Michael Steinberg, right, a former portfolio manager at Steven A. Cohen’s SAC Capital Advisors, is accompanied by his lawyer Barry Berke on the way to federal court in Manhattan for sentencing Friday. ()
Former SAC Capital portfolio manager Michael Steinberg was sentenced to serve 42 months in prison Friday for insider trading at the hedge fund.
Southern District Judge Richard Sullivan (See Profile), going below the sentencing guideline range of 63 to 78 months, said the 2013 trial that ended in guilty verdicts on five counts “was not a referendum on the man or the quality of his life” but was about the criminal charges, and whether they were proven beyond a reasonable doubt.
Sullivan also ordered the 42-year-old trader to pay a $2 million fine and forfeit $365,443. He allowed Steinberg to remain free pending his challenge on appeal to convictions on four counts of securities fraud and a related count of conspiracy.
The defendant nodded quietly when Sullivan addressed him directly and showed no reaction when the sentence was handed down. Steinberg declined to address the court. Defense attorney Barry Berke, a partner with Kramer Levin Naftalis & Frankel, explained the reason for his client’s silence was the upcoming appeal.
Sullivan, in discussing the bail decision, made a reference to a central argument Steinberg will make when he gets to the U.S. Court of Appeals for the Second Circuit.
On April 22, Steinberg’s co-conspirators—former Diamondback Capital Management LLC manager Todd Newman and Level Global Investors LP’s Anthony Chiasson—argued to the circuit that Sullivan erred by instructing their jury in a separate trial that prosecutors didn’t need to prove the defendants knew the tippers received personal benefits for leaking the inside information. He is the only judge in the Southern District, so far, to take that position on the law.
During the Newman/Chiasson appellate argument, Judge Barrington Parker (See Profile) criticized the government for using a superseding indictment to steer the Steinberg case to Sullivan, “the one judge on this list who had bought into the government’s theory of personal gain” (NYLJ, April 24).
Friday, Sullivan acknowledged that this was a live issue on the Steinberg appeal, and he took that into consideration on the bail decision. But he also instructed the parties that, if anything happens on the issue raised by Newman and Chiasson, he might reconsider his position on bail pending appeal.
On May 15, Sullivan filed an opinion in the Steinberg case outlining his view of the issue of benefit to the tipper, saying, “In fact, for more than two decades, the Second Circuit has repeatedly held that the tippee must know of the tipper’s breach but has never required a separate element of the tippee’s knowledge of the tipper’s benefit.”
Steinberg was convicted on Dec. 18, 2013 following a month-long jury trial at 40 Foley Square for trading on material non-public information in Dell, Inc. and NVIDIA Corp. he received from his analyst, Jon Horvath.
SAC Capital paid $1.8 billion to resolve criminal and civil insider trading investigations, the largest insider trading settlement in history, in a deal that was approved by Judge Laura Taylor Swain (See Profile) in April. Steven A. Cohen, the billionaire founder of SAC, was not charged in the probe (NYLJ, April 11).
On Friday, more than 10 benches of courtroom 318 were filled with relatives and friends and supporters of Steinberg, many of whom wrote letters that Sullivan quoted from before he asked Steinberg to stand and be formally sentenced.
Assistant U.S. Attorneys Antonia Apps and Harry Chernoff asked the judge to sentence Steinberg within the 63-to-78 month range.
“He knowingly violated the law and he knew what he was doing was wrong,” Apps told the court.
Berke had asked for a sentence “substantially below the guidelines”—less than two years—telling the judge that his client had devoted himself to his family and community and had taken a lead role in marshaling young professionals to help charities unable to win support from large institutions.
There were “over 80 small charities” he assisted with both time and money, Berke said.
Sullivan said he was taking into account Steinberg’s good works, something he told the defendant “distinguished you from most of the people I’ve sentenced.”
But he nevertheless said he had to consider the crimes committed here, saying, “They are crimes that go to the heart of what it means to live in an honest society.”
The judge also had to consider that the crimes were “consistent over a period of time, quarter to quarter to quarter” involving multiple stocks and trades.
Sullivan accepted the argument that Steinberg was less culpable than Newman, who actually paid money for the information. Newman’s guideline range was the same as Steinberg’s, and Sullivan sentenced him to 4 1/2 years in prison.