Getting by on just $2.1 million a year must’ve been tough for SAC Capital money manager Michael Steinberg.
As Steinberg’s total pay sank to that level in 2008 from about $5 million the prior year, the 41-year-old hedgie started using illegal insider tips to score some very profitable trades, a federal court jury was told Thursday.
Steinberg used illegal tips on Dell in 2008, supplied by his analyst Jon Horvath, to score huge profits, the government has charged.
SAC’s CFO Dan Berkowitz told the jury in Manhattan federal court that Steinberg’s total pay took a hit in 2008 as Wall Street reeled from the financial crash.
Steinberg was one of the top earners at Steve Cohen’s SAC Capital.
Steinberg is on trial for conspiracy to commit securities fraud. He is the eighth SAC employee to face insider-trading charges.
The highest-ranking SAC employee nabbed in US Attorney Preet Bharara’s Wall Street probe of insider-trading, Steinberg has denied the charges.
The trial is expected to last up to four weeks.
Prosecutors are expected to lean heavily on the testimony of Jon Horvath and his “corrupt circle of friends.”
Horvath will be the star witness in the case against his boss.
Another so-called friend is Jesse Tortora, a research analyst at now-defunct hedge fund Diamondback Capital. Tortora was on the stand for most of the day Thursday.
Tortora explained how the circle traded inside tips on Dell through sources inside the company who gave them illegal information.
Tortora told the jury he passed the illicit tips to others, including Horvath. Horvath has said that he passed the illegal information on to Steinberg, who traded on it.
The government has to prove that Steinberg knew the tips were not kosher — a point the money manager’s legal team is expected to deny.
On the stand, Berkowitz detailed some of the inner workings of SAC Capital Advisors, including how Steinberg, who joined SAC in 1996, was so highly regarded at the hedge fund that he was given more money to trade than most of his colleagues.
Steinberg was entrusted with $300 million to trade at the beginning of 2008 and was given wider latitude than others.
Steinberg was able to sink 15 percent in one trade until the financial crisis forced SAC to rein in its traders later that year, the jury was told.
In testimony that started a little after 11 a.m. and lasted the rest of the day, Tortora began the government’s task of laying the foundation of the conspiracy, much of it through emails and instant messages among members of the group.
After Tortora had passed on inside information on Dell that led to profitable short trades on Aug. 28, 2008, he wrote in an email to Horvath: “r u there on Dell,” Horvath replied, “Nice man” and “u nailed it.” Tortora then replied “should be lower” and “shorting more.”
SAC had total assets of between $10 billion and $17 billion between 2007 and 2009, with about 100 other money managers in the same role as Steinberg, according to Berkowitz.