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 But a federal prosecutor said Steinberg knew the information he
received from SAC Capital analyst Jon Horvath was improper when he
made trades that netted more than $1.4 million in profits.
The two sides were making closing arguments in a trial that has been
playing out in a federal court in New York for the past four weeks.
The nine women and three men on the jury are expected to begin
deliberations on Tuesday. The trial followed SAC Capital's agreement
last month to pay $1.2 billion and plead guilty to fraud charges
stemming from the insider trading probe.
Steinberg, who worked in SAC's Sigma Capital Management division, is
one of eight employees at the hedge fund to face criminal charges
for insider trading and the first to fight them at trial.
Steinberg, 41, is charged with five counts of securities fraud and
conspiracy to commit securities fraud for trading in Dell and Nvidia
Corp based on insider information. He denies wrongdoing.
During an animated closing argument, Steinberg's lead lawyer, Barry
Berke, centered his attack on Horvath, an ex-SAC analyst who
prosecutors contended supplied Steinberg with nonpublic information
about companies including Dell and Nvidia.
Berke told jurors Horvath pleaded guilty on the eve of his own
trial, after others involved in the conspiracy had already cut plea
deals. To avoid jail time, Horvath accused Steinberg of being in on
the scheme, Berke said.
"The prosecution accepted what he told them hook line and sinker,"
he said.
Horvath, 44, was the government's star-witness in the case against
Steinberg, testifying over the course of nine days that Steinberg
pushed him to get "edgy, proprietary" information after a bad bet on
Horvath's recommendation in 2007.
But while Horvath said the meeting took place a "couple days" after
the trade went sour, Berke argued it never took place, saying
evidence showed the analyst was out of town up until a week later.
"Just as Jon Horvath engaged in deception and rule breaking when he
thought his job was in jeopardy in 2007, he engaged in the same type
of deception when he thought his liberty was at stake, as it was
last year," Berke said.
And while Horvath may have sought out illegal tips, Berke said, he
actively sought to cover up from Steinberg that the information was
coming from inside companies.
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The lawyer showed jurors excerpts of Horvath's testimony where the
analyst on cross-examination said he "didn't tell Mr. Steinberg
explicitly" that information about Dell was illegal.
For his part, Assistant U.S. Attorney Harry Chernoff played down
Horvath's inconsistent memory of the timing of the 2007 meeting and
other events.
"When Jon Horvath came back with inside information, Mike Steinberg
gladly took it and traded on it again and again and again," said
Chernoff, who made his closing arguments before Berke did.
Steinberg knew that an analyst Horvath talked to at another hedge
fund, Jesse Tortora of Diamondback Capital Management, had inside
information about Dell, Chernoff said.
Tortora and Horvath were part of a group of analysts who shared
inside information so their hedge fund bosses could make trades,
Chernoff said.
Tortora, 36, pleaded guilty in 2011 to conspiracy to commit
securities fraud and one substantive count of securities fraud and
has been cooperating with the investigation.
Despite emails from Horvath with financial information about various
companies, Chernoff said, Steinberg never asked anyone in the
compliance office at SAC whether there was a problem trading on it.
"You don't work in the financial industry all those years and not
understand the significance of getting rolled up quarterly earnings
numbers before the announcement," he said.
The case is U.S. v. Steinberg, U.S. District Court, Southern
District of New York, No. 12-cr-00121.
(Reporting by Nate Raymond in New York;
editing by Steve Orlofsky)
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