The SAC Capital hedge fund companies plead guilty to insider trading charges and will pay $1.8 billion.

The plea agreement imposes a $1.8 billion financial penalty on the SAC Companies – the largest insider trading penalty in history – split between a $900 million fine in the criminal case, and a $900 million forfeiture judgment in a civil money laundering and forfeiture action.

It also provides that the SAC Companies and their affiliates will no longer accept outside investor funds and will shut down operations as an investment adviser.

The SAC companies were represented by Martin Klotz, Michael Schacter and Alison Levine of Wilkie Farr in New York and by Theodore Wells, Daniel Kramer and Michael Gertzman of Paul Weiss in New York.

“As I said four years ago, at the time of our first major insider trading arrests, greed sometimes is not good,” said U.S. Attorney Preet Bharara. “And there are at least 75 convicted insider trading defendants who, today, would likely agree. But individual guilt is not the whole of our mission. Sometimes, blameworthy institutions need to be held accountable too. No institution should rest easy in the belief that it is too big to jail. That is a moral hazard that a just society can ill afford. Today, SAC Capital, one of the world’s largest and most powerful hedge funds, agreed to plead guilty, shut down its outside investment business, and pay the largest fine in history for insider trading offenses. That is the just and appropriate price for the pervasive and unprecedented institutional misconduct that occurred here.”

Federal officials alleged that from 1999 through at least 2010, numerous employees of the SAC Companies obtained and traded on material, non-public information that they were not permitted to have, or recommended trades based on such information to SAC Portfolio Managers — or the SAC Owner.

The indictment charges the SAC Companies with insider trading offenses committed by numerous employees, occurring over the span of more than a decade, and involving the securities of more than 20 publicly-traded companies across multiple sectors of the economy. The insider trading engaged in by SAC PMs and Research Analysts was the predictable and foreseeable result of multiple institutional failures, federal officials alleged.

The failures alleged included hiring practices heavily focused on recruiting employees with networks of public company insiders, the failure of SAC management to question employees about trades that appeared to be based on inside information, and ineffective compliance measures that failed to prevent or detect such trading, particularly prior to late 2009.

In the forfeiture action, the complaint alleges that the SAC Companies engaged in money laundering by commingling the illegal profits from insider trading with other assets, using the profits to promote additional insider trading, and transferring the profits with the assistance of financial institutions.

The SAC Companies will plead guilty to all counts of the indictment in which they are charged, which include a securities fraud and wire fraud count for each of the SAC companies.

The SAC Companies will pay a $1.8 billion financial penalty, consisting of a $900 million fine in the Criminal Case and a $900 million judgment in the forfeiture action.

Because the SAC Companies have already agreed to pay $616 million to the U.S. Securities & Exchange Commission to resolve related civil insider trading charges, that amount will be credited against the penalty, and therefore, the additional payment will be approximately $1.2 billion.

The SAC Companies also agreed that neither they nor any other person or entity paying any portion of the $1.8 billion financial penalty shall claim any tax deduction or credit for any money paid in resolving the actions.

The SAC Companies will no longer accept third party investor funds and will terminate operations as an investment adviser.

The SAC Companies will each be sentenced to five-year terms of probation – the maximum allowed by law – with a provision to end probation earlier if the SAC Companies cease operating entirely.

The terms of probation will require, among other conditions, that the SAC Companies employ appropriate compliance measures to identify and prevent insider trading.

Additionally, the insider trading compliance measures of the SAC Companies and any related entities trading securities will be reviewed by an independent compliance expert who will direct the SAC Companies to correct identified deficiencies.

The agreement would resolve the criminal charges against the SAC Companies but does not provide any individual with immunity from prosecution.

Under the terms of the agreement, the Government is not prevented from charging any individual with insider trading offenses and seeking the maximum prison term authorized by law for such offenses.