Steinberg Sentencing

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

UNITED STATES OF AMERICA,
ECF CASE
V.
MICHAEL STEINBERG,
S4 12 Cr. 121 (RJS)

Defendant.
SENTENCING MEMORANDUM ON BEHALF OF MICHAEL STEINBERG
KU 2971449 1
Case 1:12-cr-00121-RJS Document 380 Filed 05/02/14 Page 1 of 71
TABLE OF CONTENTS
Page
I. MICHAEL STEINBERG'S ALTRUISM, GENEROSITY, AND LIFE-LONG
COMMITMENT TO FRIENDS, FAMILY, AND COMMUNITY STRONGLY
SUPPORT A SENTENCE SUBSTANTIALLY BELOW THE GUIDELINES 4
A. Personal Background, Education, and Professional Career 5
B. Mr. Steinberg's Dedication to and Support of His Family 7
1. Mr. Steinberg's Devotion to and Support of His Wife Has Been Critical
to Her During Extremely Difficult Times 7
2. Mr. Steinberg Has Been Instrumental in Helping His Children Overcome
, and Is an Exemplary and
Dedicated Father 11
C. Mr. Steinberg's Devotion of His Time to Charity Reflects a Deep Commitment
to the World Around Him 18
1. Mr. Steinberg's Work Creating and Building Natan 18
2. Mr. Steinberg's Additional Charitable Works 22
D. Mr. Steinberg's Altruism and Generosity to Others 25
1. Mr. Steinberg Steadfastly Supports His Friends, Often Making a
Dramatic, Positive Impact on Their Lives 26
2. Mr. Steinberg Has Been a Trusted and Invaluable Source of Advice
for Friends, Family, and Business Colleagues 30
3. Mr. Steinberg Is Altruistic Towards Strangers As Well 34
II. THE ADVISORY SENTENCING GUIDELINES RANGE 37
III. THE NATURE AND CIRCUMSTANCES OF THE OFFENSE CONDUCT 39
A. Mr. Steinberg's Offense Conduct Lacks Many of the Hallmarks of Culpability
Evinced by Several Other Insider Trading Defendants 40
1. Mr. Steinberg Did Not Corrupt Insiders 40
2. Mr. Steinberg Did Not Have an Integral Role in the Conspiracy 43
3. Mr. Steinberg's Level of Knowledge Further Supports a Sentence
Substantially Below the Guidelines Range 45
IV. THE NEED TO AVOID UNWARRANTED SENTENCING DISPARITIES 49
A. Mr. Steinberg's Sentence Should Be Significantly and Proportionally Lower
than Todd Newman's Sentence 49
KL3 2971449 1
1. Mr. Steinberg Was Not Involved in the Consulting Payments Authorized
and Covered Up by Mr. Newman 50
2. Mr. Newman Was Alleged To Have Had Far Greater Awareness of the
Scope and Details of the Conspiracy than Mr. Steinberg 51
B. Mr. Steinberg Is Also Distinguishable from Anthony Chiasson 55
C. The Recent Sentences of Doug Whitman, James Turner, and Donald Longueuil
Further Show that Mr. Steinberg Should Receive a Substantially Reduced,
Below-Guidelines Sentence
58
1. Doug Whitman
58
2. James Turner
61
3. Donald Longueuil
62
CONCLUSION
64
KL3 2971449 1
TABLE OF AUTHORITIES
Page(s)
CASES
Gall v. United States,
552 U.S. 38 (2007) 5, 49
United States v. Booker,
543 U.S. 220 (2005)
4
United States v. Garcia,
920 F.2d 153 (2d Cir. 1990)
44
United States v. Wills,
476 F.3d 103 (2d Cir. 2007)
58
STATUTES
15 U.S.C. 78j
37
18 U.S.C. 3143(b)
64
18 U.S.C. 3553(a)
passim
Insider Trading Sanctions Act of 1984, Pub. L. No. 98-376, 98 Stat. 1264 et seq. 44
U.S.S.G. 2B1.1
37, 38, 39
U.S.S.G. 2B1.4
2, 37, 38,40
U.S.S.G. 3D1.2
37
U.S.S.G. 4A1.1
37
U.S.S.G. ch. 5, pt. A
38
OTHER AUTHORITIES
Brief for the Securities and Exchange Commission as Amicus Curiae Supporting
Respondents, Bateman Eichler, Hill Richards, Inc. v. Berner,
472 U.S. 299 (1985), 1985 WL 669566
43, 44
Statement of Preet Bharara, U.S. Attorney, S.D.N.Y., Public Hearing Before the U.S.
Sentencing Comm'n 11 (Feb. 16, 2011), available at
http://www.ussc.gov/Legislative and_Public_Affairs/Public_Hearings_and_Meetings
/20110216/Hearing_Transcript.pdf
39
KL3 2971449 1
Benjamin Fischer, Insider Trading and Conscious Avoidance: Handling the
Government's Most Powerful Prosecutorial Tool, Forbes, Dec. 23, 2013 (attached as
Exhibit B) 48
Julie Steinberg & Rob Copeland, 'Information Trailed Back to Steinberg' Juror Says,
Wall St. J., Dec. 19, 2013 (attached as Exhibit C) 48
Julie Steinberg & Rob Copeland, Turnabout by Juror was Crucial in Steinberg's SAC
Case, Wall St. J., Dec. 19, 2013 (attached as Exhibit E) 49
Alexandra Stevenson & Rachel Abrams, Insider Jury-Room Demonstration Persuaded
Holdouts in Ex-Trader's Trial, N.Y. Times, Dec. 19, 2013 (attached as Exhibit D) 48
United States v. Chiesi,
No. 09 CR 1184 (RJH), (S.D.N.Y. June 13, 2011), Gov't Sentencing Mem. 41
United States v. Chiesi,
No. 09 CR 1184 (RJH), (S.D.N.Y. July 20, 2011), Sentencing Tr. 41
United States v. Drimal,
No. 10 CR 56 (RJS), (S.D.N.Y. Aug. 24, 2011), Gov't Sentencing Mem. 45, 46, 63
United States v. Drimal,
No. 10 CR 56 (RJS), (S.D.N.Y. Aug. 31, 2011), Sentencing Tr. 45, 58, 63
United States v. Emanuel Goffer,
No. 10 CR 56 (RJS), (S.D.N.Y. Oct. 7, 2011), Sentencing Tr. 39, 45, 63
United States v. Zvi Goffer,
No. 10 CR 56 (RJS), (S.D.N.Y. Sept. 14, 2011), Gov't Sentencing Mern. 45
United States v. Zvi Goffer,
No. 10 CR 56 (RJS), (S.D.N.Y. Sept. 21, 2011), Sentencing Tr. 45
United States v. Goldfarb,
No. 10 CR 56 (RJS), (S.D.N.Y. Aug. 19, 2011), Sentencing Tr. 45
United States v. Kimelman,
No. 10 CR 56 (JRS), (S.D.N.Y. Oct. 12, 2011), Sentencing Tr. 43
United States v. Longueuil,
No. 11 CR 161 (JSR), (S.D.N.Y. July 21, 2011), Gov't Sentencing Mem. 62, 63
United States v. Rajaratnam,
No. 09 CR 1184 (RJH), (S.D.N.Y. Oct. 13, 2011), Sentencing Tr 59
United States v. Turner,
No. 11 CR 868 (DMC), (D.N.J. Dec. 19, 2011), Information 62
iv
KI3 2971449 I
No. 11 CR 868 (DMC), (D.N.J. Dec. 19, 2011), Plea Agreement
No. 11 CR 868 (DMC), (D.N.J. Apr. 16, 2012), Sentencing Tr
United States v. Whitman,
No. 12 CR 125 (JSR), (S.D.N.Y. Feb. 8, 2012), Indictment
No. 12 CR 125 (JSR), (S.D.N.Y. Jan. 17, 2013), Gov't Sentencing Mern
No. 13-491 (2d Cir. July 15, 2013), Gov't Appellee Br.
http://innoafrica.org/
http ://www .natan. org/cgi-b in/grants/grants . pl?ID=1
http ://www.natan.org/cgi-bin/grants/grants.pl?ID=2
61,
61
62
59
60
60
21
21
22
KL3 2971449 1
We submit this memorandum on behalf of Michael Steinberg, who is scheduled to
be sentenced by this Court on May 16, 2014. As the Court knows, Mr. Steinberg stood trial for
approximately four weeks in November and December of last year, and the jury returned a guilty
verdict on December 18, 2013. We address in this submission the relevant sentencing
considerations set forth in 18 U.S.C. 3553(a), and endeavor, among other things, to provide the
Court with a broader and deeper understanding of who Michael Steinberg is, and how he has led
his life.
Mr. Steinberg's criminal conviction is starkly at odds with the character and
broader life accomplishments of the man who will stand before the Court for sentencing. The
scores of letters submitted on his behalf demonstrate Mr. Steinberg's generosity, empathy,
respectful nature, and devotion to family, friends, and the broader community. Mr. Steinberg is a
man of many admirable individual characteristics but more than that, he is a giver and a doer,
someone whose contributions to the happiness, success and well-being of his family, friends, and
many others are second to none. He is without question a devoted family man on whom his
wife, Elizabeth, and two young children rely and count for his daily support, guidance, and
strength, and even more so in trying times. As we will discuss in greater detail below, Mr.
Steinberg's unwavering support of Elizabeth over a five-year struggle to have children, followed
by the vital role he plays as he and Elizabeth grapple with
, are a compelling testament to his character and the exemplary husband
and father he is. They also highlight the tragic and irreparable losses that a lengthy prison
sentence will bring with it.
As the Court will see from the many attached letters, Mr. Steinberg has also
dedicated himself to helping society and strangers through charitable works. In 2002, at the age
1
KL3 2971449 1
of 30, he co-founded and ran a charitable organization that has donated millions of dollars to
help people around the world, while also investing his time and energy in many other charitable
causes. That Mr. Steinberg engaged in such hands-on and substantial charitable works as a
relatively young man underscores what a core value philanthropy is for him. Mr. Steinberg also
made sure to pass this charitable spirit on to others by inspiring young professionals and their
children to engage in proactive philanthropic work.
Mr. Steinberg's generosity extends beyond philanthropy as well. Indeed, altruism
has been a constant throughout Mr. Steinberg's life and has driven him to make lasting,
impactful differences in the lives of people in need. Mr. Steinberg has done all of this because of
his deep empathy for the needs of others and his generosity of heart. It is plain from reading the
many letters recounting Mr. Steinberg's acts of kindness and support that the people in his life
rely on him in the most difficult of times, and that Mr. Steinberg has always been there to answer
the call.
Beyond Mr. Steinberg's personal history and characteristics, the Court must of
course consider the nature and circumstances of the offense of conviction. The insider trading
guideline ( 2B1.4) primarily distinguishes among defendants based on the amount of gain.
Accepting the verdict for purposes of sentencing, and recognizing that insider trading is a serious
offense, we respectfully ask the Court to consider the many ways in which Mr. Steinberg's
offense conduct reflects a lesser degree of culpability compared to many other insider trading
defendants. Mr. Steinberg was tried as a remote tippee, four levels removed from the insider
tippers. He did not breach or induce breaches of any primary duties. He did not know about, let
alone authorize, any payments to obtain illegal inside information. Mr. Steinberg did not initiate
the conspiracy, which existed before he was alleged to have joined it and would have continued
2
KL3 2971449 1
without his participation. In addition, Mr. Steinberg lacked knowledge about significant details
of the conspiracy that were known to other co-conspirators, including the circumstances of the
initial alleged fiduciary breaches, the full specific content of the information that was disclosed,
and the particulars of the path the information traveled. We respectfully submit that all of these
aspects of the evidence and lack of evidence against Mr. Steinberg weigh strongly in favor of a
reduced sentence.
We also explain in detail below why we believe Todd Newman's sentence of 54
months in prison (with a Guidelines range of 63 to 78 months) is an important comparative
sentence. Unlike Mr. Steinberg, Mr. Newman approved and concealed payments to Sandy
Goyal that the government has argued facilitated the alleged breach of Rob Ray's fiduciary
duties. Mr. Newman was alleged to have far greater awareness of and involvement in the scope
and details of the conspiracy compared to Mr. Steinberg, including his receipt of "verbatim" and
"constant" updates from his analyst, Jesse Tortora, as well as full knowledge of all of the links
within the information chain. In short, as the government argued at his sentencing, Mr. Newman
played a central role in the conspiracy. The same cannot be said about the case against Mr.
Steinberg. Because Mr. Newman's sentence was based on offense conduct that was significantly
more culpable than the conduct at issue here, and because of the other factors discussed below,
we urge the Court to give Mr. Steinberg a reduction from his Guidelines range that is
substantially larger than the reduction received by Mr. Newman.'
