NEW YORK (Reuters) - A U.S. judge on Thursday rejected a request to acquit Michael Steinberg, a day before the scheduled sentencing on an insider trading conviction for the former portfolio manager at Steven A. Cohen’s SAC Capital Advisors hedge fund.
U.S. District Judge Richard Sullivan in Manhattan rejected various arguments by Steinberg’s lawyers, including that a jury could not have rationally found he knew corporate insiders were receiving benefits to provide illegal tips.
“On the facts presented at trial, a rational jury could find that (Steinberg) knew or was willfully blind to the fact that the tippers breached duties of trust and confidence by disclosing material nonpublic information for their personal benefits,” Sullivan wrote.
Barry Berke, a lawyer for Steinberg, declined comment.
A hearing is set on Friday to sentence Steinberg. Prosecutors say he should serve up to 6-1/2 years of prison for trading on inside information.
Prosecutors accused Steinberg, 42, of trading on illegal tips about Dell Inc and Nvidia Corp passed to him by an SAC analyst, who admitted to swapping confidential information among a group of analysts at other hedge funds.
A jury convicted Steinberg in December on charges conspiracy and securities fraud, adding him to what has become a list of eight current or former SAC Capital employees convicted on insider trading charges.
SAC Capital itself has pleaded guilty to fraud charges and has agreed to pay $1.8 billion in criminal and civil settlements.
SAC Capital recently rebranded itself Point72 Asset Management as it shifted toward being a so-called family office managing mostly Cohen’s own fortune.
In his 10-page decision, Sullivan reaffirmed his view that to gain an insider trading conviction, the government did not need to prove that the recipient of non-public information must know that the source of the tip benefited from the disclosure.
The issue is expected to part of Steinberg’s appeal. It is already under review by the 2nd U.S. Circuit Court of Appeals in the related insider trading case of two other convicted fund managers, Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, co-founder of Level Global Investors.
During arguments before the 2nd Circuit last month in Newman and Chiasson’s case, two of the three judges on the panel voiced skeptical questions regarding whether Sullivan’s interpretation was correct.
But Sullivan on Thursday called a requirement that the government prove knowledge of a personal benefit “a redundant and unnecessary element.”
He added that a rational jury could have found that Steinberg “knew or at least overwhelmingly suspected” the tippers received a benefit.
Evidence showed Steinberg was “savvy enough to understand that there is no such thing as a free lunch,” Sullivan wrote.
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 David Gregorio