S.A.C. Capital Advisors' Michael Steinberg became the hedge fund investment company's longest-serving manager to be convicted of insider trading in a government victory that might increase pressure on his former colleague, Mathew Martoma, to cooperate in the U.S. investigation of founder Steven A. Cohen.
Mr. Steinberg was convicted of conspiracy and securities fraud after a five-week trial in Manhattan federal court. A jury found him guilty of using illegal tips on technology stocks provided by his former analyst, Jon Horvath, to reap more than $1.4 million in illicit profits. Mr. Steinberg faces as many as 25 years in prison when he is sentenced April 25.
Last month, S.A.C. Capital agreed to plead guilty and pay a record $1.8 billion for perpetrating an insider-trading scheme stretching back to 1999 that reaped hundreds of millions of dollars in illicit profits. New York federal prosecutors have brought insider-trading cases against 87 people and won convictions against 76 of them as part of a six-year nationwide probe of fund managers, company insiders and so-called expert network firms.
Manhattan U.S. Attorney Preet Bharara said after S.A.C.'s plea that his investigation of the Stamford, Conn.-based hedge fund's employees continues as investigators seek evidence to link Mr. Cohen to insider trading. Mr. Martoma, who has declined to cooperate with prosecutors in the past, goes on trial in Manhattan federal court on Jan. 6 on charges he used illegal tips tied to pharmaceutical company stocks.
Mr. Martoma, a former fund manager at S.A.C.'s CR Intrinsic unit, is accused of using inside information on clinical trials of an Alzheimer's disease drug to earn a profit and avoid losses for a combined benefit of at least $276 million. Mr. Martoma has pleaded not guilty.
Jonathan Gasthalter, a spokesman for S.A.C., declined to comment on the verdict.