As also discussed below, we believe that Anthony Chiasson's sentence of 78 months in
prison (with a Guidelines range of 97 to 121 months) is inapposite for purposes of a 3553(a)(6)
analysis. Mr. Chiasson's sentence was significantly driven by (1) his enormous trading profits of
approximately $40 million (which are not remotely comparable to Mr. Steinberg's portfolio's
profits of approximately $1.8 million); and (2) Mr. Chiasson's large trading bets, which the
government argued demonstrated his higher level of knowledge and culpability (and which are
3
KL3 2971449 1
In addition, there are three relevant insider trading sentences from other cases that
we ask the Court to consider, each imposed on a defendant who was a hedge fund portfolio
manager, who was convicted of trading as a tippee, and who faced a Guidelines range similar to
Mr. Steinberg's advisory Guidelines range of 51 to 63 months. 2 These defendants received
sentences of 12, 24, and 30 months in prison respectively, yet in each of these cases the
defendant engaged in conduct that again was in many ways more culpable than Mr.
Steinberg's offense conduct. Accordingly, these sentences too are important comparative
benchmarks for the Court to consider with respect to 3553(a)(6) and its directive to avoid
unwarranted sentencing disparities.
We respectfully submit that the 3553(a) factors, when analyzed collectively,
strongly support a sentence significantly below Mr. Steinberg's advisory Guidelines range. We
respectfully ask and urge the Court to sentence Mr. Steinberg to no more than 24 months in
prison which we strongly believe would be a severe sentence, one that is "sufficient, but not
greater than necessary" to achieve the purposes of sentencing.
I. MICHAEL STEINBERG'S ALTRUISM, GENEROSITY, AND LIFE-LONG
COMMITMENT TO FRIENDS, FAMILY, AND COMMUNITY STRONGLY
SUPPORT A SENTENCE SUBSTANTIALLY BELOW THE GUIDELINES
With its decision in United States v. Booker, 543 U.S. 220 (2005), the Supreme
Court rendered advisory the once-binding Guidelines and empowered the District Courts to take
full account of all of the statutory factors in the sentences they impose, including "the history and
not comparable to Mr. Steinberg's relatively modest trading positions that were far below his
trading limits).
2
As discussed below, we agree with the Probation Department's recommendation in the
pre-sentence report ("PSR") that Mr. Steinberg's loss amount should be calculated based on the
profits from the portfolio he managed (PSR 35), which results in an advisory Guidelines range
of 51 to 63 months.
4
KL3 2971449
characteristics of the defendant." 18 U.S.C. 3553(a)(1). As part of this analysis, a sentencing
court must consider any and all information relating to the background, character and conduct of
the defendant, in order to "make an individualized assessment based on the facts presented."
Gall v. United States, 552 U.S. 38, 50 (2007).
Michael Steinberg's life is not defined by his offense conduct. He is much more
than that. We know and appreciate that the Court will carefully read each letter of support. We
focus here on three aspects of Mr. Steinberg's personal history that we believe are particularly
relevant and compelling for purposes of sentencing: (1) his devotion to and the critical role he
plays in the life of his family, including his vital emotional and physical support of his wife,
Elizabeth, daughter (age 8), and son (age 6),
; (2) his hands-on charitable works, including his co-founding (at the
age of 30) and development of a charitable organization that has brought assistance to people in
need throughout the world; and (3) his consistent and frequent support of his friends, family, and
even relative strangers.
A. Personal Background, Education, and Professional Career
Michael Steinberg was born and raised, along with his older brother Daniel, in
Great Neck, New York by Maurice and Sandra Steinberg. (PSR In 49, 51-52). Mr. Steinberg
worked several part-time jobs throughout high school and played football, while succeeding
academically. (S. Steinberg Ltr. at 1). 3 He graduated from high school in 1990 and enrolled at
the University of Wisconsin. (PSR1154). Mr. Steinberg earned degrees in Philosophy and
History, graduating from college in 1994. (PSR 'M 54 & 67).
3
The letters submitted in support of Mr. Steinberg are attached to this memorandum and
designated as Exhibits A-1 to A-68.
5
KL3 2971449 1
In addition to his studies, Mr. Steinberg took on the responsibility of owning and
operating a business that helped students move and store their belongings. This entailed not only
running the entire company, but physical labor as well "so that after finals each semester, while
other students were celebrating their upcoming vacation, Michael was spending hours moving
furniture in and out of moving trucks." (Roban Ltr. at I). Mr. Steinberg used earnings from this
business to help pay the cost of his college education. Mr. Steinberg understood well the
sacrifices his parents were making simultaneously paying college tuitions for both Mr.
Steinberg and his older brother and Mr. Steinberg wanted to help alleviate that burden. (M.
Steinberg Ltr. at 3).
It was in college that Mr. Steinberg first met Elizabeth, or Liz as her friends call
her, and they began dating shortly after they each moved back to New York. They were married
15 years ago this March. (PSR 1155). Liz pursued a career as a special education teacher (PSR
1155), while Mr. Steinberg decided to pursue a career in finance, despite the fact that he would
need to learn about a field in which he had not been formally educated or trained. (S. Steinberg
Ltr. at 2). He made up for this through hard work and study. As his friend Lee Heiss remembers
from those early years, "I saw him working all hours of the day, coming home at 2 am, and really
giving 110% to do the best he could." (Heiss Ltr. at I; see also Roban Ltr. at 2 ("I can still
picture him working away, sitting on the floor of their apartment with a highlighter and the latest
edition of Barrons, trying to explain to me what he was looking for.")).
After starting his career as a financial adviser at Sanford C. Bernstein and
Company, Inc., Mr. Steinberg began working at SAC Capital in 1996 as a trading assistant.
(PSR111171-72). Within just a few months, Mr. Steinberg demonstrated the aptitude to run his
own relatively small portfolio, and he did so without the benefit of having his own research
6
KL3 2971449 1
analysts. (PSR 71). In 2004, Mr. Steinberg moved to SAC's Sigma Capital division in New
York and was given permission to hire research analysts. (PSR 1171). During his tenure at SAC,
Mr. Steinberg developed a reputation for being a hard-working, conservative, and thoughtful
investment manager. (See DX 9286; Trial Tr. 1496-1497; Baskin Ltr. at 1; E. Steinberg Ltr. at
8) . 4
B. Mr. Steinberg's Dedication to and Support of His Family
Mr. Steinberg is a devoted family man, and the letters submitted on his behalf
demonstrate that he is a wonderful husband and a caring, fully engaged father to his two
children. He also remains extremely close to his parents speaking with them daily and making
them very much part of his life and his older brother. Mr. Steinberg's strength of character and
commitment to family are further revealed in how he supported his wife and two children
. It is clear that his
optimism, strength, and devotion have been essential to his wife, daughter, and son in different
ways, and that they have each come to rely on Mr. Steinberg to hold them together, overcome
life's challenges, and grow individually and as a family.
1. Mr. Steinberg's Devotion to and Support of His Wife Has Been
Critical to Her During Extremely Difficult Times
The letters submitted on Mr. Steinberg's behalf exalt his virtues as a husband to
Liz. Perhaps the clearest window into Mr. Steinberg's devotion, support, and compassion as a
husband is found in how he conducted himself over the five heartbreaking years when the couple
desperately wanted, and struggled together, to have children. The disappointment and frustration
4
Citations to "Trial Tr." refer to the transcript of Mr. Steinberg's trial. Citations to
"Newman Trial Tr." refer to the transcript of the trial of Todd Newman and Anthony Chiasson.
To avoid ambiguity, when the two transcripts are discussed in close proximity, this
memorandum uses "Steinberg Trial Tr." to refer to the transcript of Mr. Steinberg's trial.
7
KL3 2971449 1
fron this prolonged ordeal took a heavy emotional toll on them,
Mr. Steinberg steadfastly supported and consoled Liz through this difficult
process, frequently putting aside his own frustrations and disappointments to focus on his wife's
needs and their relationship. As Sandra Steinberg explains:
Michael and Liz married in 1999, and s )on aflei tried to start a
family, but had difficulties.
itli each attempt. there
was a build-up of hope and then clushing disappointment over
and over again. Throughout this period of almost five years,
Michael became Liz's pillar of strength, committed to taking
responsibility for the emotional aspects of his wife's welfare.
(S. Steinberg Ltr. at 4).
It is clear that Mr. Steinberg's unflagging optimism and conunitment to persevere
together, no matter what the outcome, helped sustain the couple through this challenge. As Liz
writes: "[O]ne of [Michael's] strongest qualities is his optimism. His positivity became
essential for those long heartbreaking five years. . . . When I was feeling down. Michael
encouraged me to see the beauty around us and celebrate others' joyous moments." (E.
Steinberg Ltr. at 2). Moreover, Mr. Steinberg used their collective struggle to grow closer to his
wife. As Liz explains:
were tunes when I grew
pessimistic and s When I was feeling
discoura ged [Michael]
would take off from work and arrange a meeting with our doctor to
help put things into perspective. When I felt weak in the face of
this challenge. Michael would say, "You have the strength to
overcome what is standing in your way." . Our bond as husband
and wife grew while we faced this daunting challenge together.
(E, Steinberg Ltr. at l -2).
KL 971449
Mr. Steinberg's critical role in supporting Liz was evident to their friends as well.
As the couple's friend Lara Markenson writes:
Despite their difficult times during this endeavor, Michael alwan
remained o timistic, loving Liz unconditionally and being there.
In many marriages,
issues like this can drive people apart. But Michael would have no
part of that. If anything, Michael used this struggle as an
opportunity to grow closer to Liz and to form an even more lasting
love together. As her biggest champion, Michael never gave up
hope, never ceased finding opportunities to make Liz laugh, and
always knew in his heart that no matter what happened, they would
find a way to become parents. To see Michael connect so deeply
with Liz, to see him see the beauty in each day even when their
days were sad, was something that truly impressed us.
(Markenson Ltr. at 3).
While Mr. Steinberg and his wife each bore the disappointment of having their
dreams of parenthood frustrated, it was particularly difficult for Liz to face well-intentioned, but
painful questions from friends and family about what was happening in their efforts to have
children. Mr. Steinberg supported Liz in this regard as well, shielding her from these inquiries
and being the person in the relationship who talked to others about the process and the
disappointments. As the couple's friend, Jennifer Leff explains:
It was particularly hard on Liz and she did not like to talk about it
with others. Naturally, their friends and family were concerned
about them and wanted to know how it was going. While the
entire process was also very difficult for Michael, he remained
very protective of Liz and her feelings, and it was Michael who
was in charge of talking about the difficult process and how it was
going. He made sure that everyone knew to talk to him so that Liz
never had to talk about it if she didn't want to.
(Leff Ltr. at 2).
During this time, many of Mr. Steinberg's friends and relatives had children of
their own. It is telling about Mr. Steinberg's character that he was able to react to this news with
genuine joy and love, despite how much he and Liz were struggling to have children of their
9
KL3 2971449 I
own. For example, as Lara Markenson writes: "Despite all of the disappoMtments Michael was
feeling trying to start his own fanbly, he was one of our first friends to visit us and hold our sons
when they were born. When our older son was born and Michael came to the bris, his smile lit
up the room and he expressed to everyone how beautifill this new life was and how truly happy
he was for me and Ari." (Markenson Ltr. at 3).
While it was challenging for Liz to overcome her sadness and disappointment to
similarly show her happiness for others, Mr. Steinberg's optimism, encouragement and support
enabled her to celebrate such special moments with their friends and family. As Liz explains:
Despite our own sadness, we never missed a friend's child's
birthday party, a birth, or a chance to ooh and abh at another
family's photo of their child. I specifically remember going
through a difficult time around my nephew's fourth birthday. We
had just endured another failed attempt and I was struggling to stay
positive. Michael insisted that we attend my nephew's birthday
party. He reminded me of all the joy and happiness that our
nephews brought us, how much we would be missed if we didn't
go, and he was right. Michael would say, "The sun rises each day,
Liz. We will be OK. We need to celebrate today." So we
celebrated all the wonderful moments in life that surrounded us,
genuinely happy for others' good fortune. Michael's optimism
gave me strength as we navigated through our continuing
struggles.
(E. Steinberg Ltr. at 2).
Mr. Steinberg also applied the lessons he learned from these struggles to conceive
children to ielp his friends facing the same daunting challenge. As Hilary Weisfeld describes:
Michael's support was particularly extraordinary whet
husband and I were strug ling to conceive our second child
Because Michael and Liz bad
experienced the same ordeal. Michael was a tremendous source of
strength for us and helped us navigate the emotional roller coaster.
Having been through the process himseltl. his empathy helped me
maintain perspective and courage throughout fhe difficult process,
10
KO 29714,49
and he was always there reminding me that it would all be worth it
in the end, to be able to eventually bring home a healthy baby,
(Weisfeld Ltr. at 2).
2. Mr, Steinberg Has Been Instrumental in Helping His Children
Overcome and Is an
Exemplary and Dedicated Father
When the Steinbergs were finally able to conceive, there were more challenges
for the couple'
From the
outset, Mr. Steinberg met this challenge head-on with his indefatigable optimism. As Liz
explains:
Once again, Mic iae ie ec me
co )e
le was
my -Aar of strentli and would co -fort ine by sa
's ove an encouragement,
as well as his hope and op imism, was what helped ease my
anxiety and lifted my spirits.
