SAC Capital Advisors LP fund manager Michael Steinberg’s lawyer used the cross examination of a witness to suggest inside information he claims to have fed his former boss was already publicly available.
Jon Horvath, who was Steinberg’s analyst, has told the Manhattan federal jury hearing Steinberg’s insider-trading case that he was part of a circle of hedge funds analysts who swapped illegal tips about technology companies that they funneled to their fund managers. Horvath testified he obtained the information from Jesse Tortora, an analyst at Diamondback Capital Management LLC.
Steinberg, 41, who has pleaded not guilty, is charged with conspiracy and four counts of securities fraud for allegedly making more than $1.4 million by trading on Dell Inc. and Nvidia Corp. from 2007 to 2009.
During the first full day of cross-examination today, defense lawyer Barry Berke highlighted for jurors dozens of e-mails Horvath sent Steinberg including messages in May 2009 that included Dell’s gross margin numbers and operating expenses during that period, ahead of the company’s earnings announcement.
“So you don’t know if he’s getting these from Dell investor relations or an illegal check?” Berke asked Horvath about Tortora.
“It’s difficult to distinguish,” Horvath said, reviewing a December 2008 e-mail. “Some of Jesse’s good data checks were vague like this.”
Horvath has testified he continually updated Steinberg and SAC’s internal trading database with secret Dell revenue and gross margin numbers that Tortora provided for an August 2008 Dell trade that earned Steinberg’s portfolio more than $1 million. The illegal tips came from a Dell employee, Horvath said.
Berke showed Horvath several May 2009 e-mails Horvath sent to Steinberg that included the same gross margin figure of 18 percent for Dell that had been publicly disseminated by analyst reports at investment banks. Horvath had written that Tortora had also predicted a gross margin number of 18 percent
“So you got it ‘spot on’?” Berke asked.
“Yeah, and I also had another read from Jesse at the time,” Horvath replied.
Steinberg is the first of eight current or former SAC employees charged by the U.S. to go to trial. Horvath and five other people in the insider-trading ring have pleaded guilty and are cooperating with the U.S.
The case is U.S. v. Steinberg, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).