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12.23.13 | Blog Posts

Insider Trading And Conscious Avoidance: Handling The Government's Most Powerful Prosecutorial Tool

The Insider: White Collar Defense and Securities Enforcement

The recent conviction of Michael Steinberg, a former senior trader at SAC, highlights the power of the government to obtain a conviction when armed with the ability to have a jury charged on a conscious avoidance theory of fraud.  The case proceeded without any direct evidence establishing that Mr. Steinberg explicitly knew that the information provided to him was improper inside information. Sure, there was testimony that Mr. Steinberg wanted his assistant Jon Horvath to obtain “edgy” or “proprietary” information, but Horvath did not testify that Mr. Steinberg expressly directed him to improperly obtain confidential information nor was their evidence that demonstrated that Mr. Steinberg actually knew where and how Horvath obtained the information.  Indeed, Horvath conceded that Mr. Steinberg never told him to break the law in obtaining his trading information.   And, Mr. Steinberg was not the direct recipient of the information—he was five people removed from the source of the confidential information. [...]

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