Mr. Steinberg's optimism and support for his daughter were immediately present
at her birth. As Sandra Steinberg explains:
(S. Steinberg Dr. at 5),
As Liz describes it:
11
KO 9714.49
During this difficult period, Mr. Steinberg was steadfastly there for his wife and
for his daughter, balancing the demands of work, parenting a child
and providing the support Liz needed to
persevere. As Liz explains:
Michael tried to be home as much as he could during the day to
help, finding ways to work remotely in order to balance his work
responsibilities. He was up every night, walking her, singing to
her, trying to calm her down so she could sleep. If she fell asleep
in his anus, he would continue to hold her, sometimes for hour' so
she wouldn't be awakened by him putting her down:
There were also challenges for the cot ple with their sonliMill
As Liz
explains, Mr. Steinberg was there to support her through this hying time uit optimism, faith,
and determination:
During that time, Michael managed to take care of everything at
home while still juggling his extensive work commitments. He
12
KU N714,49 1
was father and mother to our almost two-year old 1111 he
bathed, fed, changed and cared fbr her. He was up at night when
she cried. He was also there for me, tenfold he bought the
groceries, prepared meals, did the laundry, and kept the house in
order. He worked from home whenever he could, but when he had
to go to the office, he would call a friend or his mother, who
worked full time, to help take care of 1111 and me. Michael's
devotion to us took precedence over everything else. I do not
know how we would have made it through this difficult period
without Michael's steadfast connnitment to our fannly,
(E.. Steinberg Ltr. at 3).
111111111111111111111.11111 As Sandra Steinberg writes:
(s
MI=
As Liz explains:
(E. Steinberg Dr. at 4).
13
KL3 ;'971449 I
(M. Steinberg Dr. at 4).
In these ways, Mr. Steinberg has deepened his relationship and bond with his son,
As Liz explains: "IIIIIIclearly appreciates Michael's creative and quality play
with him and this has led to an unusually strong bond between them. Michael's the first person
MN
asks for when he wakes up , when he returns from school and before he goes to sleep."
14
KI3 9449 I
1
1111111111111111111111111111111111111111111111
(S, Steinberg Ltr. at 5-6).
As Liz explains: "Michael's
unconditional presence and constant attention to our son= has had a particularly
importa -it impact on his life. . . . [B]ecause of Michael's undying devotion to our son,
111111.111111111111111111111.111111111111111111111111111111111111111111
(E.
Steinberg Ltr, at 4),
The letters of support also make clear that Mr. Steinberg is an exemplary father
across the board, a dad who adores lns children and takes an active role in their day-to-day lives.
Despite - the work demands on a portfolio manager, Mr. Steinberg makes his children a priority in
his life. Numerous letters describe how Mr. Steinberg puts work and other distractions aside to
engage his children in play, participate in their life events, and impart life lessons. For example,
Liz describes Mr. Steinberg's dedicated and affectionate approach to parenting:
15
KI3 2971449
Michael has become a most dedicated and dynamic father. He is
everything to and . He takes the time to be with each
of them individually and together. He gives them his undivided
attention, away from his phone and emails, and plunges into play
with them. He becomes a part of their world, immersing himself in
building forts, staging battles, creating scavenger hunts and reading
to them each night before bed. He awakens the children each
morning by whispering the words "I love you" in their ears.
Michael gets pleasure from making M&M pancakes for the kids,
laughing as he plays rock the boat at the end of the bed and
creating obstacle courses on rainy Sunday afternoons. Even during
his busiest times at work, Michael managed to do it all. He did not
miss a single milestone. He was and continues to be there for
every parent-teacher conference, school production and father-
child event. Michael has often said that he gets back more than he
gives in the joy that'. and bring him.
(E. Steinberg Ltr. at 3-4).
Family friend Lara Markenson similarly describes the importance of the children
to Mr. Steinberg, as well as his personal interaction with them and daily presence in their lives:
[Michael] truly feels in his heart and has said it to us on many
occasions that there is nothing more important in the world than
being together with his family. He is an involved dad through and
through. Whether it's reading together before bed each night,
celebrating his children daily by just being there with them along
the course of their lives, spending hours in the pool with them on
hot summer days, playing dress up, making pretend meals in a toy
kitchen, racing toy cars, or creating elaborate dinosaur set ups
you name it, Michael is there, loving, laughing and feeling his
happiest when he is with his family. He is a truly exceptional, fun,
loving, supportive and amazing dad.
Mr. Steinberg also plays a key role in parenting his children in the most literal
sense imparting invaluable life lessons about character and responsibility, even at their young
age. For instance, Mr. Steinberg teaches his children about accountability, hard work, and
discipline. As Adelle Fruman writes: "I have seen him sit patiently with [his children],
encouraging them to work hard and complete their projects and telling them that they must live
16
KL3 2971449 1
up to their commitments, whether to a friend, a family member or in school. A priority for
Michael is teaching his children, both academically and socially." (Fruman Ltr. at 1).
Generosity to others and fiscal responsibility are also values Mr. Steinberg has
made sure to pass along to his young children. As his brother Daniel recounts:
About five years ago I walaying with my niece El (Mike's
daughter) in her room. was about three years old and we
were playing a game in which she owned a store, would bake items
such as cookies, and I would buy them. "That's money!" Ili
said as she pointed to some plastic tokens she wanted me to use. I
asked her if she knew what money was. Without pause III said,
"Yes I know what it is and there are things we do with it." I asked
her what are the things one does with money? I1. replied,
"Daddy says we give it away, we use it to help other people, and
we save it." We spoke a bit more about what these concepts meant
and I remember being struck by how clearly I. understood them
at only the age of three. It was so impressive that my brother had
imparted such an awareness of the importance of charity, of
helping others, and of financial responsibility to his three-year-old
daughter.
(D. Steinberg Ltr. at 2).
In anticipation of a potential painful absence from his children, Mr. Steinberg has
also been spending even more time with his children to ensure they have lasting memories of
good times with their father during childhood. And while the thought of his children being
separated from Mr. Steinberg is understandably unbearable to his friends and family, Mr.
Steinberg, true to his optimistic spirit, is trying to view this daunting challenge in a less negative
light. As Sandra Steinberg explains:
Anticipating his absence, Michael is trying to be fair to his
children, to give the best of himself to make them strong so they
will be able to handle and somehow come through the ordeal.
Right now they are happy, healthy children, but we are all terribly
worried about the impact that Michael's absence will have on
them. It is unbearable to think about. In his characteristic way,
Michael has been trying to find a higher purpose for what has
happened to him. He has said that perhaps the positive to come out
17
KL3 2971449 1
of this will be that one of his children or grandchildren will grow
up to become a lawyer and help people in need.
C. Mr. Steinberg's Devotion of His Time to Charity Reflects a Deep
Commitment to the World Around Him
Mr. Steinberg has a long and broad commitment to philanthropy. What is unusual
in Mr. Steinberg's case are the relatively young age at which he became deeply engaged in
charity and the extent to and manner in which Mr. Steinberg gives to charity.
1. Mr. Steinberg's Work Creating and Building Natan
While Mr. Steinberg
he was simultaneously co-founding and building
an innovative charitable organization. At the age of 30, Mr. Steinberg co-founded a charity
called Natan (which means "to give" in Hebrew), with the specific purpose of getting young
professionals involved in developing and supporting start-up charitable causes.
As its Executive Director, Felicia Herman, describes, Natan is "a unique type of
philanthropy organization where young professionals join together and collectively make grants
to transformative new charitable initiatives with connections to Jewish culture or Israel."
(Herman Ltr. at 1).
The goal of the co-founders was to "inspir[e] young professionals to become
actively engaged in smart philanthropy, getting started early on a lifetime of giving and civic
leadership." (Herman Ltr. at 1). Specifically, Mr. Steinberg and his co-founders envisioned an
organization that would galvanize and foster the philanthropic spirit of young, successful
professionals, while also identifying and empowering start-up organizations that were not
18
KL3 2971449 I
otherwise receiving support from traditional charitable foundations a process Mr. Steinberg
refers to as "venture philanthropy." As Sandra Steinberg explains her son's vision for Natan:
Michael had told us that he felt it was his responsibility to start
Natan, because he felt he had an idea which could be uniquely
helpful. He had a two-step plan in mind. Once he assembled a
nucleus of committed colleagues, his second goal was to educate
donors on how to give intelligently. Michael had observed a gap
that needed bridging: small non-profits and start-ups were not
being funded by the larger charitable organizations at all.
Michael's idea was for Natan to practice "venture philanthropy,"
giving these small non-profits a chance.
Mr. Steinberg was essential in developing and structuring Natan to attain this
vision. As one of the co-founders, Sender Cohen, recalls, "it was Mike who was instrumental in
thinking through ways to create a vehicle that would really inspire people to give together, to
benefit from each other's wisdom and creativity." (Herman Ltr, at 1). By engaging members in
Natan's grant proposal process a process that required a rigorous review and evaluation of the
charitable causes Mr. Steinberg hoped to "enable members to truly understand the nonprofit
organizations they were supporting," as well as to "encourage active involvement in the
nonprofit sector." (Herman Ltr. at 1).
Mr. Steinberg realized that he was taking a chance by investing so much time and
energy in Natan because the organization could have easily failed, particularly in light of its
unusual structure for a charitable organization. He made those investments of time and energy
because he believed so strongly in what he was doing. As Liz recounts:
Michael felt very good about Natan, even though he realized that
the team-oriented approach was a very out-of-the-box way to run a
charity. There was a definite possibility that Natan would fail it
was a major departure from the big, traditional charities and
Michael's inclusive recruiting and membership plans were
unconventional. He had no experience and no way of knowing
whether Natan would succeed. Michael took a chance because he
19
KL3 2971449 1
felt it was worthwhile. He is not afraid of failure if he believes in
something.
(E. Steinberg Ltr. at 6-7).
During the early years, Mr. Steinberg's passion for and dedication to Natan were
essential to the organization's growth and success. As Ms. Herman describes, Mr. Steinberg's
hard work, enthusiasm, creativity, and recruiting efforts were all keys to Natan's success:
Mike's involvement in Natan since its inception was a critically
important element in Natan's first decade. . . . He dedicated his
time, energy, creativity and his warm-hearted enthusiasm to
making sure Natan succeeded. During those early years, Mike was
incredibly enthusiastic about implementing and expanding the
organization's objectives, and he put in a significant amount of
hands-on time to help Natan succeed. He seldom missed a
meeting, was vocal and engaged in discussions about Natan's
evolution and its grant decisions, and threw himself into recruiting
other members to help the organization grow.
(Herman Ltr. at 1).
Based on his essential role in the organization's growth, Mr. Steinberg was
elected each year as the Chairman of this organization from 2005 through 2009. Under his
leadership, Natan's membership doubled in size and provided grants to more than 80 different
start-up charitable organizations. (Herman Ltr. at 1).
But Mr. Steinberg was not satisfied with this exponential growth of Natan. He
wanted to do more. Specifically, Mr. Steinberg wanted to ensure that Natan maintained a strong
base of young professionals and that the children of its members were taught the philanthropic
principles of the organization. As Ms. Herman explains, Mr. Steinberg played a critical role in
expanding the base of the organization and implementing his idea to involve the children of
Natan's members to pass on the organization's charitable spirit:
Mike also put special emphasis on ensuring that Natan's impact
would grow beyond its initial founding members. As the founders
reached their late 30s and early 40s, the board, under Mike's
20
KL3 2971449 1
leadership, created a younger membership category within Natan
consisting of young professionals in their late 20s and early 30s.
There are now over 25 members in this group. Mike and his wife
Liz also both believed deeply in the importance of involving their
and other members' children in Jewish giving, and while Mike was
chair, Natan held annual family events focused on Jewish holidays
and involving Natan families in community service. Not only do
Natan members engage with a variety of ways of helping to build
civil society through Natan, but their children do as well
(Herman Ltr. at 2).
Natan's funds have benefitted people internationally from the United States to
Africa. Indeed, Mr. Steinberg worked with his two co-founders to build Natan into an
organization that has donated over $8.7 million across the globe. (Herman Ltr. at 2). One
notable Natan grantee is Innovation: Africa, a non-profit organization that brings sustainable
Israeli technologies to African villages. 5 The organization was founded in 2008 and, in just five
years, provided electricity, clean water, food and proper medical care to more than 450,000
people in Ethiopia, Tanzania, Malawi, and Uganda. 6 Another notable Natan grantee is Tsofen
High Technology Centers, an organization whose mission is to accelerate the employment of
Arab citizens of Israel in the high-tech industry through training and by bringing high-tech
companies to Israel's largest Arab communities.' Olim Beyachad, yet another grantee, is an
organization whose mission is to transform the professional paths of Ethiopian Israelis and the
role of Ethiopians in Israeli society by enabling university graduates to find employment suited
to their academic training. The organization pairs participants with high-powered mentors in
5
http://www.natan.org/cgi-bin/grants/grants.pl?ID=1
6
http://innoafrica.org/
7
21
KL3 2971449 1
their fields who help them build professional networks, understand their industries, and
effectively integrate into Israeli society. 8
Mr. Steinberg's commitment to Natan continued after his tenure as Chairman.
