What Gets An SAC Portfolio Manager $1.3 MM? Lots Of Insider Trading, Banging Hookers And Running Around Naked While High On Shrooms

Courtesy of ex-SAC portfolio manager Noah Freeman's cooperating witness testimony, we now know just what it takes to be a star trader under Stevie Cohen: i) trade on inside information at least 6 times, ii) run around San Francisco, in your underwear, high on shrooms, and iii) bang a hooker at a Taiwan bar called the Red Horse. And that's about all you need to make 1.3 million a year while in the employment of one SAC Capital.

Bloomberg brings us more details of the highly secretive, and oh so mysterious world of hedge fund high fliers:

A former SAC Capital Advisors LLP portfolio manager testified that on a 2009 business trip he ingested a hallucinogenic mushroom that resulted in his wandering around the streets of San Francisco in his underwear.

Freeman was asked about his drug history during cross- examination by David Luttinger, a lawyer for Jiau. Freeman said he smoked marijuana regularly from his senior year in high school until 2009 and said he took a hallucinogenic mushroom once while attending a conference in San Francisco in 2009.

“I was walking around looking for something to do,” Freeman said, adding that he’d bought the drug outside a concert hall. When he didn’t get an immediate reaction, he said he ate some more.

“‘Weren’t you running around the streets of San Francisco in your underwear?” asked Luttinger, who also asked Freeman why he hadn’t given authorities or hospital officials his real name when he was found wandering and disoriented.

“It was one of the worst experiences of my life,” Freeman said. “I was worried I was going to get in trouble with SAC.”

Then there is the whole insider trading thing...

Luttinger closely questioned Freeman about the number of times he committed insider trading based on material, nonpublic information while at Sonar Capital.

“Approximately a dozen where I’m totally confident the information was material and nonpublic,” Freeman said.

“What about your time at SAC Capital?” Luttinger asked.

“Focusing on only the ones where there was no question of a gray area, I would say perhaps half a dozen,” Freeman said. “Again, my trading style was faster there, so I don’t remember quite as well.”

But wait, there's more:

Was it your experience that people working in companies based in Taiwan were looser with their financial information and sales data?” Luttinger asked.

“Yes, they were,” Freeman said.

Luttinger asked Freeman if he ever paid for prostitutes for his sources, citing a report by the Federal Bureau of Investigation describing an incident at a karaoke bar in Taiwan called the Red Horse.

“Didn’t you purchase a prostitute?” Luttinger asked.

“No,” Freeman said. “The conversation was conducted in Chinese. I collected a large bill and I was never sure what happened.”

He said the bill totaled “a couple of thousand dollars,” and he submitted it to his assistant at Sonar Capital who “sorted it out.”

But wait, there's even more:

Last week, Hyland disputed Freeman’s testimony, saying that “any statement that Sonar Capital used insider trading as a business model is categorically false.”

Just like SAC has said any statement about SAC is "categorically false."

As for the bottom line:

Freeman, who said his contract at SAC Capital guaranteed him a minimum compensation of $1.3 million.

And now you know the mystery behind the hedge fund facade: insider trading, lots of drugs, occasionally running around a major metropolis in your boxers, and hookers. The rest is the daily commute.