The federal government’s investigations into billionaire Stephen A. Cohen’s hedge fund SAC Capital culminated today in the arrest of one its top portfolio managers who was responsible for technology investments. According to the New York Times, Michael Steinberg, who was arrested at his Park Avenue apartment this morning, became the most senior official of the company to be arrested in the SEC’s ongoing investigation into the hedge fund for insider trading.
Mr. Steinberg probably saw this coming just as much as the feds did, considering he was recently placed on leave after Mr. Cohen attempted to pay $616 million to resolve two previous insider trading cases. The larger settlement of $602 million was rejected by a federal judge because of a provision that would have allowed SAC to avoid stating that it had committed any wrongdoing.
The much smaller $14 million settlement was related to tradings made by Mr. Steinberg involving tech giants Dell and Nvidia. According to former analyst, Jon Horvath, who agreed to a guilty plea last September after being arrested, Mr. Steinberg made millions on insider trades on Dell and Nvidia after receiving confidential financial information from Mr. Horvath.
In a move that would have made Gordon Gecko proud, Mr. Horvath forwarded an August 2008 e-mail to Mr. Steinberg with Dell’s financial data a few days before the company’s quarterly earnings announcement.
”I have a secondhand read from someone at the company. Please keept to yourself as obviously not well known,” Mr. Horvath wrote according to the Times.
The federal government’s white whale, of course, is Mr. Cohen. According to Forbes, he is the 35th richest man in the United States, with a net worth of $8.8 billion.The SEC has previously gone after other portfolio managers focused on other markets, including one last November that resulted in a $602 million settlement. And what does Mr. Cohen do now that the prospect of prison time could very well be in his future? What any logical billionaire does! Buy a Picasso painting for $155 million and an oceanfront estate in East Hampton for $60 million.