Updated Wednesday, July 29, 2015 as of 12:51 AM ET

Steinberg Backed by SAC as Federal Probe Moves Closer to Cohen

(Bloomberg) Steven A. Cohen did something unusual when Michael S. Steinberg was arrested on the morning of March 29 and accused of insider trading at Cohen’s $15 billion hedge fund SAC Capital Advisors LP.

Within an hour of the accusations, SAC issued a statement defending the 16-year veteran of the Stamford, Connecticut-based firm. It was the first time SAC had come out publicly in support of an employee who had been charged in the government’s wide- ranging investigation of insider trading.

“Mike has conducted himself professionally and ethically during his long tenure at the firm,” Jonathan Gasthalter, a spokesman SAC, said in the statement. “We believe him to be a man of integrity.”

SAC is stepping up its public defense as Steinberg’s arrest brings the government’s probe closer to the billionaire hedge- fund founder. Steinberg, who turns 41 this week, is the longest- serving SAC employee to be accused of insider trading while at the firm, and one of Cohen’s most trusted managers.

He joined SAC in 1997, three years after graduating college, and was part of a group of traders who socialized with Cohen on vacations and at sporting events. Steinberg introduced the hedge-fund owner to his art adviser, and Cohen attended Steinberg’s 1999 New York wedding, according to former colleagues, friends and people with knowledge of SAC.

‘Another Domino’

“Steinberg is another domino that has fallen in a path that leads to a central person at SAC,” said John C. Coffee Jr., a professor at Columbia Law School in New York. “He’s one of the few that had direct communications with Cohen.”

In an indictment unsealed March 29, Steinberg was charged by a federal grand jury with five counts of conspiracy and securities fraud. He is accused of being part of a conspiracy that began in late 2007 and continued until 2009. The U.S. said he received and traded on illegal tips from Jon Horvath, a former analyst at Stamford, Connecticut- based SAC, on technology companies Dell Inc. and Nvidia Corp.

Steinberg has pleaded not guilty. Barry Berke, Steinberg’s lawyer, said his client is “caught in the crossfire of aggressive investigations” and that he did nothing wrong. Cohen hasn’t been accused of wrongdoing.

Steinberg is one of two portfolio managers who received and traded on inside information from Horvath, according to a filing by the U.S. Securities and Exchange Commission last month. Bloomberg News identified the second manager as Gabriel Plotkin.

Defending Plotkin

SAC didn’t issue a statement when Horvath was charged in January 2012. The firm did defend Plotkin after Bloomberg News identified him, saying he did nothing wrong and built his career on legitimate research. Unlike Steinberg, Plotkin hasn’t been charged by the government.

Steinberg worked at SAC’s Sigma Capital Management unit and was one of 15 portfolio managers handling technology, media and telecommunications stocks before he was put on paid leave in September. He oversaw as much as $200 million in gross assets, a relatively small amount in a firm where some portfolio managers handle as much as $1 billion, according to the people, who asked not to be identified because they didn’t want to discuss their relationship with Steinberg or SAC publicly.

The son of a doctor, Steinberg grew up in Great Neck, a village on Long Island in New York, which is also Cohen’s hometown. After graduating in 1994 from the University of Wisconsin in Madison, Wisconsin, he worked at Wall Street research firm Sanford C. Bernstein before joining SAC at the age of 25.

Early Years

At SAC, Steinberg was part of a group of former technology portfolio managers and analysts whose careers crossed paths at SAC during the late 1990s, when the hedge fund posted annual returns averaging almost 60 percent, and who have since been linked to the government investigation.

Around the time when he joined, SAC had about 50 employees managing about $450 million, mainly Cohen’s own money, and was starting to transition from a proprietary-trading firm to a hedge fund with outside clients. As part of the process, the firm was expanding its fundamental research and organizing money managers along industries, according to SAC marketing documents dated 2011.

Steinberg sat together with the other technology portfolio managers and analysts on a row in SAC’s former offices in the General Electric building in Stamford, where the hedge fund occupied a floor, according to two of the people.

‘SAC Family’

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