In August 2008, using an illegal tip on Dell that he got from Tortora, Horvath provided information that allowed Steinberg to earn more than $1 million, according to prosecutors.
Hours after Dell had issued its earnings announcement on Aug. 28, 2008, Cohen congratulated Steinberg, Horvath and their team, writing in an e-mail to employees, “nice job on Dell.”
Horvath said he and Steinberg had been alerted just days before that Cohen held a large, long position in the computer maker, believing the stock would do well. Horvath said that position was the opposite of what they were recommending.
While there’s no evidence Cohen knew the trade was based on nonpublic information obtained by Horvath, Horvath and Steinberg rushed to provide him with information on Dell to ensure he didn’t lose money on the trade, according to Horvath. SAC analysts and portfolio managers were obliged to ensure Cohen didn’t lose money on a trade, Horvath said.
“It just wasn’t very good politically,” Horvath said. “Steve didn’t like losing money and you were kind of in his bad book if you lost Steve money.”
Shorting Stock
Steinberg asked Horvath to write a memo to Gabriel “Gabe” Plotkin, an SAC fund manager, explaining the metrics he was using for a trade that would short the stock. Cohen had based his long Dell position on a recommendation from Plotkin, Horvath said.
Later that day, Horvath, who was on vacation in Cabo San Lucas, Mexico, sent Plotkin and Steinberg an e-mail explaining the metrics he used to make such a trading recommendation.
“I have a 2nd hand read from someone at the company -- this is 3rd quarter I have gotten this read from them and it has been very good in the last two quarters,” Horvath said in the Aug. 26, 2008, e-mail, which included a detailed list of Dell’s operating expenses and revenue. He then added, “Please keep to yourself as obviously not well known.”
Steinberg, a 15-year veteran of the hedge fund, responded: “Yes normally we would never divulge data like this, so please be discreet. Thanks.”