Trouble in hedge fund land. Greenwich residents are terrified that would-be new neighbor, Russian millionaire Valery Kogan, will make them look bad (read: poor) by building a proposed 54,000 square foot mansion with two wings, “extensive” subterranean space, and room for up to 300 guests, which will clearly dwarf their own homes, relative shacks compared to the behemoth.

Though they claim their protests are merely matters of (a) taste (“`It looks like they want to duplicate the Winter Palace here in Greenwich,” said Leslie McElwreath. “It’ll be an eyesore.”), (b) safety (“This is a road where our kids learn to ride bikes, rollerblade, and people take walks,” said Morris Sachs, a trader at Brevan Howard.) and (c) not being summarily drowned while taking part in a pissing contest (“This is going to be a palace on a postage stamp,” Charles Lee said. “It’s too much.”), those intimately familiar with the gastrointestinal habits of SAC Capital Founder Steve Cohen know better.

Though never stated outright, the real problem with Kogan’s house is that it is slated to contain 26 toilets. And though it has many, many WC’s, Steve Cohen’s home does not have 26. Were Kogan to start building without making some edits first, he would not only be embarrassing Cohen in his own domain, he would be breaking a law, which the residents quoted by Bloomberg are trying to uphold. Section 182, clause 17 of the Greenwich town code clearly states that “no home shall exceed the number of waste-removal stations as are found at Casa Cohen.”

Interestingly enough, Cohen, who is not cited in the article, is said to have zero problem with any other aspect of Kogan’s dream home. “He could build a domicile three times the size of Stevie’s, with 40 master bedrooms to Steve’s 2, 16 refrigerators to Steve’s 12, and 2 ice rink’s to Steve’s 1,” a friend of a friend of a friend told DealBreaker. “It’s the toilets he cares about. Just the toilets.”

Empathizing with the big guy, CNBC on-air editor Charlie Gasparino commented* that he “fully understands where Cohen’s coming from.” Pausing momentarily to enjoy a paper-thin slice of salami he’d cut moments earlier on the deli meat slicer he’d won in a bet with his local butcher, Gasparino added, “Bathrooms are extremely important to me. I live in a studio, but it’s got 4 cans. And I think that because so much of my identity is tied to my obsession with being ‘regular,’ I’d probably feel threatened if the guy next door had 5. I know it sounds crazy, but it’d be like I was less of a man or something.”

Anyway. This is a private matter that doesn’t really involve us, per se, and hopefully it’ll be resolved shortly. But obviously you’re all dying to know, “just how many toilets does Cohen’s house have?” We’re going to tell you, but not just yet. First, you’re going to guess. The first person to correctly get it will receive our heartfelt congratulations via email. But that’s not all. You’ll also receive two free tickets to a hockey game taking place at Cohen’s backyard rink. On June 6 the BG will taken on a team comprised of his young children’s friends and his least favorite SAC employees. The home team (SC) plays perched atop a Zamboni made from repurposed monster truck parts that gets to shoot out pucks at random, with a glassed-in Pope-mobile-like top in place of a mask. The away team (kids + staff) are issued Soviet-era gear, never win, and are forced to put on a Disney on Ice show of Cohen’s choosing following the game. Last year was Aladdin. This year is anyone’s guess.

On Tuesdays, I like to do what I call investigative journalism. Also called, by some in the field,“Google Image searching.” Little anthropological looks into what’s up at hedge funds, the private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested. Sometimes I publish my findings, sometimes I keep them to myself. For example, once I spent a few hours researching a persistent rumor that Jorge Soros and Jimbo Rogers love playing ‘sniper’ on trips to Eastern Europe, placing $100m bets on whether random targets fall to the left or right. Last week, after hearing from several reliable sources that Ray Dalio is always up for a good cross-dress, I decided to try and figure out what kind of garters he wears under his suit pants.

Today’s investigation was that the rumor that there are many ‘Steve-alikes’ running around, executing trades, pilfering masterpieces, posing for fake photos—like a second Oswald or Saddam Hussein—to keep the hellhounds off the trail. Though I couldn’t help but wonder, where would the big guy find such doppelgangers? It’s not everyday you come across a bald, paunchy, bespectacled Jewish guy pushing 50, for this is a very rare bird. Or is it?

