SAC Capital Pleads Not Guilty; US Stocks Tumble; Global Outlook; US Considering Scrapping $1 Bills
NINA DOS SANTOS, HOST: Tonight, SAC pleads not guilty. Wall Street's biggest hedge fund denies insider trading charges. Wonga investment. The Church of England is embarrassed over its links to the payday lender. And just as Facebook charms investors, why a study says that it might be getting its users down. Hello, I'm Nina Dos Santos, and this is QUEST MEANS BUSINESS. Good evening. SAC Capital is heading for an epic court battle with the US government after denying all charges of fraud. The hedge fund pleaded not guilty at a pretrial hearing in New York. That was after US attorneys accused it of the biggest insider trading scam in history. Let's go over to Felicia Taylor, who's in New York following all these developments. So, Felicia, they're going after the company, but also its assets, which are owned by Steven A. Cohen.</s>FELICIA TAYLOR, CNN INTERNATIONAL CORRESPONDENT: Yes, this is the crux of the conversation. And this all surrounds what they're calling "unprecedented insider trading scheme." Now, that means that the government has to prove that there was willful intent to engage in insider trading.</s>TAYLOR: But what's the definition of insider trading? That's a fine line as to the way traders and portfolio managers may have obtained information. Let's take a listen to Ralph Silva, who runs a research firm out of Toronto onto what exactly that fine line can mean.</s>RALPH SILVA, DIRECTOR, SILVA RESEARCH NETWORK: Insider trading in much smaller level happens on a daily basis. People hear things when they're going out for a bagel, they just hear things, and they react to these things. Management doesn't always know all the interactions that their traders or analysts are doing. As a result, they can't necessarily manage this. But what's unprecedented with this case is that it is a criminal case, not a regular regulatory case, where just a small fine or maybe some type of exclusion was happening. And all the contacts that I've been talking to over the past 24 hours in New York, they're running scared.</s>TAYLOR: Question is, did these individuals willfully, knowingly get non-public, material information or was it just sort of innocuous conversation that may have happened, as Ralph Silva pointed out, possibly at a coffee shop or over a dinner table or they just witnessed something happening. It's a very difficult thing to prove, especially on a criminal level. The point is, though, is that Preet Bharara, who is the US attorney in the Southern District Court of New York, is going after this hedge fund in particular because it is so high-profile. That has to scare a number of other hedge fund industry portfolio managers or heads of hedge fund out there, because they're very serious about cracking down on insider trading. Earlier, we spoke to John Coffee of Columbia University, who has has take on how this might affect a small portion of the industry.</s>JOHN COFFEE, PROFESSOR, COLUMBIA LAW SCHOOL: This will send some shockwaves through that portion of the hedge fund community that tries to beat the market by acquiring market-making news. That's a small portion of the total hedge fund community, which is largely quantitative in their orientation. But of those people, this means they've got to watch out. They've got to take diligence and compliance seriously. Mr. Cohen was sort of evading that, it appears. So, I think we will see a significant change in behavior in the world of fast-trading hedge funds.</s>TAYLOR: In other words, more compliance, more transparency. Obviously, not everybody in the hedge fund industry engages in this kind of alleged illegal activity. But you know, what's really interesting about this case, Nina, is not only are they discussing insider trading, but they've also issued charges of money laundering. That is something that we haven't necessarily heard before that is associated with this kind of trading. And how do you get from insider trading to money laundering? The way the US attorney has done this is by saying that because those funds allegedly were received and profitable off of insider trading, which is obviously illegal, and then those funds were funneled back into what were perfectly legitimate funds, all of the funds are then tainted. And that's how they can go after the money laundering, and that could lead to the seizing of all of Steve Cohen's assets. That includes his house, his art collection, and other property that he may own, which I believe he has in Florida and also in the Hamptons, which is in Long Island, the eastern part of Long Island. So, there's a number of different reasons why this could be an enormous problem for him. Not only is it going to cost him potentially hundreds of millions of dollars, possibly even billions, but they could go after all of his assets, and therefore, his business will shut down.</s>DOS SANTOS: Yes, $9.3 billion, that's an awful lot at stake, and a lot of that personal fortune, as you were just saying, Felicia, is wound up also in SAC Capital. Joining us from New York, Felicia Taylor this evening, thanks for that. Now, US stocks look like they're heading for losses on this week's trading. Take a look at the big board behind me. It's the second or third day that this market has been in the red after reaching another set of record highs earlier on in the week. The Dow is off by, as you can see here, almost around about 50 points at the moment. It was up -- down around about twice that amount in points terms earlier on in this session. It has managed to recover, as you can see. It's only down around about a third of one percent. But as we've said, we've had a series of disappointing earnings coming out from some of the big bellwethers in the United States, particularly in the tech world, like Amazon and Expedia. We'll have more on those in a moment's time. But all of this has painted a bit of a mixed corporate picture, and the economic news has been more positive. However, one measure of consumer confidence in the United States did come in at its highest level in six years. As I was saying, though, really, what people are looking for is the statements that are coming out of some of these companies further down the line about what they expect to happen in the world's largest economy. Well, it's been a big week for second quarter results as the earnings season begins to eventually wind down, that'll offer some relief to the likes of Alison Kosik, who's been following all the action at the New York Stock Exchange and joins us now, live, with more. Alison?</s>ALISON KOSIK, CNN BUSINESS CORRESPONDENT: Oh, no, no, no. I love the action, Nina. But it is a pretty light day on the earnings calendar today. We are watching shares of Zynga, right now, plunge 14 percent. Expedia shares, they're falling even more, 25 percent down after their disappointing results last night. But the reporting period overall has been going OK. Almost half of S&P; 500 companies have reported so far, and Thomson Reuters says 68 percent have topped profit forecasts, 56 percent have beat on sale. It kind of helped the market, really, churn steadily higher. But the question is, will they help economic growth, and what about the global outlook going forward? I talked with David Cote, he's the CEO of Honeywell. I talked to him yesterday. The industrial giant is erring on the side of caution when it comes to its forecasts.</s>DAVID COTE, CEO, HONEYWELL: The way we're going to look at the world economy going forward is for the next three years, the US grows at 2 percent, Europe grows at zero, India grows around 4, China grows 6 to 7. So, we're going to stay on the more conservative side.</s>KOSIK: And that Honeywell outlook for the US is a bit more bearish than the Fed, which is expecting about 3.2 percent GDP growth by 2015. Now, I also asked him what the biggest hurdle is for the global recovery.</s>COTE: The biggest headwind -- progress as a company is just what's happening on the global economy, and the biggest impediment to the global economy is debt. You take a look at the world's big democracies -- Japan, the EU, India, the US -- they're all paralyzed by debt right now. And until they actually -- all four actually take the actions that they need to, which Japan is just starting to, we're going to stay like this, and we've got to address it.</s>KOSIK: And Cote also said that two things that would be key for the US would be a smart debt deal and to produce more of our own oil and gas, but that those things are tough, too, because, Nina, they result in a lot of arguments among lawmakers. Nina?</s>DOS SANTOS: Yes, they certainly do. Alison Kosik joining us at the New York Stock Exchange. Have a great weekend, there.</s>KOSIK: You, too.</s>DOS SANTOS: Thanks for wrapping up the earnings. Now, he promised to do whatever it takes and swore it would be enough. Mario Draghi's famous speech in London is now a year old. Next up, we look at its real effect on the eurozone crisis.