Federal prosecutors are nearing a decision whether to bring criminal charges against Michael Steinberg, a longtime portfolio manager at SAC Capital Advisors, the giant hedge fund owned by the billionaire investor Steven A. Cohen.
In recent months, a former SAC analyst who worked directly for Mr. Steinberg has met with authorities and provided them with information about his former boss, according to a person with direct knowledge of the investigation. The analyst, Jon Horvath, has been cooperating with the government since pleading guilty in September to insider trading charges.
A lawyer for Mr. Steinberg, Barry Berke, said in a statement that his client “did absolutely nothing wrong.†Mr. Berke added: “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.â€
Steven Peikin, a lawyer for Mr. Horvarth, declined to coment. Representatives for the United States attorney’s office in Manhattan and the F.B.I. declined to comment.
Mr. Horvarth admitted to being part of an insider trading ring that illegally traded the technology stocks Dell and Nvidia. As part of his guilty plea, he implicated Mr. Steinberg, saying that he gave the secret data to his SAC boss and that they traded based on secret financial data about those two companies.
If prosecutors file a criminal case against him, Mr. Steinberg, 40, would be the most senior SAC employee charged in the government’s investigation of the hedge fund, which is based in Stamford, Co! nn. Including Mr. Steinberg, at least eight current or former SAC employees have been tied to allegations of insider trading while working there. Four have pleaded guilty to federal charges.
As the prosecutors weigh whether to indict Mr. Steinberg, who was put on leave last year, SAC clients are contemplating a different decision. Investors have until Thursday to inform the fund that they want their money back. The fund has told employees that it expects at least $1 billion in withdrawals from the $14 billion fund because of the heightening investigation. SAC has a standard quarterly redemption deadline.
The investigation intensified last November, when another former SAC portfolio manager, Mathew Martoma, was accused of using inside information about drug companies to avoid losses and earn profits of a combined $276 million. For the first time in the inquiry, Mr. Cohen was involved in the trades that the government contends were illegal.
Mr. Cohen has said through a spokesman that he has cted appropriately at all times. Mr. Martoma has pleaded not guilty and is fighting the charges.
The government has previously identified Mr. Steinberg, a technology stock specialist in SAC’s Sigma Capital unit, as a co-conspirator in a case involving two former hedge fund managers, Todd Newman and Anthony Chiasson. A jury convicted Mr. Newman and Mr. Chiasson in December on charges that they traded shares of Dell while in possession of secret information about the technology company.
Mr. Steinberg’s name came up several times during their trial. Evidence emerged in the case that just days before Dell announced quarterly earnings in 2008, Mr. Horvath e-mailed Mr. Steinberg with details about its financials.
“I have a secondhand read from someone at the company,†Mr. Horvath wrote. “Please keep to yourself as obviously not well known.â€
Mr. Steinberg replied: “Yes normally we would never divulge data like this, so please be discreet. Thanks.â€
Of the former ! SAC portf! olio managers and analysts ensnared by the government’s insider trading inquiry, Mr. Steinberg had the closest relationship with Mr. Cohen. He joined the fund in 1997, when it was only a few dozen traders; today, it has more than 1,000 employees. For a time, he sat next to Mr. Cohen on the trading floor and was relied upon as an important source of information about technology stocks.
Prosecutors have until August to file a case against Mr. Steinberg. Under the statute of limitations for insider trading crimes, the government has five years from the trade in question â€" in this case, from August 2008 â€" to bring charges against him.
