Famed investor Leon Cooperman was accused of insider trading by U.S. regulators in the government's biggest case against a hedge fund manager since its crackdown on SAC Capital Advisors.
The Securities and Exchange Commission said Mr. Cooperman used his status as one of Atlas Pipeline Partners' largest shareholders to gain access to confidential information from a company executive, according to a statement released Wednesday by the regulator.
He earned substantial illicit profits by buying securities in Atlas before the sale of a company asset in 2010, which caused shares to jump 31 per cent, the SEC said.
"We allege that hedge fund manager Mr. Cooperman, who as a large APL shareholder obtained access to confidential corporate information, abused that access by trading on this information," Andrew Ceresney, head of SEC's division of enforcement, said in a statement.
Mr. Cooperman said in a letter Wednesday to investors he strongly disagreed with the SEC's allegations and that the firm hasn't engaged in any unlawful conduct. He was planning to hold a conference call with investors later in the day.
When Omega Advisors received a subpoena about trading in Atlas, Mr. Cooperman contacted the Atlas company executive and told him to try to fabricate a story, according to the SEC. The executive was shocked and angered when he learned that Mr. Cooperman had traded in advance of Atlas's announcement, the regulator said.
The SEC's complaint seeks disgorgement of ill-gotten gains plus interest, penalties and permanent injunctions against Mr. Cooperman, 73, and Omega Advisors, as well as a permanent ban against the hedge fund manager.
Mr. Cooperman told clients in a letter dated March 21 that he and his firm received a Wells notice regarding an investment in a single issuer that it had since 2007, according to a person familiar with the matter at the time.
Mr. Cooperman later told CNBC that the probe centred on trading of Atlas, a midstream operator that ran networks in Oklahoma, southern Kansas, Texas and Tennessee before merging with a Targa Resources Partners LP unit more than a year ago.
The hedge fund manager first established a stake in Atlas Pipeline in the fourth quarter of 2007, according to SEC filings. The position increased substantially in late 2010 and again in late 2013, according to data compiled by Bloomberg. Omega also showed a stake in Targa after it bought Atlas last year.
Mr. Cooperman's firm, with $5.4-billion (U.S.) in assets under management as of Aug. 31, is among the oldest in the hedge fund industry. He's built a reputation as a stock picker over almost half a century by scrutinizing undervalued companies and asking management tough questions. He previously headed Goldman Sachs Asset Management and worked at the Wall Street firm for 25 years before leaving in 1991.
Stocks in which Omega owns a substantial portion of shares outstanding, including First Data Corp., Altisource Portfolio Solutions SA, HRG Group Inc. and Navient Corp., fell when news of the allegations against Mr. Cooperman were announced.