SAC Capital Advisors LP fund manager Michael Steinberg was indicted by a federal grand jury on five counts of conspiracy and securities fraud as the U.S. government’s wide-ranging probe of insider trading at the $15 billion firm got one step closer to founder Steven A. Cohen.
Steinberg, 40, worked at SAC’s Sigma Capital Management unit and is the most senior SAC official to be charged. He was one of 15 portfolio managers handling technology, media and telecommunications stocks before being placed on leave in September, said a person with knowledge of the matter. He is to appear in New York federal court later today and faces as long as 20 years in prison if convicted of the most serious counts.
The indictment unsealed today alleged he traded on insider tips obtained from convicted SAC technology analyst Jon Horvath. U.S. District Judge Richard Sullivan in Manhattan in December ruled Steinberg was an uncharged co-conspirator in a $72 million scheme that also involved Level Global Investors LP co-founder Anthony Chiasson, ex-Diamondback Capital Management LLC portfolio manager Todd Newman and analysts who obtained and swapped illegal tips about technology companies.
The arrest of Steinberg, taken into custody by FBI agents at 6 a.m. at his Manhattan home, FBI spokesman Peter Donald said, is the latest development in a recent acceleration of the government’s five-year probe. According to internal e-mails and two people familiar with the matter, Steinberg and SAC fund manager Gabriel Plotkin both were recipients of inside information Horvath passed to them. Plotkin hasn’t been accused of wrongdoing.
Steinberg was accused of being part of a conspiracy that began in late 2007 and continued until 2009. The U.S. said he received and traded on illegal tips from Horvath, a subordinate, on Dell Inc. and Nvidia Corp.
Steinberg was added to an existing indictment that alleged he and Horvath were part of a group of analysts and fund managers who swapped and traded on nonpublic information they obtained from insiders at technology companies. The case is being presided over U.S. District Judge Richard Sullivan.
The U.S. Securities and Exchange Commission, which sued Steinberg today, said earlier this month that Horvath funneled nonpublic information on technology stocks to two unidentified portfolio managers at Cohen’s hedge fund. Both men then traded on the information, reaping more than $6 million for SAC Capital units. The men were Steinberg and Plotkin, according to the SAC e-mails.
Steinberg, who worked at SAC Capital since 1997, is one of nine current or former employees of the hedge fund to be tied by U.S. authorities to insider trading. Cohen, who has denied any wrongdoing, hasn’t been charged or sued by the government.
In November, the U.S. indicted Mathew Martoma, a former fund manager for SAC’s CR Intrinsic Investors unit, in what prosecutors called the biggest insider-trading scheme in history. Manhattan U.S. Attorney Preet Bharara said Martoma helped SAC make $276 million on illegal tips about an Alzheimer’s drug by trading in shares of Elan Corp. and Wyeth LLC. He has pleaded not guilty to the charges and is awaiting trial.