Email, undisclosed in SAC trader's case, could help defense: sources

Fri Oct 4, 2013 6:21pm EDT
 
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By Matthew Goldstein and Emily Flitter

NEW YORK (Reuters) - In the coming trial of a SAC Capital Advisors hedge fund portfolio manager, Michael Steinberg, prosecutors are likely to present emails purporting to show he was being tipped about inside information on Dell Inc before trading on the stock.

But two people familiar with the matter said there are some emails that prosecutors have not included in court filings that could be helpful to Steinberg's defense that he did not engage in insider trading in August 2008 at SAC, founded by Steven A. Cohen, one of Wall Street's most successful hedge fund managers.

The outcome of Steinberg's criminal trial in New York, scheduled to start on November 18, could affect negotiations between lawyers for SAC Capital and federal prosecutors over resolving an indictment against SAC Capital itself. In the indictment unsealed in July, Steinberg is listed as one of seven people either charged or convicted of insider trading while working for Cohen's 21-year-old hedge fund.

The two people familiar with the email said that in the Steinberg case, the previously undisclosed email could counter those prosecutors already have made public.

In the correspondence made public in Manhattan federal court, Jon Horvath, a former SAC Capital colleague, told Steinberg and another SAC trader that someone at Dell had told him the tech company's earnings would come in lower than expected for the third quarter of 2008.

But the undisclosed email shows that Steinberg responded to Horvath's tip by saying he did not believe Horvath, say people familiar with the emails. That could give Steinberg's lawyers the opportunity to claim Steinberg did not take Horvath seriously and therefore was not motivated to make his Dell trades on Horvath's tip, according to the sources.

If so, the undisclosed email could bolster Steinberg's defense that the trades he subsequently made for SAC Capital in shares of the computer company were not done using inside information he obtained unlawfully.

But the sources also said Steinberg's defense team will need more than a single email, in a case where hundreds of emails are under review, to overcome what is expected to be powerful testimony by Horvath, an important prosecution witness who pleaded guilty to insider trading charges in September 2012.   Continued...

 
Michael Steinberg leaves Manhattan Federal Court in New York March 29, 2013. REUTERS/Keith Bedford