White Collar Alert

Yesterday – seemingly before the ink even dried on SAC Capital Advisor’s unprecedented billion dollar plea agreement – U.S. Attorney Preet Bharara’s office secured the conviction of former SAC portfolio manager Michael Steinberg.

As recently reported by White Collar Alert editor Carrie Sarhangi, Steinberg was indicted for insider trading in March, and the government contended that he traded on financial figures he obtained from professionals with ties to computer mogul Dell and technology company Nvidia. “He allegedly made about $1.4 million in trades [executed] ahead of some of the companies’ quarterly earnings reports in 2008 and 2009.”  Richard Vanderford, SAC’s Steinberg Guilty of Insider Trading, Law360 (Dec. 18, 2013).

During the month-long trial, which began on November 18^th, prosecutors did not present the incontrovertible evidence that we have become accustomed to seeing in insider trading cases brought by Bharara’s office.  As noted this morning by The New York Times, “Prosecutors lacked the incriminating wiretaps …. The emails pointed to no smoking gun.  And the government’s star witness, a felon who testified to avoid prison time, fumbled his way through five days of cross-examination.”  Ben Protess, Matthew Goldstein and Alexandra Stevenson, Former SAC Trader Is Convicted of Insider Trading, The New York Time’s DealB%k (Dec. 18, 2013).  Indeed, the government had previously conceded “that the case was not a slam dunk,” as Steinberg “was at the end of a five-person chain of information that started with an insider … and wound its way to … [him].”  Id.

Yet, after two days of deliberations, the federal jury completed its “fact-finding,” id., and delivered the guilty verdict.  In a press release issued yesterday, Bharara stated:

The jury has found what the Government contended from the outset; in search of an edge, Michael Steinberg crossed the line into criminal insider trading.  Like many other traders before him who, blinded by profits, lost their sense of right and wrong, Steinberg now stands convicted of federal crimes and faces the prospect of losing his liberty.

Statement of Manhattan U.S. Attorney Preet Bharara On The Conviction of Michael Steinberg (Dec. 18, 2013).  Indeed, while Steinberg is free on bail until his April 25^th sentencing, he faces up to 85 years in prison.

The conviction of Mr. Steinberg is just the latest victory by the United States Attorney’s Office in Manhattan in its campaign to root out illegal conduct on Wall Street.  Over the past four years, more than 80 individuals and entities have been charged with insider trading in the Southern District of New York.  The office has secured 76 convictions without losing a single trial.  And just last week, Richard Zabel, Bharara’s Deputy U.S. Attorney, noted at a conference that insider trading remains one his office’s focuses.

According to one recent survey, financial services professionals feel that there may be plenty of Wall Streeters for Bharara’s office to target.  This survey, entitled “Wall Street in Crisis:  A Perfect Storm Looming,” revealed the following:

• 52% of financial services professionals felt it was likely that their competitors have engaged in unethical or illegal activity to engage in the market;
• 24% felt employees at their own company have likely engaged in misconduct to get ahead;
• 23% of respondents indicated that they have observed or had firsthand knowledge of wrongdoing;
• 24% of financial service professionals likely would engaged in insider trading to make $10 million if they could get away with it; and
• 29% of those surveyed believed that the rules may have to be broken in order to be successful.

Yet the question still remains whether SAC’s founder, Steven A. Cohen, falls into one of these categories of professionals prone to illegal activity, and/or whether he will be the next victim of Bharara insider trading inferno.