Billionaire Leon Cooperman invoked his Fifth Amendment right against self incrimination and declined to answer questions from the SEC about alleged insider trades because he faced a related criminal investigation by the U.S., his lawyer said.

The U.S. Securities and Exchange Commission sued Cooperman, accusing the hedge-fund manager of reaping $4 million in profits after conversations with a company insider. Cooperman had allegedly promised he wouldnt use the information, regulators said.

The remark by Coopermans lawyer came during a hearing Tuesday in Philadelphia federal court in which the hedge fund founder sought to have the SEC case dismissed. Mark Sylvester, a lawyer for the SEC, toldU.S. District Judge Juan Sanchez that Cooperman had refused to be questioned by regulators before they filed their complaint last year. Coopermans lawyer, Ted Wells, countered that Cooperman had been merely following his instructions.

"Mr. Cooperman had asserted Fifth-Amendment right before the commission because, at the time I advised him, there was a parallel criminal investigation," Wells said. "He made clear he wanted to testify, but for my advice that there was a parallel case."

William Skaggs, a spokesman for the office of New Jersey U.S. Attorney Paul Fishman, said it was his offices policy to neither confirm nor deny the existence of any investigation. Wells declined to comment when asked if Cooperman still faced a criminal inquiry.

For more on the legal questions raised by Coopermans case, click here

Your cheat sheet on life, in one weekly email.

Get our weekly Game Plan newsletter.

Coopermans lawyers argued Tuesday that he was under no obligation to refrain from trading after the calls because any purported promise came after the information was disclosed by the insider.

"You may have broken your promise not to trade, but you havent misappropriated," said Daniel Kramer, a lawyer for Cooperman. "Not every broken promise is fraud."

Bridget Fitzpatrick, a lawyer for the SEC, said the case should proceed to trial, saying Cooperman was pursuing an "astounding theory" and attempting to create a "new loophole" in securities laws by claiming he had no duty to refrain from trading after the calls. She said Cooperman could have told the insider he intended to trade but chose not to divulge it.

"They come forth with a very clever argument that gives him a free pass for deception," she said. "The statute prohibits deceptive conduct.

Youd be the first court in adopting the defendants argument," Fitzpatrick said. "It would be an astounding opinion."

Sanchez didnt immediately issue a decision on the request, saying, "Im going to be all alone" as the first federal judge to consider such a question.

The case is SEC v. Cooperman, 16-cv-5043, U.S. District Court, Eastern District of Pennsylvania (Philadelphia).

Read the original here:

Cooperman's Lawyer Says He Faced Parallel Criminal Inquiry - Bloomberg