As it turns out, there are literally thousands of them, these ‘Steve-alikes.’ Thousands! And they all look exactly alike (hence their name, ‘Steve-alike’). Join me after the jump as I offer my findings on ‘Roly-poly guys named Steve Cohen who, while rather schlubby, possess an inexplicable magnetism that makes one want to be bounced on their respective knees and who all look EXACTLY alike.’ You wouldn’t think it took the whole afternoon to compile the portfolio, but it DID.

Great headline, right? There’s more where that came from. Anyway, according to papers files yesterday, the federal Equal Employment Opportunity Commission is now investigating allegations that a SAC trader was required to take female hormones as part of a senior trader’s “top secret training program.” For those of you who don’t have Google alerts set up for “some pretty fucked up shit,” Andrew Tong, who was fired last year from the hedge fund, has accused Ping Jiang of sexual harassment that had Tong taking female hormones (which he bought on the black market) in order to reduce aggressiveness and make him more effeminate, and, in turn, a better trader. Additionally, there’s been talk of “sexual relations between two men.” Tong has also stated that the hormones caused him significant emotional and physical distress, as well as impotence.

The Post reports that those who know Jiang, still running SAC’s computer trading at its Madison Avenue offices, are surprised by the accusations. “He was a very bright, quiet loner…an aggressive trader who like to take big positions,” said a former Lehman exec (where Jiang and Tong first met, nine years ago). Another former Lehman Brother, and Jiang sympathizer speculated that “[Jiang’s] strategy might have rubbed [Tong] the wrong way, but the most successful people in hedge funds are intense and single-minded,” presumably referring to Jiang’s more legal trading strategies. Meanwhile, a third former Brother (and DealBreaker reader) countered that Jiang is a “maniac” and said that the allegations seem “plausible.”

Up in Stamford, SAC employees are flummoxed. Not by the accusations, per se, but the rationale behind them. “If taking female hormones actually helped you do your job, they would simply hire women here,” one said. “But they don’t.”

For his part, Stevie Cohen is apparently angry, or at least embarrassed, and supposedly dispatched his minions to go from “desk to desk to try and find out who leaked it…like a witch hunt.” In accordance with his personality, Stevie will have no compunction over burning anyone alive, which he’s said to have done before, “for lesser things.”

Jiang/SAC’s lawyers called the allegations “salacious and false.” Tong’s lawyer, sort of awesomely, countered that the allegations are “neither salacious nor false.” False? Perhaps not. Salacious? We think so. One wonders what other sort of cases Tong’s lawyer may have covered that would make him so openminded.

Earlier: The Secret To SAC’s Sucess?
Sartorial Behavior Modification At SAC?

Two In The SAC [New York Post]

In May, we told you about the allegations of sartorial behavior modification at SAC Capital Management. Former SAC employee Andrew Z. Tong had accused current SAC employee (and top trader, and Yoko Ono neighbor) Ping Jiang of sexual harassment that included enrollment in a “top secret training program,” and the elimination of Tong’s alleged personality flaws by requiring him to wear “certain kinds of clothes to work.” No one got back to us regarding whether or not leather was involved and we pretty much forgot about the whole thing, the night terrors involving Stevie Cohen, spandex and warm-up suits notwithstanding. Today, Charlie Gasparino, because he tracks this sort of thing, brings us an update.

— Apparently, one aspect of the “program,” guided by Jiang’s belief that traders are too aggressive and should be more effeminate, had Tong taking female hormones, which he bought on the black market.

— According to Tong, as a result of the hormones, he suffered emotional and physical distress, and started wearing women’s clothes. He also said that he was unable to perform sexually with his wife, with whom he was trying to have a baby.

— Other forms of harassment allegedly included “sexual relations between two men.”

Not surprisingly, SAC and Jiang have denied the charges, and said in a statement:

”SAC conducted a thorough investigation and found these scurrilous accusations to be false. We will vigorously defend ourselves and are confident that these claims will be swiftly rejected in arbitration.”

Sources at the firm told Gasparino that Tong was fired for cause in April 2006, though whether or not the “cause” was his inability to even feign enthusiasm at being forced to wear a dress is unclear. (We know—not funny, just sick. It’s a defense mechanism sometimes employed in uncomfortable situations so back off you don’t know my life!)

