The criminal insider-trading probe of hedge-fund giant SAC Capital Advisors is getting so close to founder Steve Cohen that the mogul might be able to smell the leather on the FBI agents’ holsters.
Michael Steinberg, one of Cohen’s top lieutenants, has been indicted by a federal grand jury on five counts of conspiracy and securities fraud related to illegal tip he got that allowed him to pocket $1.4 million.
Each securities fraud count carried a maximum prison term of 20 years.
Steinberg, 40, the highest-ranking executive at Cohen’s $13 billion SAC operation caught in US Attorney Preet Bharara’s insider-trading probe, was cuffed by FBI agents at his posh Park Avenue apartment today and brought before a judge.
Cohen and Steinberg have worked together for years and are close friends. Cohen, a billionaire art collector, attended Steinberg’s wedding at the Plaza Hotel 14 years ago, a source told The Post.
Steinberg pleaded not guilty before Manhattan federal judge Richard Sullivan, where he appeared shortly before noon wearing a blue sweater and navy slacks.
“Not guilty, your honor,” he said.
He was released on $3 million bail.
The feds have accused the Great Neck, NY, native of participating in an insider-trading conspiracy that has already led to convictions of at least half a dozen other hedgies, including Anthony Chiasson, co-founder of Level Global.
According to the superseding indictment unsealed today, in one case Steinberg received a tip that Dell Inc. would report in seven days disappointing quarterly results.
Steinberg got the tip from his analyst Jon Horvath, who received it from Jesse Tortora at Diamondback Capital, who got the info from analyst Sandy Goyal at Neuberger Berman — who was tipped off by unidentified Dell employees, according to the indictment.
Horvath, Tortora and Goyal have all pleaded guilty and are cooperating with prosecutors.
Cohen has not been charged with any crime, although it has been reported that he is the subject of the FBI probe and that agents hope to pressure Steinberg to give up incriminating information on Cohen, who denies any wrongdoing.
“As alleged, Mr. Steinberg was at the center of an elite criminal club, where cheating and corruption were rewarded,” FBI Assistant Director George Venizelos said. “Research was nothing more than well-timed tips from an extensive network of well-sourced analysts.”
Steinberg was also sued by the Securities and Exchange Commission for the same trades, although the SEC said he earned more than $3 million on the illicit trades, including losses avoided.
SAC stood by him today, saying in a statement: “Mike has conducted himself professionally and ethically during his long tenure at the firm. We believe him to be a man of integrity.”
Steinberg has been on leave from his job at SAC since Horvath pleaded guilty in September.
“Michael Steinberg has done absolutely nothing wrong,” his lawyer, Barry Berke said. “At all times, his trading decisions were based on detailed analysis as well as information that he understood had been properly obtained through the types of channels that institutional investors rely upon on a daily basis.”
As previously reported by The Post, Steinberg was worried about being arrested in front of his family and his lawyer had asked permission to let Steinberg self surrender. The request was denied.
To avoid having his children see him cuffed and walked from the home, Steinberg of late spent some nights at hotels — believing an FBI arrest could happen any day.
Last week, he and his family left for a Florida vacation, sources said. Steinberg’s lawyer arranged for him to return by himself to New York to be arrested at home alone, avoiding the embarrassment of being cuffed in front of his family.
Steinberg’s arrest is Cohen’s second setback this week.
A Manhattan federal judge yesterday refused to approve a $600 million settlement Cohen’s SAC reached with regulators. The judge said he is concerned about language allowing SAC to “neither admit nor deny” wrongdoing.
kwhitehouse@nypost.com