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SAC’s Steinberg sentenced as insider probe winds down

May 17, 2014 @ 10:50 am

Michael Steinberg, SAC Capital Advisors LP fund manager, who worked at SAC's Sigma Capital Management unit.
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Michael Steinberg, SAC Capital Advisors LP fund manager, who worked at SAC's Sigma Capital Management unit. (Bloomberg News)

Former SAC Capital Advisors LP hedge fund manager Michael Steinberg was sentenced to 3 1/2 years in prison for insider trading, capping one of the biggest victories for prosecutors who spent seven years investigating the firm and its boss, Steven A. Cohen.

Mr. Steinberg, 42, who handled technology, media and telecommunications stocks at SAC Capital’s Sigma Capital Management unit, was the longest-serving employee at the hedge fund convicted in the U.S. probe. He was found guilty in December of an insider scheme involving tech stocks that garnered more than $1.8 million in illegal profits.

“For most people on the planet, $1.8 million of gain is a lifetime of accumulated wealth,” U.S. District Judge Richard Sullivan said before sentencing Steinberg today in Manhattan federal court. “Maybe in a hedge fund it’s no big deal, but it’s a lot of money to most people.”

In giving Mr. Steinberg three years less than the maximum sought by the government, the judge said the fund manager is “basically a good man.” He cited almost 70 letters of support, including those sent by Mr. Steinberg’s wife and father.

Prosecutors have won convictions against eight managers and analysts in their investigation of SAC Capital, amid a broader crackdown on market cheating at hedge funds, publicly traded companies and so-called expert-networking firms. SAC Capital last year reached a $1.8 billion settlement with the U.S., pleading guilty to making hundreds of millions of dollars in illegal profits and fostering a culture of criminality.

Mr. Steinberg was also fined $2 million and ordered to forfeit $365,000 as part of his sentencing. The criminal probe of his hedge fund never reached Cohen, who hasn’t been charged with any wrongdoing. Stamford, Conn., SAC, however, ceased being a money manager for outside investors as part of the guilty plea, and has since shed its name -- the initials of its billionaire founder. In April, SAC Capital changed its name to Point72 Asset Management LP.

Mathew Martoma, a former fund manager for SAC’s CR Intrinsic Investors unit, is to be sentenced next month in what the government called the biggest insider trading scheme in U.S. history, at least by dollar value. He was convicted in February after prosecutors alleged he helped SAC Capital make $276 million on illegal tips about an Alzheimer’s drug by trading in Elan Corp. and Wyeth LLC.

TWO YEARS

Barry Berke, Mr. Steinberg’s lawyer, sought a prison term of just two years, citing his client’s charitable works, and arguing he was less blameworthy than others convicted in the scheme. He reiterated those arguments today at Mr. Steinberg’s sentencing.

Prosecutors argued for a term of 5 1/4 years to 6 1/2 years, saying his role was much broader than Mr. Berke said. They succeeded in having some of Cohen’s trades counted by the judge in his calculation of Mr. Steinberg’s sentence.

Mr. Sullivan, who has imposed some of the longest sentences on insider traders, said he was imposing a lesser term because Steinberg hadn’t paid bribes for his tips unlike other defendants in insider-trading cases he’s presided over.

In 2011, Mr. Sullivan gave more than 10 years to Zvi Goffer, a former Galleon Group LLC trader convicted of leading a scheme in which prosecutors said he made more than $10 million.

(Bloomberg News)

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