NEW YORK A lawsuit accusing billionaire hedge fund founder Steven A. Cohen of hiding assets in a 1990 divorce was reinstated Wednesday -- the latest chapter in a long-running legal battle with his ex-wife.
A district court judge in Manhattan had thrown out Patricia Cohen's suit in 2011, saying its fraud allegations were too old and unsubstantiated to go forward. Her husband's lawyers had accused her of filing it merely to "to harass and generate media attention against Mr. Cohen" nearly 20 years after the couple split amid his rise to one of the richest men in America.
But the 2nd U.S. Circuit Court of Appeals concluded in a written opinion Wednesday that "there was no basis to dismiss Patricia's fraud-based claims as untimely" since she had only uncovered evidence to back them up in 2008.
The couple divorced in 1990 after Cohen had already become one of the most successful traders on Wall Street. He remarried in 1992 and launched SAC Capital with $25 million in assets, a total that grew into the billions over the next two decades.
An attorney for Patricia Cohen, Howard Foster, said on Wednesday that his client was eager to resume the case.
"I'm delighted that we won," Foster said. "Patricia's delighted also."
A spokesman for Steven Cohen said the ruling didn't address the lawsuit's merits.
"As we have said from the outset, these decades-old allegations by Mr. Cohen's former spouse were patently false and entirely without merit," said the spokesman, Jonathan Gasthalter. "We will continue to defend against them vigorously."
The decision comes at a time when federal authorities have intensified their scrutiny of Cohen and his $15 billion fund, SAC Capital Advisors. An insider trading investigation has resulted in arrests of five people associated with the Stamford, Conn.-based firm in the past four years.
Last month, the Securities and Exchange Commission announced that two affiliates of SAC Capital would pay more than $614 million in what regulators called the largest insider trading settlement ever. The settlement is subject to court approval.
Cohen has not been charged with any crime and his firm says it is cooperating with investigators. But court papers filed in connection with the January arrest of a portfolio manager at an SAC affiliate repeatedly reference Cohen as a "Hedge Fund Owner" who allegedly rejected the advice of his own analysts and bet heavily on secret data from a study of an experimental drug.
Patricia Cohen's racketeering lawsuit, filed in 2009, drew attention by alleging that Cohen had confided to her that he made $20 million after receiving an advance tip that General Electric was set to buy RCA in 1985. The tip came from a circle of fellow graduates of the Wharton School at the University of Pennsylvania, known to each other as "the Wharton mafia," the suit alleged.
The appeals court decision focused mainly on a separate allegation that Cohen lied about a $9 million investment in co-op apartments in 1986. His wife claimed that while contesting their financial agreement in 1991 that he'd lost the entire investment -- reducing his net worth at the time to $8.1 million.
She said she suspected he was lying. But it wasn't until 2008 that she discovered a court file showing that her husband was paid $5.5 million to settle a dispute with a partner in the co-op investment. It was only then that she had a basis to sue him, the appeals court said.
Until that point, "Patricia's suspicions that Steven had concealed payments due him ... were based on nothing more than intuition and wishful thinking," the court wrote.