Tuesday, 29 July 2014
Last updated 1 hour ago
Mar 18 2013 | 4:00pm ET
A SAC Capital Advisors trader is preparing for his arrest as the investigation into another expands.
Jon Horvath, a former SAC analyst who pleaded guilty to insider-trading and who is cooperating with authorities, already admitted passing tips to SAC manager Michael Steinberg. But the Securities and Exchange Commission, in a Friday filing, said that Horvath had tipped off another SAC manager, and cited e-mails indicating that manager was Gabriel Plotkin, who manages about $1 billion at SAC's Sigma Capital Management unit.
SAC settled separate insider-trading allegations on the same day for $616 million.
According to the SEC complaint, Plotkin, identified as "Portfolio Manager B," began selling Dell Inc. stock less than a half-hour after e-mails show that Horvath warned him that the computermaker would miss its earnings estimates.
On Aug. 26, 2008, Plotkin asked both Horvath and Steinberg to explain their Dell positions. "What are your insights?" Horvath told both men that he had "a 2nd hand read from someone at the company" that Dell would announce lower-than-expected earnings two days later.
Both Horvath and Steinberg specifically requested that the trio be discreet about the information, which Horvath said was "obviously not well known."
A SAC spokesman said that Plotkin had done "nothing wrong" and that he had "built a successful career on a commitment to sound fundamental research." The spokesman also notes that Plotkin lost "over $6 million that day on a large Dell long position;" the SEC said his trades saved SAC $2 million.
Plotkin is already the subject of a probe into his trading of Weight Watchers International in 2011.
Michael Steinberg, identified as an unindicted co-conspirator in the case against Horvath and two others, may be losing that all-important adjective. Prosecutors are building a case against him and he could be indicted in about a month.
Steinberg, who is on leave from SAC, has been spending nights in a hotel to avoid being arrested in front of his family, the New York Post reports, a trick used by one of Horvath's former co-defendants, Level Global Investors co-founder Anthony Chiasson. When the Federal Bureau of Investigation arrived to arrest Chiasson at his apartment one morning, his doorman handed them a note telling them to call his lawyer. Chiasson, who was convicted in December, turned himself in later that day.
Steinberg's lawyer has asked prosecutors to not arrest him in front of his family, but authorities have refused to agree to those terms. Steinberg lives on Manhattan's Upper East Side and has been staying in a hotel in New York City.
"Michael Steinberg did absolutely nothing wrong," Barry Berke, the lawyer, said. "At all times his trading decisions were based on detailed analysis as well as information that he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis."
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…