On a lighter note, this whole thing makes the rumors about Cohen leaving the dismembered body of a (former) analyst floating in tank of formaldehyde on the Stamford trading desk, “as a motivational technique,” not seem so bad, eh?

Earlier: Sartorial Behavior Modification at S.A.C.?

Tong v S.A.C. Capital Mgt., LLC

SAC Capital Harassment Suit [CNBC]

Stevie Cohen (may be) a sell-out. Yes, the man who has made his money through a combination of massive, rapid trading in US securities and “If you tell anyone about this, I’ll end you” secrecy is considering selling upwards of 20% of SAC Capital, his $14 billion hedge fund. The Financial Times reports that the fund has been shopping stakes in its management company to a number of Asian state funds like Temasek. Or maybe it’s the other way, and the Asians are asking to buy a piece of Cohen. It is unclear at the time whether SAC will sell one or two large stakes or a couple of baby stakes adding up to 20. Word is that Lehman is helping put together the deal.

SAC declined to comment. And the FT story contains all the usual verbal parachutes that it can rely on if the story turns out to be wrong. But we’ve been hearing similar rumors for the past several weeks. One source tells us that the fund may be planning an equity sale for September/October, but would likely step up its timeline if the news becomes public (i.e…now).

We’d also heard that Cohen’s donation of the Damien Hirst shark tank to the Met was part of an image remake in advance of an equity offering of some sort. We dismissed this and privately decided that he just wanted to show Citadel founder Kenneth Griffin that he isn’t the only one rich enough to donate small fortunes to the local art museum. Boy do we have egg on our face now.

Speaking of hedge funds and formaldehyde, the International Herald Tribune this morning anoints Hirst as a hedge fund manager: “Hirst…has gone from being an artist to being what you might call the manager of the hedge fund of Damien Hirst’s art.”

SAC Capital considers sale of stakes [FT]

Stevie Cohen’s “shark,” which is “big, important and amazingly powerful,” will be on display at the Met by Labor Day weekend, the museum confirmed on Friday. The shark, which floats in a tank of formaldehyde, has been sought after by the Gary Tinterow, the curator in charge of contemporary art, since it was purchased by Cohen for $8 million in 2004. (“Is it real? Isn’t it real?’’ the manager known for his existentialism has said of the piece. “I liked the whole fear factor”).

The trading desk of his Stamford, CT office had been previously discussed as a home for the shark but was deemed “not fear-inducing enough.” A dismembered human, also floating in a tank of formaldehyde, took the allotted space. (It’s all psychological. You yell barracuda, everybody says, “Huh? What?” You yell “shark,” same deal. You yell “dismembered analyst” we’ve got a panic on our hands on the Fourth of July).

Hirst’s Shark Moving to New Home in Met [NYT]

It’s no secret that Stevie Cohen and S.A.C. Capital Management like to keep secrets. Cohen owns the media rights to publish his photographs, makes traders in his group swear on their lives that they won’t disclose any information, never shares his ideas with others and types all correspondence in ǃ’OǃKung.

A New York County Supreme Court decision from May 17, 2007, regarding the alleged sexual harassment of former S.A.C. employee, Andrew Z. Tong, by current S.A.C. employee (and top trader, Yoko Ono neighbor), Ping Jiang, reveals a thin layer of understanding from the culture of secrecy and freakishness onion up in Stamford, CT. Tong first met Jiang back in 1998, when they were both working in the emerging markets department of Lehman Brothers. They went their separate ways in 2001 but kept in touch, and in 2005, Jiang offered Tong a job at S.A.C. Tong took the job, and worked there until his termination, effective April 10, 2006, later claiming that during that time he was subjected to sexual harassment, a hostile work environment, discrimination and retaliation by defendants. So far, so good (there’s nothing ground breaking about sexual harassment, it happens at all the best firms, if you’re lucky).

Some details in the court documents, however, cause pause:

On July 24, Tong met with Jiang both alone and with other members of Jiang’s group. Jiang told Tong about his top secret training philosophy, which was to include a program of strict confidentiality and the elimination of Tong’s alleged personality flaws by requiring him to wear certain kinds of clothing at work.

