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Jury for SAC's Steinberg hears origins of Dell tips
December 12, 2013 / 9:10 PM / 4 years ago

Jury for SAC's Steinberg hears origins of Dell tips

NEW YORK, Dec 12 (Reuters) - A former asset management firm analyst testified Thursday that he received detailed tips from a friend at Dell Inc, giving prosecutors a link to show how SAC Capital Advisors portfolio manager Michael Steinberg obtained inside information.

Sandeep Goyal, a former Neuberger Berman analyst, is the third member of what prosecutors call a “corrupt circle” of Wall Street analysts to testify in Steinberg’s federal trial. Steinberg is the highest-ranking employee at Steven A. Cohen’s hedge fund to face criminal charges for insider trading.

Goyal, who has been cooperating with prosecutors, told jurors in U.S. District Court in New York that the information he got from his friend at Dell was so detailed he could easily calculate earnings per share ahead of the computer company’s earnings announcements.

“It was a simple process,” he said.

Steinberg, 41, is facing five counts of securities fraud and conspiracy to commit securities fraud for trades in Dell and computer chip maker Nvidia Corp that prosecutors say were based on insider information. He denies wrongdoing.

He is one of eight employees at SAC Capital to face criminal insider trading charges. The hedge fund itself agreed last month to plead guilty to fraud charges and pay $1.2 billion in penalties and forfeitures.

Goyal’s testimony showed one link in a long chain of tips that prosecutors say leads to Steinberg. Goyal’s testimony also helped explain the benefits tippers received along the way, which prosecutors need to prove to secure a conviction.

Goyal, who pleaded guilty to conspiracy to commit securities fraud and securities fraud in 2011, said that starting in 2007 he began getting tips about Dell’s revenue, gross margins and operating expenses from an employee in the company’s investor relations department.

The employee, Rob Ray, was a friend from business school, Goyal said. At the time, Goyal said he was giving Ray tips on how to secure a job in the investment management industry.

Ray has not been charged, and his attorney, Joanna Hendon, said he “is innocent of any wrongdoing.”

“He took Goyal’s calls at Dell because it was his job to make himself available to analysts and because his bosses told him to be especially solicitous of analysts at the fund where Goyal worked,” Hendon said in an email.

At trial, Goyal said he passed Ray’s information on to Jesse Tortora, his former boss at the equity research department of Prudential Financial Inc, who was at the time an analyst at hedge fund Diamondback Capital Management.

“I got inside information and gave it to Jesse Tortora,” Goyal said.

Tortora, in exchange, began directing payments to Goyal through an arrangement with the Neuberger Berman analyst’s wife, he said. From 2008 to 2009, Goyal said Tortora paid them $175,000.

Tortora, who testified earlier in the case, said he was passing the information on to others, including Jon Horvath, then an analyst under Steinberg at SAC’s Sigma Capital Management division.

Horvath, a star witness in the case, has testified he then provided the Dell information to Steinberg. Both Tortora and Horvath have, like Goyal, pleaded guilty to charges including conspiracy to commit securities fraud and securities fraud.

Thursday’s proceedings marked the second time Goyal has been called as a witness as part of the broad insider trading crackdown being waged by prosecutors under Manhattan U.S. Attorney Preet Bharara.da

Last year, Goyal testified in the trial of Todd Newman, a former portfolio manager at Diamondback Capital Management, and Anthony Chiasson, a co-founder of Level Global Investors.

Newman and Chiasson were convicted in December 2012 and later sentenced to 4-1/2 years and 6-1/2 years in prison, respectively. They are out on bail pending appeal.

The case is U.S. v. Steinberg, U.S. District Court, Southern District of New York, No. 12-cr-00121.

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