For example, Mr. Steinberg devoted his time to working with Natan-grantee Hazon, an
environmental organization that seeks to create healthy and sustainable communities through
food education, outdoor adventures, and environmental advocacy.
9
Mr. Steinberg first forged a
relationship with Hazon during his time as a member and Chairman of Natan. Hazon's
President, Nigel Savage, was deeply impressed by Mr. Steinberg's dedication of so much of his
time to understanding Hazon so Natan could help Hazon grow and succeed. As Mr. Savage
writes: "Natan members, led by Michael, have consistently put in considerable time to this
commitment. Michael has personally been particularly gracious and thoughtful over many years.
His commitment and attention was both useful to us in practice, and also courteous and generous
in a personal sense." (Savage Ltr. at 1). Mr. Steinberg now continues to volunteer for Hazon
and is currently assisting with the development of one of I lazon's projects. (PSR 70).
2. Mr. Steinberg's Additional Charitable Works
Mr. Steinberg's commitment of his time to charitable causes neither begins nor
ends with the charity he co-founded. Shortly after Mr. Steinberg began dating Liz in his early
twenties, he got involved with the Joel Finkelstein Cancer Foundation, created by Liz's
grandparents, which raises money for the Long Island Jewish Hospital for cancer care. (E.
Steinberg Ltr. at 5-6).
8
9
http://www.natan.org/cgi-bin/grants/grants.pl?1D-- - 2
22
KL3 2971449 1
As Mr. Steinberg's brother-in-law Jonathan Sims explains, when Mr. Steinberg
joined the Sims family, he rolled up his sleeves and played a key role in revitalizing the
Foundation:
At around the time Michael joined the family, the foundation's
core supporters were an aging group, and it was clear that without
intervention, the foundation would ultimately fail. Upon joining
the family, Michael took an interest in the organization and began
a movement to get a new generation of younger philanthropists
involved. Michael began to network with his friends in an effort to
drum up interest for the foundation.
(Jonathan Sims Ltr. at 3).
Richard Sims, Mr. Steinberg's father-in-law and the President of the Foundation,
describes Mr. Steinberg's leadership role in organizing fundraising events and recruiting donors
for the Foundation:
Each year we have a formal dinner to raise contributions, which
Michael and Elizabeth have helped chair and plan. The other part
of our fund raising has been an annual golf outing which became a
favorite of Michael's to assist with. He helped plan the
tournaments and recruit friends to both play and raise additional
funds for this most worthy cause.
(R. Sims Ltr. at 3).
Kanti Rai, a physician treating cancer patients, spoke with Mr. Steinberg many
times about his work for the Foundation, and remarks: "I was always struck by Michael's keen
sense of social responsibility and by his altruistic spirit." (Rai Ltr. at 2). Dr. Rai learned about
Mr. Steinberg's altruistic nature by speaking with him about his reasons for staying so involved
with the Foundation, and writes about the joy Mr. Steinberg experienced by contributing his time
and energy to benefit others:
I recall Michael speaking to me with great pride about how
working for the Joel Finkelstein Cancer Foundation gave him a
new sense of purpose in life. During one of our numerous
conversations, Michael expressed how humbling the experience
23
KL3 2971449 I
was for him and how happy he felt to be doing something to help
others. He appreciated that he may never meet the people he
would be helping, but was inspired to know that the money he
raised for the foundation would be put to use either in treating
those afflicted with cancer through chemotherapy, radiation or
surgery or by supporting ongoing cancer research in neighborhood
hospitals so that progress could be made in discovering more
innovative treatments to help patients going forward.
(Rai Ltr. at 2). 1
The importance of giving to those less fortunate is also something Mr. Steinberg
believes is an important value for his children, which he has made certain to pass along to them.
As Liz explains: "Michael has always felt strongly about instilling in our children the value of
giving. He and I often discuss this subject with. and . We stress the importance of
giving to and thinking of others before ourselves. Michael has ensured that'll and
understand the importance of giving." (E. Steinberg Ltr. at 7).
Mr. Steinberg has helped his young children and their friends learn these values
first-hand by encouraging them to be active in charitable causes. As his long-time friend Lee
Heiss explains, Mr. Steinberg recently encouraged his children and some of their friends to sell
homemade bracelets, lemonade, and cookies to raise money for cancer research:
Our kids and Michael and Liz's kids were told about a friend of
ours whose wife has a rare form of cancer and needs to find a bone
marrow match. While our families were on vacation together,
Michael encouraged and helped the kids put together a simple
fundraiser to raise money for a charity that helps those with cancer
find bone marrow matches: he helped them make cookies,
lemonade, and "Rainbow Loom" bracelets, and then set up a stand
to sell them for donations to the organization. The look of joy on
my and Michael's kids' faces as they worked to get everything
ready, and again as they were able to collect donations for such a
10
In 2010, Mr. Steinberg also began serving on the board of American Friends of the Open
University of Israel a national, not-for-profit organization dedicated to raising awareness of and
providing financial support to the Open University of Israel and contributed his time by
recruiting new members and providing advice to help the organization overcome financial
challenges. (Brookler Ltr. at 1).
24
KL3 2971 ,149 1
great cause, was something I'll never forget. He taught them a
great lesson about the value of charity and of donating your time to
help others.
(Heiss Ltr. at 2).
Because of his philanthropic spirit and experience, Mr. Steinberg's friends often
look to him for counsel and support with charitable causes. As Mr. Heiss writes, "Michael is
also ever ready to lend a hand and to share his experience and his knowledge if it will help
others." (Heiss Ltr. at 2). Sharing his wife's experience working with Mr. Steinberg to improve
access to playgrounds for disabled children, Mr. Heiss explains how Mr. Steinberg's experience
and guidance were instrumental to the progress of the initiative:
Rachel is a public school teacher in New Jersey, and has been
working to have a handicapped accessible playground built at her
former school to help a student who has a physical disability, who
had really touched her with his strong spirit when he was her
student. She and I took on this initiative to try and help this
student completely on our own, and quickly became a bit
overwhelmed because we did not have experience leading any
charitable causes like this. I immediately thought of Michael and
turned to him for advice on the nuts and bolts of running a charity.
As soon as Michael heard Rachel's description of the student she
was trying to help, he said he thought it was a great cause and
wanted to do everything he could to help. Michael has been
instrumental in guiding Rachel in this project by sharing his
experience gained through working with many charities, and in
helping Rachel formulate a plan which she has implemented to
raise the funds needed on a local basis. The playground is that
much closer to being a reality because of the time and knowledge
Michael has contributed to the cause.
(Heiss Ltr. at 2).
D. Mr. Steinberg's Altruism and Generosity to Others
What shines through the letters submitted on Mr. Steinberg's behalf is that he is
truly an altruistic and generous person in both small and large ways, he helps, supports, and
counsels friends, family, and strangers alike. Because of these traits, Mr. Steinberg is a trusted
25
KL3 2971449 1
confidante and the person so many people rely on in a time of need. The letters of support
provide a multitude of examples in which Mr. Steinberg has made a profound difference in the
lives of others.
1. Mr. Steinberg Steadfastly Supports His Friends, Often Making a
Dramatic, Positive Impact on Their Lives
The starkest example of Mr. Steinberg's compassion for and support of his friends
is found in how his actions helped his friend, Ernie Dahlman. As Mr. Dahlman writes:
Many people will tell you what a terrific father Michael is, and
they will tell you what a genuinely kind and caring person he is. I
can confirm that this is all true. But what I also know deep in my
heart, is that there is a real possibility that I may not be here today
if Michael had not been there for me when I needed help the most.
(Dahlman Ltr. at I).
26
KL3 2971449 1
(Dahlman Ltr. at 1).
(Dahlman Ltr. at 2).
Mr. Steinberg has also helped his friends in other meaningful ways when a loved
one has died or illness has stmck. What is striking about all of the examples contained in the
supporting letters is that Mr. Steinberg has so consistently devoted his time to those in need,
while exhibiting an eagerness and capacity to listen to and comfort his friends. One such
example is found in Mr. Steinberg's support of his friend, Heather Heller, when she fell seriously
ill
As Mrs.
Heller explains, Mr. Steinberg's optimism and emotional support gave her the hope she Deeded
to persevere, and his many home-cooked meals and support for her family throughout the ordeal
helped sustain the Hellers through this very difficult time:
Michael never gave up hope and helped me cling to
concept of hope for there were so many days I could not. When I
KL3 N
was bed bound, Michael and Liz took my kids for dinner and to
play at their apartment. Michael has a passion to cook and made
my family dinner multiple times anything from steak with
homemade chimichurri sauce to lamb mint meatballs with a yogurt
dip. Michael helped me, my children, and my husband get through
each day. I cry as [I] write this because without the unfaltering
friendship of Michael and Liz, this difficult situation would have
been impossible. Michael supported me through my tears, with his
calm disposition, his compassion and his delicious home cooking.
I trust and love him with all my heart and know he would be there
for any friend as a pillar of strength, with his constant and
unwavering support.
(H. Heller Ltr. at 2).
Heather's husband and Mr. Steinberg's long-time friend, Andy Heller, similarly
explains how invaluable it was to have Mr. Steinberg's empathetic ear and support when Mr.
Heller's father fell ill with cancer and then passed away:
My father fought courageously until he passed away on April 26,
2009. His downward health spiral was a horrible experience that
took a lasting and noticeable toll on me. I will never forget the
thoughtfulness and consideration Michael bestowed on me during
that difficult time. His words and the comfort he provided
throughout my father's health decline, near death moments (of
which we counted 4), and throughout the final days, were so very
much needed and appreciated. I was so lucky to have in Michael
the type of friend that is so sympathetic and empathetic, and in my
opinion, the example of a friend who will be there through it all.
Through good times and bad, Michael never shied away from a
situation and would always be there for me, whether asked or not.
(A. Heller Ltr. at 2).
Mr. Steinberg was also there for his friend Lara Markenson, when her mother fell
il , taking the time to comfort and care for Mrs. Markenson during Mr. Steinberg's
preparation for his trial. Despite his personal stresses and challenges, Mr. Steinberg never lost
sight of the impact his kindness and warmth could have on his friend in assuaging her sadness.
As Mrs. Markenson explains:
28
KL3 2971449 I
At that time, I knew Michael had his own legal issues to handle,
and I was hesitant to burden him with my own problems. Though
others in Michael's position may have simply (and understandably)
been focused only on their own issues, Michael did the opposite
despite all that he was going through at the time, he checked in
with me regularly to inquire about my mother and to make sure I
was doing okay. During the two long hospital stays she
encountered, Michael invited Ari and me over for dinner with him
and Liz many times, cooking for us or ordering in some of our
favorite dinners. What one eats for dinner may not seem like a big
deal, but after long days, day after day, visiting a loved one in a
hospital, eating your favorite dinner in the company of those who
care about you is priceless. Michael selflessly focused on me and
what I was going through even during a time of great stress for him
and his family.
It is clear that Mr. Steinberg appreciates the profound impact that gestures of
kindness or thoughtfulness can have on those who have lost loved ones. For example, Martin
Brotman recounts the kindness shown to his young granddaughter by Mr. Steinberg at a
memorial gathering, after the young girl's father had died:
During that memorial gathering, Michael met my son's daughter,
my granddaughter, for the first time. He engaged with her
immediately his own daughter is about the same age and he
knew just how to communicate with my granddaughter; he was on
her level effortlessly, talking about subjects of interest to her.
After the weekend was over, when he got home, Michael
immediately sent my granddaughter a gift, something they had
talked about when they met. She was delighted and smiled from
ear to ear when she received it. Michael's empathic response to
her, and his generous, spontaneous gift are so typical of him.
Michael saw in my granddaughter a child learning to deal with the
world without her father, and he wanted to personally connect with
her because she had lost so much. This kindness is a rare and
beautiful strength in a man.
(Brotman Ltr. at 2).
Similarly, Mr. Steinberg has been a source of compassion and inclusiveness when
his friends have faced difficult, life-changing events. For example, when his friend Jennifer Leff
29
KL3 2971449 1
was going through a divorce, Mr. Steinberg was a source of strength, perspective, and support
that helped Ms. Leff navigate those lonely and difficult days:
I went through a rough time in my life when my husband and I got
divorced, and Michael was always there for me. He was never too
busy to listen and was a shoulder for me to lean on during that
difficult time in my life. He would offer help, perspective, or
advice whenever he could. I can recall being on the phone with
Liz and when she would tell him it was me on the phone, he would
ask how I was doing and invite me to come over so I didn't need to
be alone. I took them up on his offer often. He gave me
wonderful advice and told me to take time for myself and to figure
out what I really wanted from a relationship so I could find
someone who truly made me happy.
(Leff Ltr. at 2).
