Thursday, 18 December 2014
Last updated 9 hours ago
Dec 17 2012 | 1:43pm ET
Add Dell Inc. shares to the list of stocks that investigators are eyeing in their insider-trading probe of SAC Capital Advisors and firm founder Steven Cohen.
Cohen was consulted on 2008 trades in the computer maker's stock that were allegedly based on non-public information, according to evidence in the trial of two former hedge fund managers accused of illegally trading Dell shares. SAC portfolio manager Michael Steinberg, who was put on leave from the hedge fund in September after one of his former analysts pleaded guilty to insider-trading, says in an e-mail that he discussed the information he received with Cohen.
"Guys, I was talking to Steve about Dell earlier today and he asked me to get the two of you to compare notes before the print, as we are on opposite sides of this one," Steinberg, who has not been accused of any wrongdoing but who was identified as an unindicted co-conspirator in the trial, wrote to fellow portfolio manager Gabe Plotkin and to the analyst, Jon Horvath.
There is no indication that either Cohen or Plotkin knew that the information Steinberg had was non-public, or that either traded on it. And while Steinberg himself has not been charged, the judge overseeing the trial of Level Global Investors co-founder Anthony Chiasson and former Diamondback Capital Management portfolio manager Todd Newman said during a hearing, "it seems to me that the logical inference is that Steinberg knows exactly what is going on."
Prior to Steinberg's discussion with Cohen, in August 2008, Horvath sent an e-mail that read in part, "I have a 2nd hand read from someone at the company," meaning Dell, which he said would miss its earnings estimates. "Please keep to yourself as obviously not well known."
"Yes normally we would never divulge data like this, so please be discreet. Thanks," Steinberg responded.
"Comparing notes is not in furtherance of the conspiracy," U.S. District Judge Richard Sullivan said. "But having compared notes and having divulged the source of the information on gross margin, and then telling the other person who is on the other side, 'By the way, don't tell anybody about this, be discreet,' that seems to me in furtherance of the conspiracy."
"Why would you need to keep statements from [investor relations] on the 'down low'?"
Horvath allegedly got the Dell information from Jesse Tortora, a former analyst for Newman, who has admitted having a source inside the company. Tortora was one of the prosecutions' two key witnesses in the trial, which went to the jury last week and which is still awaiting a verdict.
Horvath is the second former Steinberg protégé to plead guilty to insider-trading; Richard Choo-Beng Lee, another former SAC trader who pleaded guilty as part of the Galleon Group case and who admitted to making illegal trades while at SAC, also formerly worked with the portfolio manager.
Dell joins a list of stocks that include Elan Corp., InterMune Inc., Weight Watchers International and Wyeth that investigators are eyeing SAC's trades of; former portfolio manager Mathew Martoma was arrested last month on charges that he traded Elan and Wyeth shares based on confidential information about Alheimers' disease drug trials.
SAC has denied any wrongdoing and says it is cooperating with authorities.
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