this required filing until October 26, 2015. Cooperman was also accused of making additional late filings involving this stock back in 2013.
He is also accused of failing to make several required filings regarding his stake in retailer Charming Shoppes in 2011. The company was acquired by Ascena Retail Group in 2012.
The SEC also accuses Cooperman of failing to make required filings showing he went from being a beneficial owner of retailer Delia’s, with 11.3 percent of the shares, to owning zero shares. Yet he sent emails on two occasions indicating “he was fully aware that he no longer held any” of the company’s securities, according to the complaint.
The regulator also accused Cooperman of failing to make required timely filings on four other stocks: Empire Resources, which sells aluminum products; MDC Partners, a provider of marketing services; New Media Investment Group, which owns media assets; and Resource America, an asset management firm. The volume of violations is seemingly damaging.
Cooperman’s letter to investors on Wednesday dealt entirely with the allegations surrounding his trades involving the securities of Atlas Pipeline Partners and the insider trading charges.
He did not devote even one sentence to the late or nonexistent filings on the eight other stocks.