Years later, Mr. Steinberg was there for Ms. Leff again, but this time through his
inclusiveness. As Ms. Leff recounts:
Years later, Michael was there for me again when my life took a
turn and I met and fell in love with a woman. I was quite nervous
to tell my friends and family. I remember having lunch with Liz
and telling her the news. She was incredible and supportive as
always. That night, I got a phone call from Michael telling me that
Liz had told him the news and how happy he was for me that I had
met someone that made me happy. He insisted that we make
dinner plans since he and Liz wanted to meet her as soon as
possible. When that night came around, Michael went out of his
way to make Jill and I feel comfortable. He asked questions about
her background, her family, her job generally taking a genuine
interest in getting to know her. He told funny stories about our
past together in an effort to keep Jill in the loop. He will never
know how much that night meant to me and how by just being
himself accepting, gracious, interested, engaging and warm he
made a huge impact on my life and my relationship.
(Leff Ltr. at 3).
2. Mr. Steinberg Has Been a Trusted and Invaluable Source of Advice
for Friends, Family, and Business Colleagues
Friends and family have frequently turned to Mr. Steinberg for advice, which he
has constructively given with an emphasis on teaching others to help themselves. This approach
30
KL3 2971449 1
to counseling others is a product of Mr. Steinberg's own method for facing life challenges. The
letters submitted on his behalf illustrate these traits in many ways. In one anecdote conveyed by
Sandra Steinberg, a truck used in Mr. Steinberg's college moving business sustained $8000 in
damage in an accident, with additional damage to some of the students' possessions inside. As
Sandra explains, the young Mr. Steinberg personally contacted each person whose property was
damaged by this incident, took direct responsibility, and ensured that things were made right:
[Michael] wrote a letter to the chairman of the truck rental
company, apologized for the accident and proposed repaying a
percentage, with the remainder to be paid just as soon as he
graduated and had a job. Michael also went door to door
delivering each student's damaged possessions, met each parent,
apologized, refunded their payment and settled on the
compensation for the damage to the items.
Mr. Steinberg has provided candid and constructive advice to friends and family
alike, no matter how close the relationship. For instance, Mr. Steinberg is very close with his
older brother, Daniel. In his letter, Daniel describes how his younger brother imparted many
invaluable lessons:
Mike and I are extremely close and have always enjoyed a very
special connection. Whenever we part company, we always give
each other a hug and say, "I love you." Growing up, it became a
bit of a joke that we would always respond the exact same way
when being introduced to new people or things, often with the
exact same words. Although we are similar in many ways, we are
of course different people and in so many ways I try to live my life
by the example of my younger brother. I have learned a
tremendous amount from Mike about responsibility, parenting,
relationships, commitment to family and community, and what it
means to do the right thing and to be a good person.
31
KL3 2971449 1
Mr. Steinberg helped teach his older brother the importance of fiscal
responsibility and of correcting his bad financial habits. More than that, consistent with his own
character, Mr. Steinberg helped his brother learn to help himself. As Daniel describes it:
Mike has been instrumental in teaching me financial responsibility
and helping me break terrible financial habits. For many years
during my twenties, Mike spoke to me about my finances. He had
noticed I was not as responsible as I should have been. I was not
saving appropriately. I had missed a loan payment that had
severely damaged my credit score. Mike stepped in to counsel me.
I was initially resistant to his advice that I should pay my loans
down and conservatively invest any money I had after that for the
long run via index funds. Although I was single at the time, Mike
reminded me that I still needed to conduct myself financially in a
way that would prepare me to support a family when that time
came.
(D. Steinberg Ltr. at 1-2).
Mr. Steinberg watched his brother take this advice to heart and start exercising
better financial responsibility. When he knew that his brother had learned to help himself, Mr.
Steinberg cemented his brother's new financial stability by paying off his medical school loans.
As Daniel explains:
After I had changed my ways and showed that I had taken his
advice to heart, Mike told me he was proud of me and respected
me for how I had changed. His words meant so much to me,
coming from the brother I so greatly admire. But then Mike did
something extraordinary. On my 30 th birthday Mike told me that
he would pay the balance of my medical school loans. He told me
he was doing this specifically because I had consistently
demonstrated more responsible behavior. In other words, I had
learned to help myself Only after he saw me take concrete steps
to help myself, and saw that I had sustained those steps, did Mike
pay my loans.
(D. Steinberg Ltr. at 2). Daniel was very grateful for this generous act, but explains that Mr.
Steinberg's life lessons about fiscal responsibility were the lasting and most valuable gifts his
brother bestowed: "I am forever grateful for these exceptional acts of kindness and generosity,
32
KL3 2971449 1
but even more so for his approach and the lessons it taught me about responsibility." (D.
Igor Chernomzav, Mr. Steinberg's cousin, also experienced Mr. Steinberg's
unvarnished advice. Mr. Chernomzav explains that he sought out Mr. Steinberg's professional
mentorship and soon experienced Mr. Steinberg's genuine empathy for his cousin's development
and candor in advising on the appropriate path, even when that advice entailed taking an initial
step backwards professionally:
Even though I had never met my cousin Michael before, I couldn't
believe how warm and caring he came across over the phone. He
spoke with me at great length and helped me to navigate through
three major offers. . . . Michael heard me out very carefully and in
no uncertain terms he advised me to look at the big picture. He
pointed out that even though the lowest offer was low to start off
with it provided me a clear path with a strong education in the field
and a reputable name, both of which were of the utmost
importance. He urged me to go the slower yet more certain route.
(Chernomzav Ltr. at 1). As Mr. Chernomzav explains, he was moved "not just by [Michael's]
reasoning nor merely from his experience, but by the depth of sincerity and caring that I felt
that it was Michael's sincerest intention that it should work out for my best interest in the long
run." (Chernomzav Ltr. at 1).
Andy Heller similarly explains that when his family's 90-year-old business
faltered, he turned to Mr. Steinberg for counsel on pursuing a new career in finance. As Mr.
Heller writes, Mr. Steinberg devoted hours each week to help his friend, listening, advising,
networking, and most importantly caring:
I was at a crossroads and needed to make a major change in my
profession, and was considering a career in finance. During this
difficult point in my life, Michael was my sounding board and
provided me with the most valuable career advice I received. . . .
Michael spent many hours each week speaking with me to
reinforce his instinct as to what would be the right position for me
to take. . . . Because of Michael and his faith and encouragement, I
33
KU 2971449 1
did not give up and was able to succeed after I adjusted to my new
career.
The letters submitted on his behalf also show that Mr. Steinberg is someone who
takes mentoring and the careers of his co-workers seriously. In dealing with his analysts, for
example, Mr. Steinberg was careful to give them the chance to improve because Mr. Steinberg
understood that his decisions could have a profound impact on their livelihood, self-esteem, and
career. As Mr. Steinberg's brother Daniel explains:
I have also observed Mike's compassion for others when it comes
to making difficult decisions about whether or not to fire someone
who is underperforming. Mike knew that I supervised interns at a
hospital in Manhattan and approached me for advice about one of
his analysts (who was not Jon Horvath). Mike thought this analyst
was underperforming and wanted to give him guidance so he could
succeed. Mike said he "just didn't have the heart to fire him" and
wanted to give him every chance to improve. Mike went on to say,
"you have to have a very high bar to fire someone as you are
talking about their life, their livelihood and their sense of self." I
remember this conversation clear as day and was flattered that my
brother was asking for my advice. We discussed the "feedback
sandwich" method, in which you first provide someone positive
feedback, then deliver constructive/negative feedback, and finish
by engaging with them in mutual development of a plan to affect
their personal improvement. I remember Mike was excited to
learn of this approach and looked forward to implementing it
because it resonated with one of Mike's core values helping
others learn to help themselves.
3. Mr. Steinberg Is Altruistic Towards Strangers As Well
Mr. Steinberg's generosity and kindness also extends to relative strangers. For
example, when Mr. Steinberg and Mr. Heller were just out of college and sharing an apartment
in the city, Mr. Steinberg welcomed a friend of a friend, who Mr. Steinberg had never met, to
34
KL3 2971449 1
live in the apartment for over a month until this stranger could afford a place to live in the city.
As Mr. Heller recounts:
A friend of one of Michael's college friends was planning a move
to New York City from Los Angeles but he lacked resources and
local relationships. Michael was the only contact he had, and
given they had never met, it wasn't much. Michael and I had a
small two-bedroom apartment and we each had girlfriends at the
time (who later became our wives). Without even meeting this
individual, just knowing he was a childhood friend of one of his
college friends was all Michael needed to know to offer a couch
and the meager accommodations we had. This lasted for over a
month until he was able to afford his own place. Michael, despite
my frustration with our guest who overstayed his welcome in my
opinion, dismissed my weekly objections and always responded
with, "what if it were you that needed help?"
Jill Silverman, who worked along with Liz as a special education teacher for
many years, also shares a memory illustrating Mr. Steinberg's kindness and eagerness to bring
happiness to some school children:
I was immediately won over by Michael the day Liz's 10 year old
students wanted to have a mock wedding for Liz and Michael's
upcoming nuptials. Michael showed up at school dressed in a suit
and tie, and very graciously donned the gigantic orange crepe
paper bow tie the class had made for him (to match the veil, of
course). Michael took the ceremony as seriously as the children
did. He made their day! They were thrilled with Michael's
enthusiasm and warmth and appreciation for all they had done for
him and Liz. And he meant it. He was touched by their efforts
and sincerity. To this day I don't know who that mock wedding
meant more to, the students or Michael. But that's just it. That's
Michael. He is so genuinely touched by acts of kindness and
thoughtfulness. It's no wonder, as he is one of the most kind and
thoughtful people I know.
(Silverman Ltr. at 1).
As his brother-in-law Jonathan Sims recounts, Mr. Steinberg's kindness and
willingness to help also extends to the staff at his apartment building:
35
KL3 2971449 1
I often remember Michael taking the time to speak to the various
doormen who worked in our building. He demonstrated a genuine
interest in their lives outside of their employment. He would often
ask about their families and their circumstances. I remember a
doorman named Jose who would confide in Michael about some
personal troubles that he was going through with his wife. Every
time Michael saw Jose he would ask about his situation, encourage
him, give him advice, and assure him that things would be okay. It
was clear that the doormen respected Michael and considered him
a friend.
(Jonathan Sims Ltr. at 1).
Mr. Steinberg brought this same level of kindness to his current home. As the
Board President for his building, Stephanie Reckler, explains, Mr. Steinberg has distinguished
himself from other tenants by opening his home to the building staff during the aftermath of
Hurricane Sandy, and more generally through his generosity and interest in the well-being of the
building's staff:
Michael always inquires about the doormen's families and health.
When he goes out to get coffee for himself, he will bring coffee
back for the doormen as well. During Hurricane Sandy, not only
did Michael and Elizabeth offer home cooked meals to the building
staff who were unable to return home to their families, they also
offered their home to those who needed a place to shower or to
rest. Michael's and Elizabeth's concern for the well-being of those
around them and their constant kindness truly differentiates them
from others.
(Reckler Ltr. at 1-2).
As the scores of letters make clear, Mr. Steinberg has a multitude of admirable
personal characteristics and life accomplishments. He is a devoted family man who has provided
and continues to be relied on for critical support to his wife and two children during numerous,
difficult challenges; a hands-on philanthropist who has inspired many others to engage in
charitable works; and a relentless source of strength and support to friends, family, and even
36
KL3 2971449 1
relative strangers. This is the broader picture of the man before the Court. We respectfully
submit that Mr. Steinberg's personal history and characteristics, when measured along with the
offense conduct and all of the other factors under 3553(a), warrant a sentence substantially
below the advisory Guidelines range.
II. THE ADVISORY SENTENCING GUIDELINES RANGE
The Federal Sentencing Guidelines (the "Guidelines" or "U.S.S.G.") direct the
court to apply offense guideline 2B1.4 to defendants convicted of insider trading under 15
U.S.C. 78j. Pursuant to 3D1.2(d) of the Guidelines, all five of Mr. Steinberg's counts of
conviction are grouped together for purposes of the Guidelines calculation. See U.S.S.G.
3D1.2(d) (listing 2B1.4 as among the offense guidelines for which grouping is appropriate);
see also 3D1.2 cmt. n.6 (providing that the conspiracy count should be grouped if the object of
the conspiracy is subject to grouping).
Under 2B1.4 of the Guidelines, Mr. Steinberg's base offense level is 8, which is
increased by the number of levels corresponding to the "gain resulting from the offense," using
the loss table in 2B1.1. 2B1.4(a), (b)(1). The government's evidence at trial indicated that
the Steinberg Portfolio realized a total gain of $1,819,349 from the trades the government argued
were based on illegal information." Applying the loss table in 2B1.1, this total gain
corresponds to an increase of 16 levels (for loss amounts between $1 million and $2.5 million),
yielding a total offense level of 24. 2B1.1(b)(1)(I), 2B1.4(b)(1).
Because Mr. Steinberg has no criminal history, he falls into Criminal History
Category I, see 4A1.1, which, when combined with a total offense level of 24, leads to a
This total is a sum of the following figures: $430,527 for Dell trading in May 2008 (GX
51), $1,039,065 for Dell trading in August 2008 (GX 59), and $349,756 for Nvidia trading in
May 2009 (GX 81).
