SAC hedge fund manager convicted of insider trading by New York court

PUBLISHED : Thursday, 19 December, 2013, 10:16pm
UPDATED : Thursday, 19 December, 2013, 11:27pm

Michael Steinberg, a top portfolio manager at Steven Cohen's SAC Capital Advisors hedge fund, has been found guilty of trading on insider information.

A federal jury in Manhattan found Steinberg, 41, guilty on Wednesday of all five counts of conspiracy and securities fraud that he faced. Prosecutors said he traded on confidential information that was passed to him by a fellow employee, who later admitted to swapping illegal tips with friends at other firms.

The verdict, delivered in the fifth week of his trial, was the latest victory for federal prosecutors in New York in their four-year crackdown on Wall Street insider trading that has resulted in the conviction of 77 people and no trial losses.

Steinberg closed his eyes and put his head back when the first guilty finding was read. Friends and family sitting behind him gasped and held each other, with some covering their mouths and others crying.

Steinberg now stands convicted of federal crimes and [may lose] his liberty

The verdict, reached after a day and a half of deliberations, was delayed slightly when Steinberg fainted as it was about to be read. Jurors left the courtroom while he received medical attention and then returned.

Steinberg will be sentenced on April 25, the judge said. A spokesman for Steinberg said he would not have any comment on the case.

The verdict came a month after SAC Capital agreed to pay US$1.2 billion and plead guilty to fraud charges stemming from a long-running probe of insider trading at Cohen's hedge fund.

"Like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty," Manhattan attorney Preet Bharara said.

Steinberg, who worked in SAC's Sigma Capital Management division, was one of eight employees at SAC to face criminal charges for insider trading and the first of two to fight them at trial. A former SAC portfolio manager, Mathew Martoma, is scheduled to face trial on the coming January 6.

Six others have pleaded guilty to charges relating to insider trading, including Jon Horvath, an SAC analyst who prosecutors said supplied Steinberg with non-public information about companies, including Dell and Nvidia.

Horvath, who co-operated with the government in hopes of avoiding jail time, became a star witness in the case against Steinberg, testifying over the course of nine days how his boss pushed him to get "edgy, proprietary" information.

Horvath was part of what prosecutors called a "corrupt circle" of research analysts who cultivated insider information and shared it with each other in order to make trading recommendations to their bosses.

Steinberg's lawyer, Barry Berke, sought throughout the trial to call Horvath's credibility into question, saying on Monday that he chose to "point the finger" at Steinberg only on the eve of his own trial and in a bid to avoid prison.