Tuesday, 3 March 2015
Last updated 6 min ago
Dec 2 2013 | 7:06am ET
The government's star witness against SAC Capital Advisors portfolio manager Michael Steinberg testified that he began to mine confidential corporate information after was he perceived as an ultimatum from his boss.
Jon Horvath, who served as Steinberg's analyst, told the jury Wednesday that Steinberg confronted him in the middle of 2007, after a Horvath-recommended trade lost nearly $2 million. Horvath said that Steinberg said, "What I need you to do is get me edgy, proprietary information," and suggested that if he failed to produce it, he'd be fired.
"I thought he wanted me to cultivate sources of non-public information," Horvath said. "I thought my job was in danger. I thought he'd fire me."
Horvath, who is cooperating with prosecutors and who has pleaded guilty, is the government's key link between Steinberg, the highest-ranking SAC employee to face insider-trading charges, and a network of analysts allegedly sharing confidential corporate information. Steinberg is accused of illegally trading shares of Dell Inc. and Nvidia Corp. based on tips he received from Horvath, who began testifying on Tuesday.
Horvath may be the only government witness who can directly connect Steinberg to the pipeline of illicit information.
Horvath told the jury that, after the 2007 conversation with Steinberg, he turned to an old friend, Diamondback Capital Management analyst Jesse Tortora, for information. Tortora testified before Horvath and said that he passed him tips about Dell.
According to Horvath, he was getting three to five tips about Dell each quarter from Tortora, and shared them with Steinberg. He said he had not previously sought confidential information prior to the 2007 talk.
But Horvath's testimony also left some doubts. He said he did not share Tortora's tips or make recommendations on them for several quarters, to test them for accuracy. And even once he began using them, he said they were "just one of the inputs" he used in making his stock picks. And, he added, most of the time, he simply entered the tips into an internal SAC database. Only if a tip was particularly important would he e-mail Steinberg, Horvath said.
Horvath said he "told Mike that Jesse had a contact at Dell, inside the company." But he did not say whether he told Steinberg that the information was confidential or authorized, and also did not remember whether that conversation took place over the phone or face-to-face.
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…