What is this “top secret training philosophy”? What kinds of clothes eliminate personality flaws? Are they made of spandex? And if so, are they bike shorts? With piping down the side? Warm-up suits? CORDUROY?? And is this why S.A.C.’s been so successful? Have any of our various hedgie readers ever unwittingly (or wittingly) taken part in something like this? Get it off your chests immediately. We’ve respected Cohen’s don’t ask, don’t tell policy long enough.

Tong v S.A.C. Capital Mgt., LLC

Nice pump up speech for hedge funds in today’s Hedge Week (we’re not going to make our ‘hedge’ quota by 5 without your help). Despite industry leaders “prophesying an end to the industry,” George Soros saying hedge funds are too over-exposed, Stevie Cohen (immune to self-inflicted irony) noting that the days of big returns are over, Warren Buffett taking hedge funds to task for their high fees in his annual letter to shareholders, and performances in general being down, Hedge Week’s Shoham Cohen still thinks everything will work out if we just think positively!

There are good managers (James Simons) and there are bad managers (Tom Hudson, the guys who do Goldman’s Alpha), Cohen perceptively notes, but given the hotness of HFs, the look-on-the-bright-side news is that every day a new manager emerges (today: Tim Sykes, tomorrow: Tom Sikkes). 1 pt: hedge fund sustainability.

Yes, there are a lot of strategies performing quite badly, of late. But that just means managers will have to work harder to diversify. This is not an obstacle for Cohen, this is an opportunity. And how about numbers, those are always good. First quarter of 2007: $60 billion from global investors. Since hedge funds were invented: $1.6 trillion managed. Big numbers—that’s got to mean something.

The person whose job is predicated on the survival of hedge funds also predicts that the future will allow “personal hedge funds pools to be created” and that there will be room for “tailored managed funds whereby fund managers will open private hedge funds.” Cohen wants you to know that this new era will be an exciting one, and if all you would-be managers out there will peel yourselves up off the bathroom floor, pump yourself full of some happy pills, “overcome the psychological barrier in setting up a fund, and come out with new strategies” and tell yourselves, “I will sell this house today!” we can begin our journey. Together, assembled brotherhood of Neo-HF’ers.

An Apocalyptic Turn for Hedge Funds? [Hedge World]

As previously noted this morning, private equity will be the hot chick at the party in ’07. But we didn’t realize that she’d be so hot that Stevie-boy Cohen would dip his fingers in her womanaly charms. But we’ve been not-clairvoyant before so, uh, this is nothing new (though upsetting all the while). As The Street’s Matthew Goldstein reports:

In a somewhat surprising move, Cohen’s $12 billion SAC Capital Partners behemoth is stepping up to the plate to help finance a $3.1 billion management-led buyout of Laureate Education. The Connecticut-based hedge fund is part of a group of investors taking the higher education company private in a deal led by Laureate CEO Douglas Becker, Kohlberg Kravis Roberts and Citigroup’s private equity arm.

Shift for SAC’s Cohen [thestreet.com]

The Hill reports that SAC Capital is currently building “a team equipped with considerable resources to make bets on Washington-based political intelligence, including tips gathered on and off Capitol Hill.” SAC is purportedly earmarking up to $1 billion for the venture. Two of Stevie-boy’s henchmen have been spotted lurking around the area, and have told sources they’re on assignment to “form relationships,” which sounds deliciously cloak and dagger enough to pique our interest (and in line with the manager’s “don’t talk to me, don’t look at me, don’t even think about me” style).

A spokesman for the hedge fund said the pair had been dispatched to the District on a trial basis, but firmly denied that SAC is setting up shop here.

“While many investment and securities firms have D.C. offices, we do not have an office there, nor have we decided to open such an office,” he said. He also refuted the claim that the hedge fund will earmark any pre-determined sum to trading on ideas flowing from Washington.

But that amounts to hair-splitting, given the fund’s substantial size — it has roughly $12 billion in assets — and its interest in gathering intelligence in Washington, argued a person familiar with SAC and the hedge-fund world.
“Based on the success of the team and the ability to generate ideas, it’s almost limitless what they could put in,” he said.

SAC will seek to profit from intelligence about pending legislation, regulatory changes as well as mergers, spin-offs and other non-financial events, sources said. The team could be up and running by the end of this month.

No word on whether or not Cohen will dirty his hands with Washington’s most closely guarded secret— Senator Chris Dodd’s hair; but if he knows what’s good for him, he will. (Is it a helmet? A piece? A bearskin rug and a near-lethal combination of hairspray and Depp? These are questions we need someone to supply answers to).

