Jon Horvath, a former technology analyst at a unit of Steven Cohen’s $14 billion hedge fund SAC Capital Advisors LP, took the stand at the insider-trading trial of his former boss, Michael Steinberg.
Horvath, 44, a Swedish citizen, pleaded guilty last year to conspiracy and two counts of securities fraud weeks before he was set to go on trial, saying he passed nonpublic information to his portfolio manager, who traded on the tips.
Steinberg, 41, of SAC’s Sigma Capital Management unit, has worked at the hedge fund since 1997 and is its longest-serving employee to be charged with insider trading.
“I was an analyst focused on personal computer stocks,” Horvath told the Manhattan federal jury hearing Steinberg’s case today. “I was one of two senior analysts who reported to Mike Steinberg. I was terminated for cause when I pleaded guilty to insider trading in September 2012.”
Horvath didn’t name Steinberg or Sigma Capital when he pleaded guilty and instead said he worked as an analyst at a Manhattan hedge fund from 2006 to 2011 and passed illegal tips to the portfolio manager who supervised him.
Horvath, of San Francisco, told the judge at his plea hearing that he and his co-conspirators obtained material nonpublic information on Dell Inc. in August 2008 and Nvidia Corp. (NVDA) in May 2009 from insiders at the two technology companies.
“In each instance I provided the information to the portfolio manager I worked for, and we executed trades in the stocks based on that information,” he told U.S. District Judge Richard Sullivan in Manhattan. Sullivan is also presiding over Steinberg’s trial.
Steinberg’s lawyer, Barry Berke, told jurors in his opening statement that Horvath decided to implicate his ex-boss for insider trading to avoid going to prison.
At least three members of Horvath’s circle of tipsters had pleaded guilty and were set to testify against him when he decided to cooperate with the government and implicate Steinberg, Berke said.
“He wanted to avoid jail but he was too late, his circle of friends had pleaded out,” Berke said. “He needed to point the finger at somebody else to get a deal. He traded his freedom for that of another. He chose his self-interest over the truth and claimed Michael Steinberg was involved in his misdeeds.”
Steinberg, who has pleaded not guilty, is charged with one count of conspiracy and four counts of securities fraud for allegedly participating in a scheme that ran from late 2007 to 2009. Each securities fraud count carries a term of as long as 20 years in prison. Conspiracy carries a five-year top sentence.
The insider-trading ring, which participants referred to as the “Fight Club,” included Spyridon “Sam” Adondakis, a Level Global Investors LP analyst; Jesse Tortora, a Diamondback Capital Management LLC analyst; and Danny Kuo, an analyst at Whittier Trust Co., Assistant U.S. Attorney Antonia Apps said.
Horvath and five others, including Tortora and Kuo, pleaded guilty and agreed to cooperate with the U.S. in the investigation.
Tortora has completed his testimony. Kuo will also testify against Steinberg, Apps said.
SAC, based in Stamford, Connecticut, this month agreed to plead guilty to securities fraud and wire fraud and to pay a record $1.8 billion to end a federal insider-trading case that U.S. Attorney Preet Bharara filed against the fund. The judge presiding over that case hasn’t said whether she will accept the plea.
The case is U.S. v. Newman, 12-00124, U.S. District Court, Southern District of New York (Manhattan).
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