Steve Cohen has one less thing to worry about, at least.

The billionaire financier, whose hedge fund SAC Capital is embroiled in insider-trading accusations, will not have to face a racketeering charge filed by his ex-wife, Patricia Cohen, a judge ruled Monday. However, she can proceed with charges she filed against him over fraud and breach of fiduciary duty.

Bloomberg News/Landov Steven Cohen

Patricia Cohen sued Steve Cohen back in 2009, saying he had cheated her out of millions of dollars in their 1990 divorce. For good measure, she alleged that hed built his hedge fund on racketeering and insider trading, invoking the Racketeer Influenced and Corrupt Organizations act.

Thats essentially what the government has proven against some SAC employees, and its investigation continues. But Judge William Pauley, of U.S. district court in New York, wrote that Patricia Cohen should not “take on the mantle of a private attorney general” just because Steve is now in the government’s cross-hairs.

“Civil RICO and marriage do not go together like a horse and carriage,” the judge added, while noting that the Cohens’ legal battles have lasted nearly twice as long as their marriage did.

The Cohens legal imbroglio is a rare look inside the close-knit world of the super-rich on Wall Street.

Patricia Finke married Steve Cohen in 1979. He had recently graduated from Wharton and was just starting his career. According to her statements, she had a G.E.D. and had never finished college. She came from “an economically disadvantaged background,” she said.

The Cohens had a son and daughter, but their marriage was rocky. Steve got $5.5 million after suing a former business partner over a failed apartment project in Queens, but never told Patricia, according to the judge’s decision. When the Cohens got divorced, Steve’s brother Donald helped him prepare a statement listing the couple’s assets at $17 million. Steve said then that the actual amount was far lower, because nearly $9 million of those assets had been lost on the apartment project.

Patricia got $1 million in the divorce, plus their 28-room East End apartment in Manhattan, then valued at $3.8 million, which she planned to sell. Steve agreed to pay $1,115 per month in support for each child, with increases for inflation, plus summer camp, private school, tutoring and extracurriculars like softball and ice skating.

In 1991, Patricia asked for more child support, saying she was struggling financially and that Steve had defrauded her by filing a separate income tax statement to hide substantial income. She complained that she was having a hard time selling the East End apartment, partly because she was busy as their daughter was dancing in “The Nutcracker” at Lincoln Center.  She complained that Steve had taken valuable artwork from the apartment. “I have only three decent items of jewelry two bracelets and a watch, she wrote. These items could not be sold for more than $5,000.” (She had plenty of clothes, though. She said Steve let her buy as much clothing as she wanted, up to $50,000 in one month, because he always wanted me to dress well.)

Steve shot back that Patricia had received more than her fair share. He said he was paying $4,000 per month in child support as well as other expenses. “She enjoyed a lavish lifestyle throughout our marriage. In fact her outrageous spending during our marriage was a source of serious controversy while (we) were together,” Steve Cohen wrote in 1991. For example, while they were separated, Steve “authorized” her to go to the Beverly Hills Hotel for three weeks, he said, and she ran up a bill “in the hundreds of thousands of dollars, which I paid.” He also said he had provided exhaustive disclosure of my income and assets during the divorce proceedings.

The two eventually worked out an agreement for more child support, and their legal bickering lay dormant until around 2006, when Patricia discovered the $5.5 million settlement that Steven had never told her about.

In 2009, she sued him. In addition to saying she had been cheated in the divorce settlement, she also alleged that Steves profits had been bankrolled by insider trading and securities fraud.

Steve argued that Patricia lacked standing to bring a racketeering claim. Pauley, in his ruling, basically agreed. He noted that Patricia did not present evidence that SAC itself was involved in any scheme to defraud her.

“As the caption of this case suggests, this is a family dispute,” Pauley wrote of Cohen v. Cohen. “The only thing that distinguishes it from countless others is the seemingly inexhaustible legal resources that each side has brought to bear.”

Patricia Cohen can proceed with her charges of fraud and breach of fiduciary duty against her ex-husband, the judge ruled.

Steve Cohen’s eponymous hedge fund has been in a harsh spotlight over others’ allegations of insider trading. So far, seven current and former SAC employees have pleaded guilty to or been convicted of insider trading, and former portfolio manager Mathew Martoma is on trial in New York .

The Securities and Exchange Commission has filed a civil suit continuing against Steve Cohen, accusing him of “failing to supervise” – in other words, letting insider trading happen under his watch. An SAC spokesman said when the suit was filed that Steve Cohen had acted appropriately at all times.

Cohen hasn’t been accused of any criminal wrongdoing.

Christina Rexrode

Christina Rexrode covers banking for MarketWatch. Follow her on Twitter @chris_rexrode. Follow The Tell @thetellblog .

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