37
KL3 2971449 1
Guidelines range of 51 to 63 months, see ch. 5, pt. A. This is the Guidelines range recommended
by the Probation Department. (PSR It 78).
The government had taken the position with the Probation Department that Mr.
Steinberg's offense level should be further enhanced by including trading by Steven Cohen and
the Select Fund (an automated trading account) as part of Mr. Steinberg's "gain resulting from
the offense," see U.S.S.G. 2B1.4(b)(1), leading to an 18-level enhancement under
2B1.1(b)(1)(J), for a total offense level of 26. (PSR 35). This would correspond to a
Guidelines range of 63 to 78 months. The Probation Department rejected the government's
suggestion of including these trades. (PSR 35).
We agree with the Probation Department that trading by Mr. Cohen and the Select
Fund should not be included within the calculation of Mr. Steinberg's gain. Since receiving the
PSR we have conferred with the government and requested that it reconsider the position it took
with the Probation Department about including these trades, but as of the date of this submission
have not received the government's response to this request. Because (i) we do not know the
government's current position, (ii) the government has not articulated the bases on which it
thought these additional trading gains should be incorporated into Mr. Steinberg's Guidelines
analysis, (iii) the government has previously described Mr. Cohen as a "non-coconspirator"
whose trading is "irrelevant" to this case (Gov't Mot. To Exclude Certain Trading Records and
Emails at 6, ECF No. 312), and (iv) the government introduced no evidence at trial about the
Select Fund, we respectfully seek leave to promptly respond to the government's argument at
such time as we understand what it is, in the event the government states that it is still pursuing
this position.
38
KL3 2971449 1
III. THE NATURE AND CIRCUMSTANCES OF THE OFFENSE CONDUCT
Mr. Steinberg was convicted of insider trading of Dell stock twice in August 2008
and Nvidia stock twice in May 2009. The jury also found that Mr. Steinberg conspired with Jon
Horvath and others to share and trade on illegal inside information over the period covered by
the indictment. While this base offense conduct, coupled with the loss amount, determines the
advisory Guidelines range, we respectfully submit that the particular facts underlying Mr.
Steinberg's conviction strongly support a sentence significantly lower than 51 to 63 months.
As this Court has recognized, while the advisory Guidelines "provide sort of a
baseline," they are "at best, a blunt instrument," incapable of the "kind of precision and nuanced
consideration that a judge is capable of" in crafting the appropriate sentence for an individual
defendant. Sentencing Tr. 20:20-24, United States v. Emanuel Goffer, No. 10 CR 56 (RJS),
(S.D.N.Y. Oct. 7, 2011). The U.S. Attorney prosecuting this case similarly has recognized this
principle and stated that one of the most important inquiries when sentencing individuals
convicted of financial fraud is "differentiating between and among financial criminals and
accurately gauging their relative culpability." Statement of Preet Bharara, U.S. Attorney,
S.D.N.Y., Public Hearing Before the U.S. Sentencing Comrn'n 11 (Feb. 16, 2011), available at
http://www.ussc.gov/Legislative andpublic Affairs/Public_Hearings_and_Meetings/20110216/
HearingTranscript.pdf.
Because criminal defendants convicted of the same crime are not all equally
culpable, 3553(a) directs the sentencing court to consider the particular "nature and
circumstances" of the defendant's offense in determining the appropriate sentence. 18 U.S.C.
3553(a)(1). This inquiry is especially important in the insider trading context, where the
guideline is particularly "blunt." Unlike other guidelines that attempt to differentiate between
and among the various offenders that fall within its purview, e.g., U.S.S.G. 2B1.1(b)
39
KL3 2971449 I
(accounting for 19 specific offense characteristics under fraud guideline), the insider trading
guideline draws primarily one distinction among offenders the amount of profits. See U.S.S.G.
2B1.4(b)(1). When the particular "nature and circumstances" of Mr. Steinberg's offense
conduct are examined, we respectfully submit they reflect a lower level of culpability than other
analogous defendants convicted of the same crime and support a sentence significantly below the
undifferentiating advisory Guidelines range.
A. Mr. Steinberg's Offense Conduct Lacks Many of the Hallmarks of
Culpability Evinced by Several Other Insider Trading Defendants
Acknowledging the jury's verdict for purposes of sentencing, an examination of
Mr. Steinberg's offense conduct demonstrates he is less culpable than many insider trading
defendants. Mr. Steinberg did not breach any primary duties himself nor induce any such
breaches; he did not authorize or even know about any illegal payments; he did not initiate or
spearhead the conspiracy, nor was his alleged participation integral to its success. In addition,
Mr. Steinberg lacked knowledge about the circumstances of the alleged fiduciary breaches and of
many other details known by other charged co-conspirators.
1. Mr. Steinberg Did Not Corrupt Insiders
A first and important distinction between Mr. Steinberg and other insider trading
defendants is that he did not induce any insider to breach a duty, or have any contact with any
company insiders who provided illegal information. The government has argued in other insider
trading cases that someone on the "front lines" of obtaining illegal information, who directly
interfaces with the insiders and personally induces their corruption, is "simply more culpable"
than a person who receives and trades on that information, even if the trading-recipient holds a
higher professional rank and greater trading authority. For example, at Danielle Chiesi's
40
KL3 2971449 1
sentencing, the government stated that Ms. Chiesi's culpability exceeded that of her boss Mark
Kurland, to whom she provided inside information:
Chiesi is simply more culpable than Kurland, since she was the one
on the front lines obtaining inside information and swapping it
with others. It was Chiesi, and not Kurland, who had the
relationship with Moffat. It was Chiesi, and not Kurland, who
induced Moffat to breach his duties to IBM. And it was Chiesi,
and not Kurland, who magnified the crime by simultaneously
conspiring with Rajaratnam and others, who controlled billions of
[sic] more dollars.
Gov't Sentencing Mem. at 12, United States v. Chiesi, No. 09 CR 1184 (RJH), (S.D.N.Y. June
13, 2011). The government recognized that Ms. Chiesi's active and personal involvement as an
initiator and corruptor rendered her conduct "particularly" serious and more blameworthy than
that of others convicted of insider trading: she "played a critical role in each of her criminal
schemes" (Chiesi Gov't Sentencing Mem. at 2); in some cases "she initiated the criminal
conduct" (Chiesi Gov't Sentencing Mem. at 2); and she "played a central and starring role in her
crimes." Sentencing Tr. 20:11-12, United States v. Chiesi, No. 09 CR 1184 (RJH), (S.D.N.Y.
July 20, 2011).
The government's case here was that Mr. Steinberg was a fourth-level tippee, and
he was certainly not "on the front lines obtaining inside information." Moreover, Mr. Steinberg
had no contact with the company insiders who provided illegal information in this case. Nor was
he involved in the events or payments that facilitated the insiders' alleged breaches of their
respective fiduciary duties.
The Dell corporate insider, Rob Ray, began disclosing information to Sandy
Goyal allegedly in breach of a duty well before even Mr. Horvath was aware of the illegal
tipping much less Mr. Steinberg. Mr. Horvath testified that he did not immediately recognize
that the Dell information he received from Mr. Tortora was coming from an unauthorized source;
41
KL3 2971449 I
rather, this realization gradually dawned on him after he had already received the information for
a period of time, and "crystallized" sometime around late 2007 or early 2008. (Trial Tr. 1710:2-
9; 1710:25-1711:3).
According to Mr. Horvath, he did not even tell Mr. Steinberg that Jesse Tortora
had a contact at Dell until "sometime around kind of [the] mid-2008 time frame." (Trial Tr.
930:2-9). It is therefore clear that Rob Ray's alleged breach of his duty was occurring well
before Mr. Steinberg is alleged to have even known that there was an insider, and that Mr.
Steinberg did not induce Mr. Ray's alleged breach of his duty.
Moreover, Mr. Steinberg did not take part in the payments made by Diamondback
to Sandy Goyal. The government has argued that these payments to Sandy Goyal payments
initiated long before Mr. Horvath contended Mr. Steinberg knew there was a Dell insider
induced Rob Ray to allegedly breach his duties. (See Newman Gov't Sentencing Mem. at 8-9).
Mr. Steinberg did not authorize, approve, or even know about these payments. Indeed, Jon
Horvath did not even know about them. (See Trial Tr. 768 ("Q. Did you ever tell Mr. Horvath
that you were paying money to Mr. Goyal? [MR. TORTORA] A. No.")). In fact, there was no
evidence that Mr. Steinberg knew anything at all about Sandy Goyal's role in providing
information to Jesse Tortora.
Mr. Steinberg also did nothing to induce the alleged breach by the Nvidia insider.
Chris Choi's unauthorized disclosures to Hyung Lim occurred without any involvement by Mr.
Steinberg, and predated even Mr. Horvath's awareness of the tips. (See Trial Tr. 1251:17-1256:3
(Mr. Horvath explaining that Mr. Kuo was getting inside information on Nvidia before Mr. Kuo
began sharing it with Mr. Horvath)). Hyung Lirn testified that Danny Kuo paid him a total of
$15,000 in "appreciat[ionl" for his illicit tips on Nvidia (and Broadcom and Altera). (Trial Tr.
42
KL3 2971449 1
3227-29). But there is no evidence that Mr. Steinberg had any knowledge whatsoever about
these payments to Hyung Lim.
2. Mr. Steinberg Did Not Have an Integral Role in the Conspiracy
A defendant's level of involvement in a conspiracy is another relevant
consideration in evaluating offense conduct for purposes of sentencing. For instance, when
sentencing Michael Kimelman for his participation in an insider trading conspiracy, this Court
highlighted Mr. Kimelman's relatively non-integral role in the scheme when imposing a below-
Guidelines sentence on him. Specifically, the Court considered whether the insider trading
activity would have continued with or without Mr. Kimelman:
I think while he was involved, I think he did play a role in
facilitating the scheme, he was not as clearly not as integral a
part of the scheme as the insiders. If you took away the Ropes &
Gray insiders you wouldn't have had the insider trading activity. If
you took Mr. Kimelman out of it I think you still would have had
that activity.
Sentencing Tr. 17:4-9, United States v. Kimelman, No. 10 CR 56 (IRS), (S.D.N.Y. Oct. 12,
2011). 12
The SEC similarly has argued that a defendant's culpability is relatively higher if
the scheme would not have occurred without him, telling the Supreme Court that tippers are the
"persons most directly culpable in a violation," because lalbsent the tipper's misconduct, the
tippee's trading would not occur." Brief for the Securities and Exchange Commission as Amicus
Curiae Supporting Respondents at 21, Bateman Eichler, Hill Richards, Inc. v. Berner, 472 U.S.
12
Mr. Kimelman, who went to trial and faced a Guidelines range of 33 to 41 months,
received a below-Guidelines sentence of 30 months. Notably, there were several factors in Mr.
Kimelman's case that made his offense conduct more egregious than Mr. Steinberg's offense
conduct. As this Court recognized, because Mr. Kimelman's conspiracy involved attorneys
violating privileges and breaching duties to their firms and clients, it was "a more serious
conspiracy than most insider trading cases," and, while Mr. Kirnelman did not personally breach
client confidences, he was a licensed attorney. (Kimelman Sentencing Tr. 25, 30).
43
KL3 2971449 1
299 (1985) (No. 84-679), 1985 WL 669566 (quoting H.R. Rep. No. 98-355, at 9 (1983))
(emphasis supplied by SEC). Congress adopted this view by enacting the Insider Trading
Sanctions Act of 1984, Pub. L. No. 98-376, 98 Stat. 1264 et seq., which "imposed a civil penalty
on nontrading tippers ( 2, 98 Stat. 1264) on the premise that tippers are the parties most
responsible for any fraud on the investing public." Id.
In this case, Mr. Steinberg a fourth-level tippee with no connection to the
tippers is not alleged to have played nearly as significant a role as others in the conspiracy, and
was far removed from those "most responsible" for the securities fraud alleged in this case. Id.
Cf United States v. Garcia, 920 F.2d 153, 155 (2d Cir. 1990) (evaluating "importance of the
defendant's actions to the success of the venture" in determining a defendant's role). Without
Mr. Steinberg, Sandy Goyal would have still obtained Dell information from Rob Ray. Without
Mr. Steinberg, Jesse Tortora and Todd Newman would have still paid Sandy Goyal $175,000 to
secure the continued information flow from Rob Ray. Without Mr. Steinberg, Danny Kuo would
have still sought inside information on Nvidia and other companies from Hyung Lim, and paid
him $15,000 for it. Without Mr. Steinberg, Hyung Lim would have still called Chris Choi and
found out important Nvidia metrics in advance of their reports. If you "took away" Mr.
