DOJ victory in SAC insider trading trial
A former top aide to SAC Capital’s founder was found guilty of insider trading on Wednesday, handing the US government another victory in its long-running crackdown on Wall Street corruption. After just a day of deliberations the jury convicted Michael Steinberg, a former SAC portfolio manager, of five counts of conspiracy and securities fraud for trading shares of Dell and Nvidia after learning confidential earnings results in 2008 and 2009 from his research analyst. The verdict was slightly delayed after Steinberg appeared to faint before it was delivered, and the jury was asked to leave the court for a short while. The trades netted more than $1m in profits for SAC, the eponymous hedge fund founded by Steven Cohen. Mr Steinberg faces up to 20 years in prison. The US attorney’s office in Manhattan has not lost an insider trading case since its crackdown began in 2009. Mr Steinberg is the 77th person to be convicted of insider trading. The trial was the toughest test of insider trading yet for the government since its case rested largely on the testimony of Jon Horvath, the former SAC analyst who pleaded guilty in a deal with the government. Mr Horvath told the jury that after a bad performance period Mr Steinberg told him to get edgy "proprietary information", which he interpreted to mean inside information. Prosecutors buttressed their case with emails between the men sharing information on gross margins and revenues for Dell ahead of its quarterly results announcement. In one example, just before Dell’s August 2008 earnings were released, Mr Horvath sent an email to Mr Steinberg with details of Dell’s gross profit margin, which read: "Please keep to yourself as obviously not well known." Mr Steinberg replied: "Yes normally we would never divulge data like this, so please be discreet." But the government was challenged because Mr Steinberg was at the end of a long chain that linked back to company insiders. Mr Steinberg’s lawyer, Barry Berke, sought to discredit Mr Horvath, pointing out that he had pleaded guilty on the eve of his own criminal trial. Over five days of cross examination during a three-week trial, Mr Berke pressed Mr Horvath who said he did not recall telling Mr Steinberg his company source on the information. In a sign of confidence, Mr Steinberg called no witnesses and did not testify. Mr Steinberg was the first former SAC employee to go to trial. Last month SAC pleaded guilty to insider trading and agreed to wind down and pay a record $1.8bn fine to resolve criminal and civil charges. Six other former SAC employees have pleaded guilty to insider trading while at the hedge fund. Mathew Martoma, a former SAC money manager, is due to face trial on January 6 for allegedly trading drug company stocks in advance of negative clinical trial results. He has pleaded not guilty.