Ex-SAC Analyst Describes Aid to U.S. Inside-Trading Probe

An ex-SAC Capital Advisors LP analyst, concluding his testimony at the insider-trading trial of his former boss Michael Steinberg, told the jury his cooperation with the government included a larger probe of the hedge fund.

Jon Horvath, a former technology analyst for Steinberg at SAC’s Sigma Capital unit, was on the stand for nine days as a government witness against Steinberg. Horvath told the Manhattan federal jury hearing the case that he passed secret tips about Dell Inc. and Nvidia Corp. (NVDA), which Steinberg used to reap more than $1.4 million.

U.S. District Judge Richard Sullivan in Manhattan today granted prosecutors permission to question the former analyst about his motivations for testifying against Steinberg. The judge ruled that questions posed by Steinberg’s defense lawyer suggested that Horvath only pleaded guilty six weeks before trial to save his own skin.

“The jury should know he’s provided information against the ‘White Whale’ that has been the focus of this investigation, that has been caught,” Sullivan said, referring to SAC Capital. He later said during the hearing, “Otherwise, the jury is left with the misimpression that the only way out of this is Steinberg.”

The judge also noted that Steinberg’s lawyer, Barry Berke, told jurors in opening arguments that Horvath fabricated the allegations because there was no one else he could implicate in wrongdoing and had faced a maximum 45-year prison term.

Dell Position

Prosecutors however declined to elicit testimony from Horvath that SAC Capital founder Steven A. Cohen, who held a long position in Dell in Aug. 26, 2008, immediately “began liquidating his entire position” in the computer-maker within minutes of receiving an e-mail from Horvath. Cohen hasn’t been charged with a crime.

Upon learning the fund’s billionaire founder held a long position in Dell just days before the company was set to announce earnings, Horvath sent an Aug. 26, 2008, e-mail to Cohen to warn him the computer-maker would miss estimates, stating, “I have a 2nd hand read from someone at the company,” according to prosecutors.

Sullivan initially told prosecutors he would allow Horvath to testify about Cohen’s trading after receiving his e-mail, yet warned them it would be “opening up a can of worms” and prompt a new round of questioning by Steinberg’s lawyer. The trial was scheduled to end before Christmas, and Sullivan has said jurors have been asking about their travel plans.

“I don’t want to have a mini-trial on Mr. Cohen,” he said. “The witness has been on the stand for about two weeks of a four-week trial.”

The case is U.S. v. Newman, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at

pathurtado@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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