Steinberg, you would not eliminate much of the criminality that took place. To be sure, insider
trading by a non-integral participant is still insider trading, but, by contrast, others were
indispensable to the success of the conspiracy, such as those who personally induced the insiders
to allegedly breach their duties and disseminated the information across multiple hedge funds. 13
13
None of the individuals closest to the alleged breaches have been sentenced. The
insiders, Rob Ray and Chris Choi, without whom no illegal trading would have been possible,
have not even been charged with any crime. (Mr. Choi recently entered into a civil settlement
with the SEC.) The analyst co-conspirators, including Jesse Tortora, Sam Adondakis, and
Danny Kuo, who initiated, managed, and perpetuated the allegedly illegal disclosures, have all
44
KL3 2971449 1
3. Mr. Steinberg's Level of Knowledge Further Supports a Sentence
Substantially Below the Guidelines Range
In evaluating offense conduct, this Court has also differentiated among defendants
by examining the relative level of knowledge of the criminal activity. For instance, the Court
found an insider trading defendant to be more culpable where there was evidence of
contemporaneous statements by the defendant demonstrating that he "absolutely understood the
illegality of what [he was] doing." Sentencing Tr. 35-36, United States v. Zvi Goffer, No. 10 CR
56 (RJS), (S.D.N.Y. Sept. 21, 2011) (imposing a 120-month sentence, just below the Guidelines
range of 121 to 151 months). In particular, Zvi Goffer was the leader and organizer of the
conspiracy, he sought out lawyers who could provide him with illegal inside information, and he
was personally involved in paying bribes. Gov't Sentencing Mem. at 1, United States v. Zvi
Goffer, No. 10 CR 56 (RJS), (S.D.N.Y. Sept. 14, 2011). 14
The government has similarly argued for a higher sentence in the recent case
involving Craig Drimal, where the defendant was "intimately familiar with the operation of the
insider trading scheme," and wiretaps revealed that he "knew he was breaking the law." Gov't
Sentencing Mem. at 1, United States v. Drimal, No. 10 CR 56 (RJS), (S.D.N.Y. Aug. 24, 2011);
see also Sentencing Tr. 40:7-10, United States v. Dritnal, No. 10 CR 56 (RJS), (S.D.N.Y. Aug.
31, 2011) (government sentencing argument that defendant "understood exactly what was going
on, that he was contributing to the corruption of lawyers so he could get made a lot of money,
basically"); Sentencing Tr. 60:15-16, 61:7-9, United States v. Goldfarb, No. 10 CR 56 (RJS),
cooperated with the government and received repeated adjournments of their sentencings at the
government's request.
14
In contrast, this Court imposed a sentence of 36 months (below the 41 to 51 months
Guidelines range) on Emanuel Goffer, in part because of his lesser role. (See E. Golfer
Sentencing Tr. 25:8-25:11).
45
KL3 2971449 1
(S.D.N.Y. Aug. 19, 2011) (government argument that defendant "was a very significant and
active participant in the criminal conduct and his role[] [was] a significant one," partially on the
ground that defendant "had a greater understanding of the scope and magnitude of the scheme
than the Ropes & Gray lawyers did"). In the case of Mr. Drimal, for example, the evidence
indicated that he knew such details because he told a cooperating witness that lawyers were
being paid to provide inside information, and in a recording he admitted he did not "feel good"
about the payments. (Drimal Gov't Sentencing Mem. at 3).
The proof concerning Mr. Steinberg's level of knowledge was different in both
kind and degree than that in these other cases. This difference was in fact reflected in the
government's arguments in summation that leaned heavily on a theory of conscious avoidance.
As discussed, Mr. Steinberg was not on the front lines of the conspiracy and did
not know all the intimate details about how the conspiracy operated. See supra III.A.1 & infra
IV.A.2. In that regard, the government's primary cooperating witness, Mr. Horvath, repeatedly
testified about critical pieces of information that he never told Mr. Steinberg. For example, Mr.
Horvath never explicitly told Mr. Steinberg that he was planning on doing anything illegal.
(Trial Tr. 1514:2-4 ("No, I didn't tell him I was going to do anything or I didn't tell him that
explicitly we were going to do something illegal, no.")). He also never told Mr. Steinberg at any
time that he was providing Mr. Steinberg illegal information:
A. I didn't tell Mr. Steinberg explicitly on that call [on August 18,
2008] or any call with him that it was illegal information.
Q. You never told that to Mr. Steinberg, did you?
A. Explic itly.
Q. You never told Mr. Steinberg it was illegal inside information,
did you, sir?
A. I never told Mr. Steinberg explicitly that it was illegal
information.
46
KL3 2971449 1
(Trial Tr. 1877:1-8). In addition, Mr. Horvath generally did not forward the emails he received
to Mr. Steinberg (see Trial Tr. 929-30), including the February 2009 email explicitly identifying
the Nvidia source as an accounting manager (GX 806). Mr. Horvath also admitted he never even
informed Mr. Steinberg that the Nvidia source was an accounting manager. (See Trial Tr.
2238:6-17, 2277:23-2278:2).
Following this testimony and similar evidence, the government told the jury at the
outset of its closing argument that conscious avoidance was a "critical concept in this case."
(Trial Tr. 3470:4-5 ("Now, this deliberate avoidance of learning the truth that the law speaks of
is a critical concept in this case . . . .")). Indeed, the government read aloud the court's willful
blindness instruction in full within the first few minutes of its summation the only jury
instruction that the government quoted in its entire closing argument. (Trial Tr. 3469:1-22).
This stands in sharp contrast to the trial of Messrs. Newman and Chiasson, in which deliberate
ignorance was mentioned only once in passing, during the government's rebuttal, and never
again. (Newman Trial Tr. 3976:22-3977:1).
The government's summation argument also encouraged the jury to rely on
conscious avoidance by asking the jury to judge Mr. Steinberg's conduct by looking to what
SAC's compliance manual required. For example, the government asked the jury to determine
whether "this [is] a situation where someone who wanted to follow the law would have called his
compliance department." (Trial Tr. 3472:25-3473:1). The government also argued that if Mr.
Steinberg thought Dell investor relations had leaked the earnings numbers, "he should have
reported that to his compliance department immediately." (Trial Tr. 3507:10-11). Indeed, over
and over, the government asked the jury to evaluate what Michael Steinberg should have done
under SAC's compliance policy:
47
KL3 2971449 1
If you think any of that evidence presents even just a close call as to Mr.
Steinberg's actual knowledge, . . . then ask, . . . is this a situation where he should
have asked his compliance department to look into the matter before he traded on
the information; is this a situation where the stock should have been put on the
firm's restricted list while it was being looked at . . . . (Trial Tr. 3472:21-3473:9).
And this is another point where it's helpful to think, again, is this email at least
questionable enough, is the information that's being passed at least suspicious
enough that Mike Steinberg should have asked his compliance department to
check it out, to see whether it was public, to see whether he could trade on it, to
put the stock on the restricted list while those questions were answered. (Trial Tr.
3487:25-3488:7).
And, again, every time you see a questionable e-mail that Mike Steinberg sends or
receives, ask that question I posed at the outset regarding compliance: Was this a
questionable enough communication that Mike Steinberg should have brought in
the compliance department to make sure he was staying on the right side of the
insider trading rules? (Trial Tr. 3502:22-3503:2).
The issue of Mr. Steinberg's alleged deliberate ignorance thus played a key role in
the government's summation to the jury. While we are not contending that the government
wholly abandoned any theory of actual knowledge in its closing arguments, its heavy reliance on
conscious avoidance arguments, and in particular on what Mr. Steinberg "should have" known or
done, was an acknowledgment that the proof concerning Mr. Steinberg's level of knowledge was
of a lower degree and a different kind than, for example, the proof of knowledge with respect to
Messrs. Newman and Chiasson. 15
15
Following the conclusion of the case, members of the jury commented on the significance
of the government's conscious avoidance arguments. See Benjamin Fischer, Insider Trading and
Conscious Avoidance: Handling the Government's Most Powerful Prosecutorial Tool, Forbes,
Dec. 23, 2013 (attached as Exhibit B) ("Remarkably, in interviews with members of the
Steinberg jury shortly after the conviction, the jurors actually acknowledged that their verdict
which at first was hotly disputed in the jury room ultimately was secured on a conscious
avoidance basis. The jurors concluded that Mr. Steinberg should have known where the
information came from even without direct evidence showing that he did."); see also, e.g., Julie
Steinberg & Rob Copeland, 'Information Trailed Back to Steinberg' Juror Says, Wall St. J., Dec.
19, 2013 (attached as Exhibit C) (one juror commenting that a concern was "whether prosecutors
had shown that Mr. Steinberg was 'explicitly' aware that his tips were gained from nonpublic
information" and that the jury focused its deliberations on the problem of whether Mr. Horvath
"made clear" to Mr. Steinberg that "the information was confidential"); Alexandra Stevenson &
48
KU 2971449 1
In sum, the government's arguments at trial are consistent with the fact that Mr.
Steinberg lacked the level of knowledge and brazenness that is most deserving of punishment,
and that his sentence should therefore be mitigated to account for his lower degree of culpability.
IV. THE NEED TO AVOID UNWARRANTED SENTENCING DISPARITIES
In determining the appropriate sentence, the Court must consider "the need to
avoid unwarranted sentence disparities among defendants with similar records who have been
found guilty of similar conduct." 18 U.S.C. 3553(a)(6). Conversely, the Court should also
consider avoiding "unwarranted similarities among other co-conspirators who were not similarly
situated." See Gall, 552 U.S. at 55 (second emphasis added).
A. Mr. Steinberg's Sentence Should Be Significantly and Proportionally
Lower than Todd Newman's Sentence
The sentence and offense conduct of Todd Newman are important comparative
considerations in determining the appropriate sentence for Mr. Steinberg. Mr. Newman's
individual profits of $3,688,624 were approximately double the profits in Mr. Steinberg's
portfolio, resulting in a higher Guidelines range (63 to 78 months) compared to Mr. Steinberg's
recommended Guidelines range in the PSR (51 to 63 months). (See PSR IT 78). This Court
sentenced Mr. Newman to 54 months (9 months below the bottom of his applicable Guidelines
range). (Newman Sentencing Tr. 8, 57).
The government itself argued that "[Mr.] Newman was a critical link in the chain
of the information flow for Dell," rendering him a "central participant in the insider trading
Rachel Abrams, Insider Jury-Room Demonstration Persuaded Holdouts in Ex-Trader's Trial,
N.Y. Times, Dec. 19, 2013 (attached as Exhibit D) (one juror told reporters that she thought Jon
Horvath was trying to "save his own skin," "did not believe anything [Mr. Horvath] said," and
that she had noted 28 times when she thought Mr. Horvath was lying); Julie Steinberg & Rob
Copeland, Turnabout by Juror was Crucial in Steinberg's SAC Case, Wall St. J., Dec. 19, 2013
(attached as Exhibit E).
49
KL3 2971449 1
scheme." (Newman Gov't Sentencing Mem. at 1, 2.) The same certainly cannot be said of Mr.
Steinberg. His circumstances are substantially different and reflect a significantly lower level of
culpability. As a result, we respectfully submit that Mr. Steinberg's sentence should be
significantly and proportionally lower than the sentence imposed on Mr. Newman.
1. Mr. Steinberg Was Not Involved in the Consulting Payments
Authorized and Covered Up by Mr. Newman
One clear reason why Mr. Steinberg should be treated more leniently than Mr.
Newman is that Mr. Steinberg, as discussed above, was never even aware of the payments to
Sandy Goyal. In contrast, the evidence at trial showed that Mr. Newman approved payments to
Sandy Goyal totaling $175,000 payments which Mr. Goyal testified were his motivation for
providing Mr. Tortora the Dell information. (See Steinberg Trial Tr. 3037:10-22).
According to the government, these payments motivated Mr. Goyal to obtain
information from Rob Ray and thereby induced Mr. Ray's alleged breach of his duties to Dell,
underscoring Mr. Newman's far more significant role in the conspiracy. As the government put
it: "in paying Goyal[,] Newman ensured the continued flow of the Dell inside information and
was, therefore, very much responsible for 'inducing' the Dell insider's breach of duty."
(Newman
Gov't Sentencing Mem. at 3). Moreover, as this Court explained at his sentencing
hearing, Mr. Newman's sentence reflected not only his role in "authorizing substantial payments
to Mr. Goyal," but also the deceptive and "surreptitious" manner in which the payments were
effectuated. (See Newman Sentencing Tr. 54-55).
By contrast, Mr. Steinberg had no knowledge of any payments to Mr. Goyal or
anyone else; and, in fact, was not even aware of Mr. Goyal's role in obtaining information from
his former colleagues at Dell. See supra III.A.1-2.
50
KL3 2971449 1
2. Mr. Newman Was Alleged To Have Had Far Greater Awareness of
the Scope and Details of the Conspiracy than Mr. Steinberg
There are many other distinctions demonstrating that Mr. Newman was alleged to
have had much greater awareness of and involvement in the scope and details of the conspiracy,
and was thereby far more culpable than Mr. Steinberg. At Mr. Newman's sentencing, the
government asserted that Mr. Newman specifically directed Mr. Tortora to obtain and provide to
Mr. Newman a "constant flow" of detailed confidential financial information. (Newman Gov't
Sentencing Mern. at 9). The government also alleged Mr. Newman knew far more than Mr.
