Insider Trading Trial of Former SAC Manager Goes to the Jury

The fate of a former top trader for the hedge fund SAC Capital Advisors will soon hinge on whether or not jurors believe the government’s star witness, a technology analyst who has pleaded guilty to insider trading.

The trial of the portfolio manager, Michael S. Steinberg, who is accused of trading technology stocks after receiving confidential information from the SAC analyst, will go to the jury in United States District Court in Manhattan on Tuesday.

Wrapping up his defense on Monday, Mr. Steinberg’s lawyer, Barry H. Berke, called the analyst, Jon Horvath, a liar. “If you don’t believe something a witness says, you can reject his entire testimony,” Mr. Berke told the jury.

Mr. Steinberg, 41, did not know that the information that Mr. Horvath gave him had been illegally obtained, Mr. Berke argued.

The defense’s contention stands in sharp contrast with the insider trading case that the prosecution, led by Antonia M. Apps, an assistant United States attorney, has been trying to build over the last three weeks. Last month, SAC Capital, where both Mr. Steinberg and Mr. Horvath worked, agreed to plead guilty to insider trading violations and pay a record $1.2 billion penalty.

For the government, too, the case turns on Mr. Horvath.

“If Mr. Horvath was on that witness stand lying to get his deal, lying to get credit, wouldn’t he have told better lies?” Ms. Apps asked the jury in her rebuttal. Mr. Horvath pleaded guilty to securities fraud charges in 2012.

Both the defense and the prosecution gave their closing arguments on Monday, after weeks of testimony from 13 witnesses. Just before the lawyers mounted their cases, Mr. Steinberg and his wife spent a moment talking quietly. She then squeezed his hands.

Recalling many of the phone records, emails and trading records submitted as evidence during the trial, Harry Chernoff, an assistant United States attorney, began the prosecution’s closing remarks by recounting how in August 2008, after a brief telephone chat with Mr. Horvath, Mr. Steinberg immediately bought short positions in, or bets against, Dell, without asking any questions about where the information had come from.

He did not need to, Mr. Chernoff said, because “Michael Steinberg already knew the score.” The tip and the trade Mr. Steinberg subsequently made ahead of Dell earnings on Aug. 28, 2008, would ultimately reap $1 million in profits. The company ended up reporting a surprise fall in revenues and its stock had its biggest one-day drop in eight years.

Mr. Chernoff portrayed Mr. Steinberg as a “sophisticated” and “experienced” investment professional who should have questioned where the information Mr. Horvath was supplying him with had originated.

“Mr. Steinberg certainly knew how to do his job,” and was paid to know the source of any information he traded on, the prosecutor said.

When Mr. Horvath, who worked for Mr. Steinberg, came to him with illegal information, Mr. Chernoff said, Mr. Steinberg “gladly took it and traded on it again and again and again.”

He asked the jury to consider whether in certain situations Mr. Steinberg should have called a compliance officer to raise questions about whether the information was permissible or whether he had instead “just deliberately closed his eyes to the situation.”

The government must prove that Mr. Steinberg had actual knowledge that he was receiving insider information.

Mr. Chernoff recalled testimony from one witness, John Casey, an SAC compliance officer, who testified about SAC’s strict code of ethics and its annual training sessions for employees on insider trading.

In his closing, which took nearly three hours, Mr. Berke struck a more combative tone, telling jurors that the prosecution’s case had “collapsed.”

“The prosecution has such huge holes in their argument that they are using putty to fill it in,” he said.

Mr. Berke brought up a series of correspondences between Mr. Horvath and Mr. Steinberg in May 2009 about Nvidia, one of the technology companies the government contends Mr. Steinberg traded using illegal tips.

In a May 6, 2009, email to Mr. Steinberg, Mr. Horvath wrote that he had no visibility on the company’s gross margins. But two days earlier, Mr. Horvath had received an email from Danny Kuo, an analyst in a “circle of friends” who shared tips from sources inside public companies, that provided a specific gross margin number for Nvidia’s “April quarter.”

“Clear evidence of Mr. Horvath deceiving Mr. Steinberg,” Mr. Berke said. He also said that Mr. Horvath concealed from Mr. Steinberg the fact that the information he had obtained was illegal. As a result, Mr. Berke said, Mr. Steinberg did not have any suspicions about the nature of the information.

“It’s perfectly proper to speak to other buy-side, sell-side analysts,” Mr. Berke told the jury, referring to the many emails that showed Mr. Steinberg knew about specific members of the circle of analysts that shared tips.

He also addressed Mr. Horvath’s testimony that Mr. Steinberg asked him to get “edgy proprietary information,” calling these “proper, legitimate words.”

As Ms. Apps finished her rebuttal just before 5 p.m. to a tired-looking jury, she appealed to the jurors, three men and nine women, to look closely at the cooperating agreements.

“There are harsh consequences for cooperators who lie,” she said, adding that Mr. Horvath had an incentive to tell the truth on the witness stand. Mr. Horvath, who pleaded guilty to insider trading in 2012, is cooperating with the government in hopes of getting a lenient sentence.