SAC Capital Hedge Fund, Under Fire, Braces for Withdrawals The embattled hedge fund SAC Capital Advisors is bracing for investors to pull out as much as several billion dollars by a Monday deadline. Withdrawals have stepped up as a separate deadline looms for law enforcement officials investigating the firm. Over the next several weeks, the authorities must decide whether to bring a criminal case against SAC related to suspicious trading in two drug stocks. The government has already brought charges against a former SAC employee connected to those trades, which involved the fund's billionaire founder, Steven A. Cohen. Authorities have explored new avenues on how they might bring a criminal case against the firm and possibly a civil action against Mr. Cohen, people briefed on the case said. The escalated investigative activity has caused SAC investors to grow increasingly worried about the fund's future. Already this year, investors have pulled $1.7 billion from the $15 billion fund, or about a quarter of the outside money managed by SAC. Mr. Cohen's fortune and employee money accounts for about $9 billion of the fund. Depending on the total amount of withdrawals on Monday, a scheduled quarterly deadline, SAC, which is based in Stamford, Conn., could shut its door to outside investors and manage only internal funds. But the ultimate fate of the fund may be determined this summer, as the government's investigation enters the final stages. Prosecutors expect four senior SAC executives who received subpoenas last month to testify before a grand jury, according to the people briefed on the case. The executives include the firm's chief compliance officer and head trader, and they are expected to field questions about trading and compliance practices, these people said. Mr. Cohen has also received a grand jury subpoena, but he is expected to assert his constitutional right against self-incrimination rather than subject himself to unlimited questioning, the people briefed on the case said. He has already provided testimony to securities regulators in a parallel civil inquiry. Neither Mr. Cohen nor the firm has been accused of criminal wrongdoing. Though SAC has been a focus of investigators since at least 2006, the firm came under heightened scrutiny in November. Prosecutors accused Mathew Martoma, a former SAC employee, of obtaining secret data about clinical trials being done by the drug companies Elan and Wyeth, and using the information both to earn trading profits and avoid losses, a total of $276 million. For the first time in the inquiry, the government said that Mr. Cohen authorized the trades. Prosecutors have not claimed that Mr. Cohen knew about the confidential information that Mr. Martoma is accused of obtaining. Mr. Martoma is fighting the charges against him and has rejected overtures to cooperate and testify against Mr. Cohen. Because the Elan and Wyeth trades occurred in mid-July 2008, the government is running up against a five-year deadline to bring charges related to them. Prosecutors also face an August deadline to file charges related to trading in Dell shares, a case that has resulted in two indictments of former SAC employees, one of whom pleaded guilty. As these deadlines approach, clients are fleeing. At least three have indicated they are withdrawing money, according to people briefed on the matter. Blackstone Group, SAC's largest outside client, is expected to redeem more than half of roughly $500 million. Magnitude Capital, a New York-based firm that invests client money in hedge funds, has asked for its money, though how much is unclear. A third investor, Ironwood Capital Management, has also put in a withdrawal request. Ironwood, a San Francisco-based fund, decided to pull its money after SAC said last month that it was no longer cooperating "unconditionally" with the government or providing investors with updates about the investigation. Based on these withdrawals, SAC may decide to return money to all outside investors and become a "family office," managing only Mr. Cohen's wealth. The investor retreat comes after Mr. Cohen and his legal team thought that they had resolved most of SAC's legal problems. In March, it agreed to pay $616 million to settle two civil cases brought by the Securities and Exchange Commission related to the Elan, Wyeth and Dell trades. But despite the record fine, the S.E.C. is still contemplating a civil action against Mr. Cohen, according to the people briefed on the case. The agency is considering a number of possible claims against him, including insider trading related to the drug-stock trades. Another option is a lawsuit accusing Mr. Cohen of failing to supervise his employees. The S.E.C., which could assess a fine and seek to ban Mr. Cohen from the securities industry, has a lower threshold for proving its case than criminal authorities do. Prosecutors need to prove their case beyond a reasonable doubt, but the S.E.C. would have to prove its case by a preponderance of the evidence. The criminal authorities also continue to press their case. In recent weeks, by serving new subpoenas on SAC executives, they have made it clear that they are still trying to build evidence against the fund, and perhaps Mr. Cohen. Prosecutors often hesitate to indict companies, fearing job losses and the threat to the economy. Often they file a so-called deferred prosecution agreement, suspending charges as long as the company begins reforms. But prosecutors are not considering such an agreement with SAC, say people briefed on the investigation. At least nine current or former SAC employees have been tied to insider trading while at the fund; four have pleaded guilty. In late April, SAC's lawyers called a meeting to lay out their defense to possible charges, according to people briefed on the investigation. They were taken aback when 17 government officials - prosecutors, S.E.C. lawyers, F.B.I. agents and postal inspectors - attended the meeting at the United States attorney's office in Manhattan. Underscoring the importance of the SAC case, Richard B. Zabel, the deputy United States attorney in Manhattan, and Lorin L. Reisner, the head of the office's criminal division, helped lead the meeting and have taken an active role in the investigation. Lawyers from Willkie Farr & Gallagher and Paul, Weiss, Rifkind, Wharton & Garrison are defending SAC. A few weeks after the meeting, the authorities issued the grand jury subpoenas to the SAC executives, including one to Mr. Cohen. That day, the firm told investors it was no longer fully cooperating, a sign that Mr. Cohen will decline to testify. The other subpoenaed executives are Thomas Conheeney, the firm's president; Solomon Kumin, chief operating officer; Steven Kessler, chief compliance officer; and Phillipp Villhauer, head of trading. None have been accused of any wrongdoing. Mr. Cohen's lieutenants are expected to testify, but if they refuse, the government could compel testimony with a grant of immunity. One risk is that the executives could tell the grand jury they have no knowledge that Mr. Cohen ever violated securities laws. Some government officials hold out hope that the two former SAC employees under indictment will turn against Mr. Cohen. If convicted, Mr. Martoma, 38, married with three young children, faces up to 25 years in prison. Much of the case rests on what was said during a 20-minute call between Mr. Martoma and Mr. Cohen the night before SAC began executing the trades. Another of Mr. Cohen's former employees, Michael S. Steinberg, 41, also married with a young family, is also staring at possible prison time for his involvement in the Dell trade. The authorities sought the cooperation of Mr. Steinberg, one of SAC's longest-serving employees and a friend of Mr. Cohen. But he, too, has denied the charges. Jon Horvath, a former SAC analyst, pleaded guilty to trading Dell shares illegally, and said he passed inside tips to Mr. Steinberg. He is expected to be the government's main witness at Mr. Steinberg's trial, set for Nov. 18. SAC is paying for the legal bills of both Mr. Martoma and Mr. Steinberg.