By Emily Flitter and Katya Wachtel
NEW YORK (Reuters) - A former employee of SAC Capital Advisors' Chicago office was once part of an "insider trading group" at a rival hedge fund, according to an indictment filed on Thursday against SAC.
A source familiar with the matter said the hedge fund was Citadel. A Citadel spokeswoman said there was no such "insider trading group" at the firm.
Charges filed in U.S. District Court in New York on Thursday against prominent hedge fund manger Steven A. Cohen's SAC Capital said his former employee, Richard Lee, moved from a firm, identified only as "Hedge Fund A" to SAC, despite a warning that Lee "was known for being part of Hedge Fund A's 'insider trading group.'"
The source familiar with the matter said "Hedge Fund A" is Citadel, the Chicago-based firm founded by Kenneth Griffin. Citadel managed roughly $13.3 billion at the end of 2012, according to a regulatory filing. Citadel was one of several hedge funds subpoenaed by federal authorities in 2010 as part of the government's broader insider trading investigation.
Lee worked at Citadel from 2006 until he was fired in 2008, according to a spokeswoman for the firm. The spokeswoman, Katie Spring, said Lee worked as a team member in a merger arbitrage group known as Principal Strategies, which was shuttered as a result of the financial crisis.
"There is no insider trading group at Citadel," Spring said in response to that characterization in court documents.
Spring said Lee's termination was for a violation of firm policy as he was in transition to take over the Principal Strategies team, but was "unrelated to anything about insider trading."
Lee agreed this week to plead guilty to securities fraud charges and to cooperate with government investigators.
A spokesman for SAC Capital was not immediately available to comment on Thursday.
According to court papers filed in Lee's case, federal investigators said he obtained inside information about several stocks while at SAC including Yahoo, which he traded ahead of the technology company's earnings release and the announcement of a planned corporate partnership.
Citadel and SAC have engaged in a rivalry that has included attempts to poach each others' best employees. SAC had a small office in Chicago with four teams of portfolio managers and analysts, but closed it at the end of 2012, citing cost-cutting measures and poor performance.
(Reporting By Emily Flitter and Katya Wachtel in New York and Svea Herbst-Bayliss in Boston; Editing by Matthew Goldstein and Grant McCool)