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Jury hears final arguments in insider trading trial of SAC's Steinberg

Former SAC Capital portfolio manager Michael Steinberg (R) arrives with his lawyer Barry Berke at the Manhattan Federal Courthouse in New Yo
Former SAC Capital portfolio manager Michael Steinberg (R) arrives with his lawyer Barry Berke at the Manhattan Federal Courthouse in New Yo

By Nate Raymond

NEW YORK (Reuters) - A lawyer for Michael Steinberg, an SAC Capital Advisors portfolio manager on trial for insider trading, urged jurors on Monday to find his client not guilty, saying the government's star witness has been lying.

But a federal prosecutor said Steinberg knew the information he received from SAC Capital analyst Jon Horvath was improper when he made trades that netted more than $1.4 million in profits.

The two sides were making closing arguments in a trial that has been playing out in a federal court in New York for the past four weeks.

The nine women and three men on the jury are expected to begin deliberations on Tuesday. The trial followed SAC Capital's agreement last month to pay $1.2 billion and plead guilty to fraud charges stemming from the insider trading probe.

Steinberg, who worked in SAC's Sigma Capital Management division, is one of eight employees at the hedge fund to face criminal charges for insider trading and the first to fight them at trial.

Steinberg, 41, is charged with five counts of securities fraud and conspiracy to commit securities fraud for trading in Dell and Nvidia Corp based on insider information. He denies wrongdoing.

During an animated closing argument, Steinberg's lead lawyer, Barry Berke, centered his attack on Horvath, an ex-SAC analyst who prosecutors contended supplied Steinberg with nonpublic information about companies including Dell and Nvidia.

Berke told jurors Horvath pleaded guilty on the eve of his own trial, after others involved in the conspiracy had already cut plea deals. To avoid jail time, Horvath accused Steinberg of being in on the scheme, Berke said.

"The prosecution accepted what he told them hook line and sinker," he said.

Horvath, 44, was the government's star-witness in the case against Steinberg, testifying over the course of nine days that Steinberg pushed him to get "edgy, proprietary" information after a bad bet on Horvath's recommendation in 2007.

But while Horvath said the meeting took place a "couple days" after the trade went sour, Berke argued it never took place, saying evidence showed the analyst was out of town up until a week later.

"Just as Jon Horvath engaged in deception and rule breaking when he thought his job was in jeopardy in 2007, he engaged in the same type of deception when he thought his liberty was at stake, as it was last year," Berke said.

And while Horvath may have sought out illegal tips, Berke said, he actively sought to cover up from Steinberg that the information was coming from inside companies.

The lawyer showed jurors excerpts of Horvath's testimony where the analyst on cross-examination said he "didn't tell Mr. Steinberg explicitly" that information about Dell was illegal.

For his part, Assistant U.S. Attorney Harry Chernoff played down Horvath's inconsistent memory of the timing of the 2007 meeting and other events.

"When Jon Horvath came back with inside information, Mike Steinberg gladly took it and traded on it again and again and again," said Chernoff, who made his closing arguments before Berke did.

Steinberg knew that an analyst Horvath talked to at another hedge fund, Jesse Tortora of Diamondback Capital Management, had inside information about Dell, Chernoff said.

Tortora and Horvath were part of a group of analysts who shared inside information so their hedge fund bosses could make trades, Chernoff said.

Tortora, 36, pleaded guilty in 2011 to conspiracy to commit securities fraud and one substantive count of securities fraud and has been cooperating with the investigation.

Despite emails from Horvath with financial information about various companies, Chernoff said, Steinberg never asked anyone in the compliance office at SAC whether there was a problem trading on it.

"You don't work in the financial industry all those years and not understand the significance of getting rolled up quarterly earnings numbers before the announcement," he said.

The case is U.S. v. Steinberg, U.S. District Court, Southern District of New York, No. 12-cr-00121.

(Reporting by Nate Raymond in New York; Editing by Steve Orlofsky)

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