It looks like Steve Cohen, the founder of the $14 billion SAC Capital Advisors, may have gotten some protection from his boys.
Cohen’s top lieutenant, Michael Steinberg, on trial for insider trading in Manhattan federal court, and his research analyst Jon Horvath debated what to tell the mega-investor about the inside information they had on Dell, Horvath testified Monday.
The analyst’s inside information on Dell indicated the company would miss analysts’ estimates when it reported earnings in August 2008. That differed from the positive view others at the hedge-fund giant had on Dell, which led SAC and Cohen to take a big long position in the stock.
In an email to Horvath on Aug. 25, Steinberg, a portfolio manager, wrote that he hadn’t mentioned any of Horvath’s Dell information to Cohen and that “I’d like to properly weigh the risk-reward of doing so.”
To explain the difference between his view and others inside SAC, the next day Horvath wrote an email to Steinberg’s group saying that he had a “2nd hand read” that Dell would miss analysts’ estimates.
Steinberg, who the government claims knew the Dell info was illegal, responded: “Yes, normally we would never divulge data like this so please be discreet.”
Steinberg, facing up to 20 years in prison, denies the charges.
The email was later forwarded to Cohen, although that was not produced as evidence in court — nor was the fact that Cohen sold his entire Dell position.
By Aug. 28, Steinberg had shorted Dell — a $10 million, position that earned $1 million profit, the prosecution said earlier.
“Nice job on Dell,” Cohen wrote Steinberg.
Later that year, Cohen and Steinberg argued again about Dell in an instant-message exchange that was shown to jurors.
When Cohen questioned Steinberg’s then-bullish view on Dell, the portfolio manager responded, “I have an analyst that covers the stocks. He has industry contacts.”
Cohen replied, “I would prefer to talk on phone.”
Steinberg then sent an instant message to Horvath, discussing the exchange with Cohen.
“I told him not to be short and he got pissed, drilling me; who is telling me business is ok. I said Jon has a number of industry contacts and that is what he has heard through supply datapoints and he was not pleased. Total bulls–t,” Steinberg wrote Horvath.
Later, Horvath testified that Steinberg told him, “Don’t worry. I told him you had supply datapoints,” which are legitimate sources of information.
Horvath said he thought that meant Steinberg wasn’t letting Cohen know he was getting the information from Jesse Tortora, a research analyst at now-defunct hedge fund Diamondback Capital.
Tortora, an admitted insider trader in the corrupt circle who testified last week, was Horvath’s Dell source.
Horvath has pleaded guilty to insider trading charges and is the government’s star witness against Steinberg.
Cohen has not been charged with any crimes. While SAC has loomed large at the much-watched trial, Monday was the first time the billionaire investor’s name was mentioned.