SAC Fund Manager Wants Jury to Hear Kinnucan Discussion
By Patricia Hurtado
A lawyer for SAC Capital Advisors LP fund manager Michael Steinberg said an excerpt of a secret recording that he says depicts the money manager as wary of inside information should be heard by a jury to demonstrate his innocent mindset.
In a recorded November 2010 phone call, Steinberg’s analyst, Jon Horvath, tells a co-conspirator at another fund about a conversation he heard between Steinberg and an expert-networking consultant, John Kinnucan. The recording was made the same day the FBI conducted raids ofhedge funds in New York and Boston as part of a U.S. insider-trading probe.
“Mr. Steinberg is on the phone with Kinnucan and said ‘Is this inside information you’re telling me?’ and Kinnucan is like, ‘No, I swear Mike, It’s not,’” Steinberg’s lawyer, Barry Berke, said yesterday, recounting an excerpt from a transcript he wants to read to the jury.
U.S. District Judge Richard Sullivan in Manhattan, who is presiding over Steinberg’s trial, now in its fourth week, said he will rule today whether to let Berke read the transcript and told lawyers he’s unlikely to allow it.
Steinberg, 41, is charged with conspiracy and four counts of securities fraud for allegedly making more than $1.4 million by trading on tips Horvath shared with other hedge fund analysts about Dell Inc. and Nvidia Corp. (NVDA) from 2007 to 2009.
One of those analysts, Spyridon “Sam” Adondakis, was working for Level Global Investors LP when, at the behest of the Federal Bureau of Investigation, he secretly recorded a conversation with Horvath on Nov. 22, 2010. Level Global, based in New York, was among the firms searched by the FBI that day.
Two days earlier, the Wall Street Journal had reported that Kinnucan sent an e-mail to 20 hedge fund clients saying he’d refused a request by the FBI to cooperate in a federal insider trading probe and record their conversations. The article said SAC fund managers were among Kinnucan’s clients and had received inside information.
Horvath, who pleaded guilty and agreed to cooperate with the government, has been testifying against his former boss since Nov. 26.
Berke told the judge yesterday that portions of the conversation between Horvath and Adondakis should be shared with the jury to show Steinberg’s “consciousness of innocence.”
Assistant U.S. Attorney Antonia Apps argued that the conversation is second-hand hearsay and isn’t relevant to the government’s case against Steinberg because it occured after prosecutors say the insider-trading scheme ended.
In her summary of the dialogue between the analysts, Apps said Horvath told Adondakis that Steinberg had yelled at Kinnucan and “made him cry.”
Sullivan said yesterday that while he would accept written arguments from both sides, he’s unlikely to let Berke read the transcript to the jury.
“It looks to me like it’s far afield and also hearsay,” the judge said.
Kinnucan, the principal and founder of Broadband Research LLC, pleaded guilty last year to passing nonpublic information to hedge fund clients on technology companies including SanDisk Corp. (SNDK), F5 Networks Inc. and OmniVision Technologies Inc. and was sentenced to serve more than four years in prison.
Apps said Adondakis was already secretly cooperating with the FBI at the time of the November 2010 conversation and would later plead guilty in January 2012. Horvath pleaded guilty last year a month before trial. Berke has argued that Horvath only pleaded guilty and implicated Steinberg after realizing that all his co-conspirators were set to testify against him.
The case is U.S. v. Newman, 12-cr-00121, U.S. District Court, Southern District of New York (Manhattan).
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