No wonder Steven Cohen threw a decadent party at his 10-bedroom East Hampton estate the night after his SAC Capital Advisors pleaded not guilty to fraud. After all, it’s his firm, not him, that’s been slapped with a five-count criminal indictment.
It’s the billionaire’s 1,000 employees who are biting their fingernails, rather than feasting on the $2,000 of tuna served at his Saturday night soiree. How likely are they to rebuild their careers after working at a place prosecutors have called “a veritable magnet of market cheaters”?
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Just 10 former SAC employees have been charged or implicated for insider trading. But the taint has spread across the firm and its history, so it is now affecting careers even of people who left years earlier. For those who joined a name-brand investment company to upgrade their resumes, this takedown could topple their chances of climbing back into industry ranks.
Those seeking to shake off the stigma should look to the only comparable historical example: the demise of Arthur Andersen.
The Chicago-based former "Big Five" accounting firm was charged, as a firm, in March 2002 with obstruction of justice after a disclosure that it had destroyed documents related to its work as auditor of disgraced energy giant Enron. The firm was convicted three months later, effectively shutting it down.
The Supreme Court tossed out the verdict in May 2005, but the decision came too late for a fresh start. The majority of the global firm’s 85,000 employees were long gone by then. Soon less than 200 staffers were left mostly battling litigation resulting from past audits and ambling through other lingering lame tasks from a legacy lost.
Even if SAC is absolved of criminal charges, the SEC might have already drawn enough blood to kill the firm. Consider the difference between the era of Enron and 2013, where everything is immediately dissected by every media organization and social media platform. Also, SAC has enemies that Enron didn’t have to content with. Overstock.com CEO Patrick Byrne coughed up $100,000 for a full-page ad in the Wall Street Journal mocking Cohen on the day of his fabulous fete. Overstock is not the only company that considers itself victim of SAC shortsellers.
But even if there is no hope for SAC, there is hope for its current and former employees. Here are some Arthur Andersen employees who landed on their feet even after the firm fell hard.
Joseph (Joe) F. Berardino, who joined Arthur Andersen in 1972 and in 2001 was named managing partner and CEO of Andersen Worldwide, is now managing director (since 2008) in charge of the Eastern region in the business consulting practice at Alvarez & Marsal. That may be less lofty ground, but Berardino is not laying down.
The Big Four left standing tall quickly scooped up staff to build their ranks from their reeling rival.
The following hires were among those made in May-June 2001:
KPMG picked up 206 Seattle-based Arthur Andersen tax and audit employees. Another 411 ex-Andersen employees were added in Salt Lake City, Seattle, Portland, Ore., and Boise, Idaho, as well as 65 in Milwaukee, Wisconsin.
Grant Thornton opened a Milwaukee office with three former Andersen partners and then hired 50 more staffers.
Deloitte & Touche's Atlanta office plucked 359 former Arthur Andersen LLP employees, including 39 as partners, and picked up 225 more in Milwaukee.
PricewaterhouseCoopers and Ernst & Young only hired a handful in Milwaukee.
Most of the 2,000 Arthur Andersen alum from the Washington, DC-area were quickly snapped up, moving on to prominent firms like the Carlyle Group, Cogent Communications, Marriott International, J.E. Roberts, MuniMae and other major accounting firms.
Teaming together, former employees were often hired as groups, even forming their own social network.
Maybe SAC Capital’s aggressive, ambitious employees will form their own firewalled social network. It’s more likely they’ll spread out on searches of their own. They’re likely looking beyond their own company’s website which still lists 11 open jobs.
One lesson they can take from the boss – don’t apologize and never stop fighting. Don’t give up years of accomplishment over some bad behavior that the government has only been able to pin on a few people.
Follow the author on Twitter @natashagural