Wednesday, 28 January 2015
Last updated 11 hours ago
Nov 22 2013 | 11:43am ET
Prosecutors used a confessed insider-trader to lay the groundwork for their case against SAC Capital Advisors portfolio manager Michael Steinberg.
According to the government, Jesse Tortora was a key cog in the "pipeline" of illicit information that leads to Steinberg, who is accused of illegally trading two technology stocks. Tortora, a former analyst at Diamondback Capital Management, told the jury that he passed tips to Steinberg's former analyst, Jon Horvath, the key witness in the case, and that Horvath told him that he had shared the information with Steinberg.
Tortora, who previously testified against his former boss at Diamondback, Todd Newman, who was convicted and sentenced to four-and-a-half years in prison, said that one tip about Dell Inc. came from an employee of the computer-maker, Rob Ray, and made its way through several analysts before it reached Tortora. Tortora said he learned about it from Sandeep Goyal, a former Neuberger Berman Group analyst who has also pleaded guilty in the case.
Three days after his lunch with Goyal, in August 2008, Tortora said he e-mailed Horvath.
Tortora told the jury that trading on confidential information "allowed us to be more effective, more efficient and more profitable than working alone." Prosecutors showed the panel an e-mail from Tortora to Horvath and other alleged members of the insider-trading ring reading, "Enjoy. Your perf will now go up 100% in 09 and your boss will love you."
Prior to Tortora's testimony, SAC CFO Daniel Berkowitz explained the firm's bonus policy, particular "Cohen tag bonuses"—those received for the best ideas that firm founder Steven Cohen adopted. Generators of such ideas "would receive a bonus, depending on how big the trade was," Berkowitz said.
Steinberg's lawyer, cross-examining Berkowitz, sought to show that his client was just doing his due diligence. Berkowitz said that analysts routinely "meet with companies, suppliers, vendors and other market participants," and that "proprietary company-specific analysis" was legitimate.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…