| NEW YORK
NEW YORK Oct 4 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 Nov. 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.
Horvath used to work for Steinberg at SAC Capital's Sigma
Steinberg's lawyer, Barry Berke, did not return phone calls
seeking comment. A spokesman for Manhattan U.S. Attorney Preet
Bharara declined to comment.
SAC Capital spokesman Jonathan Gasthalter declined to
comment. Steinberg, who started at SAC Capital in 1997, is still
employed at SAC but he is on leave.
In the government's case against SAC Capital, prosecutors
and lawyers for the hedge fund are in preliminary negotiations
that could lead to the hedge fund paying up to $2 billion in
fines and admitting some liability, according another source
familiar with the investigation. Prosecutors have indicated the
cost to SAC Capital of settling the case could rise if Steinberg
Prosecutors have charged that Cohen's firm had fostered a
culture where employees flouted the law and were encouraged to
tap their personal networks of contacts for inside information
about publicly traded companies.
Prosecutors have not charged SAC founder Cohen with any
wrongdoing but securities regulators filed a civil
failure-to-supervise action against the billionaire trader.
In March, prosecutors unsealed a five-count indictment
against Steinberg, charging him with using inside information to
trade shares of Dell and chipmaker Nvidia Corp.
Prosecutors contend Steinberg used the inside information to
generate about $1.4 million in illegal profits for Cohen's fund,
which had $14 billion in assets as of this summer.
In charging Steinberg with using inside information in
trading Dell shares, prosecutors introduced a series of emails
between Horvath, Steinberg and Gabriel Plotkin, another SAC
Capital trader. In those emails, Horvath warned his fellow
traders not to share the information with anyone.
Steinberg is quoted in one of the emails made public by
prosecutors, responding: "Yes normally we would never divulge
data like this, so please be discreet."
Plotkin has not been charged.