Tuesday, 9 February 2016
Last updated 8 min ago
Dec 3 2013 | 1:36pm ET
SAC Capital Advisors portfolio manager Michael Steinberg has been described as the highest-ranking employee of the hedge fund to face insider-trading charges and a close personal friend of firm founder Steven Cohen, but the tips that have him on trial were a source of friction between the two, Steinberg's former analyst testified.
Jon Horvath, the government's star witness against Steinberg and the source of the allegedly illicit tips that Steinberg traded on, said that while Cohen was thrilled with the results of their work, he pushed for more information about where the information was coming from.
Cohen was "drilling" Steinberg about "who is telling me business is OK" at Dell, Steinberg wrote to Horvath in 2008, after Steinberg told Cohen "not to be short" based on a tip from Horvath.
"I said Jon has a number of industry contacts and that is what he has heard," Steinberg wrote to Horvath, explaining.
"Mike was kind of my buffer," Horvath told the jury.
While Cohen may not have been happy about being kept in the dark, he was happy about the money Steinberg and Horvath were earning him, writing to Steinberg's group in 2008, "Nice job on Dell." And Horvath said that there was an expectation that top trading ideas would be sent Cohen's way.
"There was some kind of obligation to help Steve if you had conviction or good reason for the position," Horvath said.
Horvath may be the only person who can connect Steinberg to the alleged ring of hedge fund analysts sharing insider information. Horvath has testified that he got his tips about Dell from Diamondback Capital Management analyst Jesse Tortora.
Unfortunately for Horvath, the wide dissemination of the information sometimes backfired, leading to an e-mail from Steinberg urging him, "Tell your boy to KEEP QUIET." Horvath himself asked another SAC manager, Gabriel Plotkin, who has not been accused of wrongdoing, to keep a tip about Dell "to yourself as obviously not well known."
"It wasn't out there," Horvath said of word that Dell would miss earnings estimates. "Investors weren't expecting this miss. And I didn't want it out there."