The federal government's star witness against SAC Capital Advisors portfolio manager Michael Steinberg took the stand yesterday afternoon to begin the testimony that the entire trial could turn on.
Jon Horvath is Steinberg's former analyst and has pleaded guilty to being Steinberg's source for key tips about the technology companies who trading it at the center of the allegations against Steinberg, the highest-ranking SAC executive to be charged in the case. Horvath's own source for the information, former Diamondback Capital Management analyst Jesse Tortora, completed his testimony earlier yesterday.
Prosecutors had just a half-hour with Horvath yesterday in Manhattan federal court, and moved quickly to blunt the harsh questioning he is likely to face under cross examination. Steinberg's lawyer said during his opening statement that the prosecution's entire case is based on Horvath's story, in which he said Horvath was seeking "to rewrite history" to stay out of jail.
Horvath yesterday did not deny that motivation, telling jurors bluntly, "I hope to avoid jail time." Horvath faces decades in prison under his guilty plea, as well as deportation. Horvath is a native of Sweden who grew up in Canada.
Horvath also copped to committing at least one other crime: stealing "a handful of prescription drugs" from a pharmacy he worked at in Canada. Horvath, who is in the U.S. on a green card, did not disclose the matter on his visa application, saying he didn't think it was necessary as it was expunged prior to the application.
Horvath also briefly discussed his role at SAC, where he worked for six years, and his relationship with Steinberg. He said he joined SAC after being recruited from Lehman Brothers Holdings, where he worked on a technology hedge fund in San Francisco. Horvath said he was charged with building a "deep fundamental understanding" of technology companies and to "make recommendations to Mike as to whether to invest in the stocks or not."
Steinberg's lawyers plan to argue that their client did not know that Horvath was privy to confidential corporate information, but Horvath said they often discussed how he developed his trade ideas.
"He frequently asked me where the information came from if I didn't volunteer it," Horvath said. During his time on the stand, Tortora said that the members of their insider-trading circle frequently shared the sources of information with their bosses.
Horvath will return to the stand today, before the court breaks for the Thanksgiving holiday.
Prior to Horvath's taking the stand, SAC compliance officer John Casey testified. Casey told the jury that SAC held annual and periodic insider-trading sessions, and documents showed that both Steinberg and Horvath attended. He also said that Steinberg asked about a restricted stock list "a half dozen" times; SAC from time to time restricts trading in certain names because an employee received material, non-public information about them.