NEW YORK, N.Y. – A portfolio manager for one of the nation’s largest hedge funds accused by the government of cheating to boost sagging results in 2007 was convicted on Wednesday of insider trading charges.
The verdict against Michael Steinberg in Manhattan federal court was announced only after he was checked by a nurse because he had slumped in his seat and appeared to faint when the jury first entered the courtroom.
U.S. District Judge Richard J. Sullivan, who set sentencing for April 25, told jurors Steinberg had a “bit of a dizzy spell” but that he had been checked by the nurse and Steinberg’s brother, who’s a doctor, and that everyone including the 41-year-old defendant agreed he was fit to receive the verdict. When the first of five guilty verdicts was read aloud to conspiracy and securities fraud charges, Steinberg’s head dropped back and he looked up.
“Disappointing verdict, I know,” the judge told Steinberg after jurors left the courtroom as he again offered medical assistance if the defendant required it. Steinberg did not. The jury had deliberated for two days.
The drama came amid a case that was the first to result from the government’s focus on insider trading at SAC Capital Advisors.
The company, based in Stamford, Conn., was founded by billionaire businessman Steven A. Cohen, who hasn’t been charged criminally but faces civil claims. This month it agreed to pay a record $1.8 billion to settle civil and criminal insider trading charges.
Steinberg joined SAC in 1996, working for a time in an office next to Cohen, before moving to the New York offices of its Sigma Capital division, prosecutors said.
A spokesman for Steinberg’s defence said lawyers wouldn’t immediately comment on the verdict. A spokesman for Cohen declined comment Wednesday.
U.S. Attorney Preet Bharara said in a statement that Steinberg had crossed the line into criminal insider trading “like many other traders before him who, blinded by profits, lost their sense of right and wrong.”
During the trial, the defence tried to demonize analyst Jon Horvath of San Francisco, saying Horvath committed the insider trading crimes and tried to blame Steinberg to escape what would otherwise be a lengthy prison sentence. Horvath pleaded guilty last year to insider trading charges in a deal with prosecutors that could earn him a significant reduction in any sentence if he co-operates fully.
In his closing argument, defence attorney Barry Berke belittled Horvath’s testimony, saying he was “walking, talking reasonable doubt.”
Berke said prosecutors had to prove Steinberg knew Horvath was passing along inside information and purposely was involved in committing insider trading.
“The prosecution hasn’t even come close, hasn’t even come close,” he said. “The case they promised you has collapsed.”
After the verdict was announced, Steinberg shook his head as he spoke with Berke and later embraced family members.
But Assistant U.S. Attorney Harry A. Chernoff said the government had proven that Steinberg knew he was receiving inside information and that he deliberately closed his eyes to it.
He noted that Steinberg traded on inside information about Dell Inc. in 2008 “without any hesitation or surprise or question” within 2 minutes of receiving the information from Horvath.