Jon Horvath has been positioned as a star witness for federal prosecutors in the insider trading trial of Michael S. Steinberg, his former boss at SAC Capital Advisors. But under questioning by the defense on Tuesday, Mr. Horvath, a former analyst at SAC, acknowledged having some memory lapses, potentially undercutting some of his credibility.
Under questioning by Mr. Steinberg’s lead lawyer, Barry H. Berke, Mr. Horvath was unable to recall when he created a document titled “Jon’s trading rules” and when he wrote some of the rules for himself.
“I don’t remember exactly when I wrote this,” said Mr. Horvath, who worked for Mr. Steinberg for about five years and has testified he provided his boss with inside information about several stocks, including Dell Inc. and Nvidia. “It sounds like something I wrote, but I don’t remember when I wrote it.”
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VideoMr. Berke, in challenging Mr. Horvath’s memory about his “trading rules,” sought to undermine some of the former analyst’s previous testimony about how he felt pressured by Mr. Steinberg to begin providing inside information about technology stocks in summer 2007.
Mr. Horvath, who pleaded guilty to securities fraud charges in September 2012, is testifying against his former boss in the hopes of getting a lenient sentence or avoiding jail time altogether.
The insider trading trial of Mr. Steinberg, 41, in federal court in Manhattan comes a few weeks after SAC Capital, the hedge fund founded by Steven A. Cohen, pleaded guilty to securities fraud charges, while agreeing to pay $1.2 billion and stop managing outside money for investors. Mr. Cohen has not been criminally charged, but securities regulators have filed an administrative action accusing him of failing to properly supervise his employees.
Last week Mr. Horvath, 44, testified that Mr. Steinberg told him in August 2007 that he needed to start getting “edgy, proprietary information” about publicly traded companies. The former analyst said he took Mr. Steinberg’s message as a directive to “cultivate sources of nonpublic information.”
Mr. Horvath said his former boss was fully aware of his contacts with potential competitors and that this “circle of analysts” was passing inside information among one another.
But Mr. Berke pointed out that Mr. Horvath, in his own trading rules document, wrote about the importance of obtaining proprietary information on stocks. Mr. Berke said the document appeared to have been created before the August 2007 meeting between Mr. Horvath and his boss.
Under questioning, Mr. Horvath also conceded that he might be wrong on the timing of that meeting after evidence showed that Mr. Horvath was not in New York for most of August 2007.
The cross-examination of Mr. Horvath, which is expected to last into next week, is the most critical part of Mr. Steinberg’s defense strategy. During the first three days of his testimony, Mr. Horvath painstakingly testified on behalf of the prosecution about the many emails he sent to Mr. Steinberg. In them, he made no secret that he was getting information from analysts at other hedge funds who had contacts with people working inside companies like Dell and Nvidia.
One of those former analysts who shared information with Mr. Horvath was his friend Jesse Tortora, who worked at Diamondback Capital Management and has also pleaded guilty to insider trading.
Mr. Tortora earlier testified during Mr. Steinberg’s trial that he provided Mr. Horvath with inside information ahead of Dell’s August 2008 earnings report. Prosecutors have charged that Mr. Steinberg, using information about Dell that Mr. Horvath got from Mr. Tortora, made about $1 million by selling and short-selling Dell’s shares.
Earlier in the day, before Mr. Berke began his cross-examination, Mr. Horvath testified that after Diamondback and two other hedge funds were raided by federal authorities in fall 2010, Mr. Steinberg coached him about how to talk to the Federal Bureau of Investigation if approached by any agents. Mr. Horvath said his former boss told him if the F.B.I. asks about the kind of information Mr. Tortora provided on Dell, just say it was “O.K.”
Mr. Horvath said Mr. Steinberg flew to a conference he was attending in Arizona to personally deliver that message. “He just walked straight up to me,” Mr. Horvath said, adding that his then boss didn’t even say hello before bringing up the F.B.I.