The lawyers battling in SAC Capital Advisors portfolio manager Michael Steinberg's insider-trading trial continued to spar yesterday over what the jury should and shouldn't hear.
After U.S. District Judge Richard Sullivan rejected a defense request to read to the jury from a wiretapped phone call involving Steinberg's former analyst—and the government's star witness—the hedge fund manager's lawyers asked Sullivan to bar prosecutors from bringing up SAC founder Steven Cohen's trades in Dell Inc., which the government said were based on recommendations from Steinberg.
Prosecutors also told Sullivan they wished to ask the analyst, Jon Horvath, about SAC's "hiring practices" and "compliance practices, or lack thereof." Sullivan said he would rule on the requests today.
Earlier, Sullivan barred Steinberg lawyer Barry Berke from using the transcript of a phone call between Horvath and another hedge fund analyst who has pleaded guilty to insider trading. On that call, Horvath tells Spyridion Adondakis about a call between Steinberg and John Kinnucan, an expert-network consultant also ensnared in the insider-trading probe. Horvath told Adondakis, who was cooperating with the authorities, that Kinnucan had sworn to Steinberg that he had not passed him insider information.
But, Sullivan pointed out, Steinberg has not been charged with trading on Kinnucan's information, and threw the transcript out.
"What I think is being asked, either implicitly or, at least, in reality, is that the jury should infer from his state of mind on Kinnucan that he was not guilty of the Kinnucan conspiracy," Sullivan said, "and from the fact that he was not guilty on the Kinnucan conspiracy, the jury should conclude as propensity evidence that he is not guity of the charged conspiracy. And that's not proper."
"You can't use propensity evidence in that way any more than the fact that Mr. Kinnucan engaged in legitimate trades in Coca-Cola or Boeing on the same day that he did the allegedly illegal Dell trades."