SAC Capital eyes D.C. move with $1 billion [The Hill]

Bloomberg’s reporting today that Steve Wynn is suing Lloyds of London for $54 million, the amount of the claim he submitted after he stuck his elbow through a Picasso that SAC Capital founder Stevie Cohen had agreed to buy for $139 million.

We don’t know. We like to think that if we put our elbow through a Picasso we’d do a lot more than wreck 1/3 of the thing. What kind of girly elbows does Wynn have, anyway?

But nonetheless we’re making a note to ourselves that if we ever find ourselves as guests at Stevie Cohen’s place, we’re keeping our gestures tight to the body and not pointing at anything at all.

Wynn Sues Lloyd’s After Claiming $54 Million for Picasso Tear [Bloomberg]

A bid by SAC Capital’s Stevie Cohen to hire away energy trader Brian Hunter may have been “the first domino” in the series of decisions that eventually led to the collapse of Amaranth, the Greenwich, Connecticut-based hedge fund brought down in September by bad bets on energy futures, according to a report from Bloomberg this morning.

Here’s the lede:

Nicholas Maounis, founder of the Amaranth Advisors LLC hedge fund, made a decision in April 2005 that eventually cost him his firm.

His promising natural-gas trader, Brian Hunter, had been offered a $1 million bonus to join Steven Cohen’s SAC Capital Advisors LLC. Maounis, who had built his Greenwich, Connecticut- based fund to $6 billion in assets, didn’t want Hunter to go.

Convertible bond and equity prices were falling and oil and natural gas prices were increasing, making Hunter’s expertise more valuable. So Maounis named Hunter co-head of the energy desk and gave him control of his own trades.

But you really should read the whole thing. There are lots of details about Amaranth’s internal controls (or lack thereof) and investment diversification (or lack thereof).

The dog that doesn’t bark in this article, however, is named Harry Arora. Harry was an Enron Zombie—an energy futures trader at the now infamously collapsed Houston company who had found new at Amaranth. He ran the hedge fund’s energy trading desk, leaving right around the time Brian Hunter got his big promotion. What’s unclear is whether Harry was forced out to make room for Brian, whether he left rather than share leadership of the desk with Brian or whether he was leaving anyway. He went on to start his own energy fund, Arcim Advisors.

[Editors note: The picture above the left represents Brian Hunter. And some other guy holding him up for the camera.]

Amaranth’s $6.6 Billion Slide Began With Trader’s Bid to Quit [Bloomberg]

Stevie-boy has said that he makes 90% of his money from 5% of his investments. We hope he’s trying to make money with this art stuff because the alternative—that someone would actually like to have stuff like this painting hanging around their home—is too horrible to contemplate.

From the New York Times:

As records were being broken at contemporary art auctions this week, the hedge fund billionaire Steven A. Cohen privately scooped up a de Kooning “Woman” painting for roughly $137.5 million, adding to the prestige of a personal collection that is fast becoming one of the world’s greatest.

Landmark De Kooning Crowns Collection [New York Times]

We totally saw this on the Brady Bunch once. (Yeah, we know it was a vase, but it’s the same idea and you know it). The thing to do is tape it together and hope mom and dad don’t notice.

The Ganz collection went up for auction in 1997, Wynn was saying — he was standing in front of the painting at this point, facing us. He raised his hand to show us something about the painting — and at that moment, his elbow crashed backwards right through the canvas.

There was a terrible noise.

Wynn stepped away from the painting, and there, smack in the middle of Marie-Therese Walter’s plump and allegedly-erotic forearm, was a black hole the size of a silver dollar - or, to be more exactly, the size of the tip of Steve Wynn’s elbow — with two three-inch long rips coming off it in either direction. Steve Wynn has retinitis pigmentosa, an eye disease that damages peripheral vision, but he could see quite clearly what had happened.

“Oh shit,” he said. “Look what I’ve done.”

The rest of us were speechless.

“Thank God it was me,” he said.

For sure.

The word “money” was mentioned by someone, or perhaps it was the word “deal.”

Wynn said: “This has nothing to do with money. The money means nothing to me. It’s that I had this painting in my care and I’ve damaged it.”