Steinberg did about the illegal information flow from Dell. Mr. Tortora testified that he "kept
Todd [Newman] in the loop of everything as it related to [Sandy Goyal's Dell] information and
when we would be getting the next update." (Newman Trial Tr. 177:6-10). He would tell Mr.
Newman "verbatim" what he heard from Sandy Goyal, and he relayed the information to Mr.
Newman immediately, sometimes right after hanging up the phone with Mr. Goyal. (Newman
Trial Tr. 160:1-6; see also Steinberg Trial Tr. 747:22-24). Mr. Newman was fully aware that
Mr. Goyal was the conduit of the Dell information, and of the path that the information flowed.
(See GX 215, 287, 322, 750-54, 775A, 780A).
By contrast, Mr. Horvath testified that he did not provide Mr. Steinberg with
anything near the same type of "constant flow" of information and detail received by Mr.
Newman. Instead, Mr. Horvath shared only certain pieces of information. (See Steinberg Trial
Tr. 929:19-25). Relatedly, Mr. Horvath did not forward Mr. Tortora's emails to Mr. Steinberg,
except on a few isolated occasions: 6 Mr. Steinberg thus lacked knowledge of the more complete
16
There was evidence that SAC began retaining all emails on or about September 18, 2008
(DX 8248-R). It is notable that even during the period of full email retention, there was no proof
that Mr. Horvath routinely forwarded emails from his analyst friends to Mr. Steinberg.
51
KU 2971449 1
and real-time picture Mr. Newman had of the information being shared and of the scope and
nature of the conspiracy.
In fact, Mr. Horvath kept many of his email updates to himself by using his
personal Yahoo email account to communicate with his analyst friends. (See, e.g., GX 806).
Mr. Horvath began receiving ernails from the other analysts at his personal Yahoo address after
he specifically requested they send the "more sensitive emails" there including the information
from Sandy Goyal. (Trial Tr. 766:8-21 (Tortora cross-examination)). Mr. Horvath admitted that
part of the reason he used his personal account was to "conceal" what he was doing. (Trial Tr.
2072:17-2073:1). There was no evidence that Mr. Steinberg requested Mr. Horvath to start using
his Yahoo account, or even that he was aware of Mr. Horvath's use of that account.
Mr. Newman also knew that Sandy Goyal spoke to the Dell insider outside of
traditional work hours, including on nights and weekends. Mr. Tortora repeatedly sent emails to
Mr. Newman reflecting this course of communications. (E.g., Newman GX 322, Newman GX
160, Newman GX 197, Newman GX 242, Newman GX 305). Mr. Goyal testified that the reason
he called Mr. Ray on nights and weekends was that Mr. Ray would not be able to provide
confidential information if he was in the office. (Steinberg Trial Tr. 3064:14-18). In the
government's view, Mr. Newman's awareness that the calls occurred outside of normal work
hours suggested to him more clearly that the disclosures were unauthorized. (E.g., Newman Trial
Tr. 3675:23-3676:1 (government summation) ("How else do you know that Newman knew the
Dell insider was not authorized to disclose the inside information? Well, Newman knew that
Sandy Goyal had to talk to his contact on nights and weekends.")). There is no evidence that Mr.
Steinberg had such knowledge of the timing of the calls.
52
KL3 2971449 1
Mr. Newman was also alleged to have been aware of all the links in the Nvidia
information chain, as he understood Mr. Kuo obtained the information from an intermediary
"friend," who obtained the information from an accounting manager at Nvidia. Mr. Tortora
forwarded all of Mr. Kuo's ernails directly to Mr. Newman, so he knew the timing, content, and
context of all of Danny Kuo's Nvidia information. (See GX 806, 810, 818, 820, 831, 842). Mr.
Horvath, however, did not forward a single email from Danny Kuo to Mr. Steinberg regarding
Nvidia.
One of the emails Mr. Newman received concerning Nvidia was the February 9,
2009 email identifying the Nvidia insider as an accounting manager. (See GX 806). During
summation at Mr. Newman's trial, the government argued that Mr. Newman's specific
awareness that the source was an accounting manager greatly enhanced his level of culpable
knowledge because Mr. Newman knew accounting managers are ordinarily not permitted to
discuss company business with investors. (See Newman Trial Tr. 3728:12-18 (summation)
("Let's look at what Newman knew in February 2009. Danny Kuo writes to his boss on Nvidia:
'Check with an accounting manager at Nvidia through a friend of mine.' Ladies and gentlemen,
nothing could be clearer. This is information coming directly from an accounting manager at the
company who has access to those financial results."); Newman Trial Tr. 3729:4-8 (summation)
("All of this exchange is given straight to Mr. Newman, ladies and gentlemen. He gets the e-
mail that says the source is an accounting manager at the company. There is no question, ladies
and gentlemen, that Mr. Newman knows this information comes from inside Nvidia."); Newman
Trial Tr. 3998:1-2 (rebuttal) ("Mr. Newman gets every e-mail that Jesse Tortora sends. He is on
the accounting manager e-mail.")).
53
KI3 2971449 1
Mr. Steinberg was never told that the Nvidia information was coming from an
accounting manager; in other words, Mr. Steinberg did not receive what the government argues
was the clear notice of illegality that Mr. Newman received. Mr. Horvath unequivocally testified
that he never conveyed to Mr. Steinberg that the information came from an accounting manager.
(Trial Tr. 2238:6-17 ("No, I never mentioned to Mike that it was from an accounting manager..
. I never told him it came from an accounting manager."); Trial Tr. 2278:1-2 ("No, I have
already testified that I never told him that it came from an accounting manager.")).
The government also argued that Mr. Newman not only received information
from his analyst, but also independently obtained and disseminated illegal inside information.
For instance, the government alleged that Mr. Newman obtained information from his own
sources who had access to Dell insiders, and then shared that information with Mr. Tortora. (See
Newman Trial Tr. 285:5-14 (Tortora direct examination) ("[H]e informed me that he knew
someone that worked for a company called Inflection Point Research, IPR, and this person had a
contact at Dell. . . . He got information from this guy buy [sic] business unit for Dell. That
suggested Dell was going to miss all their internal margin targets or had missed all their internal
margin,targets by a business unit.")). There is no evidence that Mr. Steinberg independently
obtained and shared any illegal inside information.
In light of these many sharp distinctions between Mr. Newman and Mr. Steinberg
demonstrating Mr. Steinberg's far lower level of culpability, we respectfully submit that Mr.
Steinberg's sentence should be substantially and proportionally lower than Mr. Newman's
sentence.
54
KL3 2971449 1
B. Mr. Steinberg Is Also Distinguishable from Anthony Chiasson
Anthony Chiasson, the only other alleged co-conspirator of Mr. Steinberg to be
sentenced, received a sentence of 78 months. Mr. Chiasson's Guidelines range (97 to 121
months) and his sentence, of course, were significantly affected by his enormous trading profits.
Mr. Chiasson's gains were approximately $40 million, dwarfing Mr. Steinberg's profits. Mr.
Chiasson's substantially higher profits and Guidelines range, standing alone, render his resulting
sentence inapposite for purposes of a 3553(a)(6) comparative analysis.
But Mr. Steinberg is distinguishable from Mr. Chiasson for other reasons as well.
For instance, Mr. Chiasson took much larger positions than Mr. Steinberg did. As this Court has
recognized, it is not only the size of the gain that matters, but also the size of the bet. (See
Chiasson Sentencing Tr. 58). Because profits naturally include a degree of fortuity due to
external market factors, the amount an investor is willing to risk in a position is a measure of the
investor's conviction, and of his desire to maximize profits on a putative "sure thing." In this
regard, this Court observed that Mr. Chiasson's significantly sized bet revealed an intent to
"cheatH to realize tremendous profits, tens of millions of dollars." (Chiasson Sentencing Tr. 58).
The government similarly argued that Mr. Chiasson's large position sizes were
highly probative of his guilty knowledge and criminal intent. (E.g., Chiasson Sentencing Tr. 47
("When he got that information, he made huge bets on that inside information . . . ."); Newman
Trial Tr. 3691:8-10 ("There is no way Anthony Chiasson is making the second biggest short
trade at Level Global based on some sell side analyst from outside the firm."); Newman Trial Tr.
3741:4-8 ("You know why they placed the biggest and the second biggest short trades
respectively that they had ever made. It was because they had a secret pipeline to an insider at
the company. They had a secret pipeline for Dell and they had a secret pipeline for Nvidia.")).
55
KL3 2971449 1
Moreover, in both summation and at Mr. Chiasson's sentencing, the government made sure to
emphasize that "the Dell trade was the largest short position Level Global had ever taken in a
technology stock." (Chiasson Gov't Sentencing Mem. at 9; see also Newman Trial Tr. 3666:13-
22 (summation))."
No such claims can be made with respect to Mr. Steinberg's position sizing.
Unlike Mr. Chiasson's Dell trade, Mr. Steinberg's Dell position was not his biggest historical
position by any relevant measure. Mr. Steinberg also hedged his Dell trade, cutting into his
potential profits. Indeed, Mr. Horvath testified that Mr. Steinberg hedged the trade out of
concern that Dell's earnings report might be "good," contrary to the significantly negative results
predicted by Mr. Tortora's information. (Trial Tr. 1119:12-18 (Mr. Horvath testified that he
understood Mr. Steinberg was comfortable with the size of the trade because "we had some
offsets, that is, we owned some stocks in the PC space that would probably go up if we were
wrong and the earnings were good.") (emphasis added)). 18
Moreover, the evidence showed that Mr. Steinberg had the capital to make large
bets if he so desired. Yet none of Mr. Steinberg's positions in Dell and Nvidia even remotely
approached his investment limits. Mr. Horvath testified that the August 2008 Dell position was
around $10 million. (Trial Tr. 1997:13-23). This position size fell far below Mr. Steinberg's
17
The government argued the relative sizing of the trades was incriminating for both
Messrs. Newman and Chiasson. (E.g., Newman Trial Tr. 3666:17-22 ("The Dell trade in August
2008 was the single biggest short position Newman had ever made at Diamondback. For
Chiasson, it was the second biggest short position that his firm, Level Global, had ever made,
and the biggest short position in technology stocks for which Mr. Chiasson was responsible.")).
18
There was no similar evidence that Mr. Chiasson hedged his investments in Dell in
August 2008 out of a concern that he could be wrong and the earnings would be good.
56
KL3 2971449 1
single position limit of $45 million. 19 In other words, Mr. Steinberg could have easily
quadrupled the size of his investment (and profits) in Dell, but he did not. 20
Furthermore, unlike Mr. Steinberg, who was one of many portfolio managers at
SAC Capital, Mr. Chiasson was a co-founder of his hedge fund, Level Global, and served in a
compliance function at his firm. The government argued Mr. Chiasson's position as a co-
founder rendered his conduct more "seriousH" and that his unlawful behavior was particularly
odious in light of his designation in a compliance manual as "the person to whom queries should
be directed in the case of compliance issues." (Chiasson Sentencing Tr. 47).
For all of the foregoing reasons, Mr. Chiasson's sentence is not an appropriate
point of comparison under 3553(a)(6) in considering a sentence for Mr. Steinberg.
19
In August 2008, SAC allocated to Mr. Steinberg a total buying power of $300 million.
SAC imposed a "single position limit," an amount up to which Mr. Steinberg had unfettered
discretion to invest in a single position, of 15% of his total buying power, or $45 million. (Trial
Tr. 92:1-4, 93:15-94:10; DX 1931). In addition, portfolio managers could exceed those limits
with permission of management, which was commonly granted. (Trial Tr. 90:11-91:4).
SAC also imposed a "net market value" limit on Mr. Steinberg's portfolio. However, this
limit posed no constraint on Mr. Steinberg's ability to deploy his full $45 million single position
limit in a Dell short position in August 2008. The "net market value" limit imposed by SAC
ensured that portfolio managers were not too long or too short. (Trial Tr. 108:1-7). The trading
records introduced at trial by the government show that on August 28, 2008, Mr. Steinberg's
NMV was net positive $1,014,100, while his NMV limit was $66,000,000, leaving him over $67
million to invest in short positions. (DX 6400-A (SEGMV 5AC2012 07601980.xls)).
20
And of course, Mr. Steinberg's May 2009 Nvidia trade was even smaller. The
government has made no argument that the size of the May 2009 Nvidia trade was noteworthy in
any way. In addition, Mr. Steinberg hedged his Nvidia position in May 2009, which, as the
government conceded in summation, reduced his potential for profits on the trade. (See Trial Tr.
3517:7-11 ("Michael Steinberg also put on a small hedge on the Nvidia trade. He bought options
in the opposite direction, which caused him to lose some money, as you see for Government
Exhibit 81, and that reduced some of his profits.")).
57
KL3 2971449 1
C. The Recent Sentences of Doug Whitman, James Turner, and Donald
Longueuil Further Show that Mr. Steinberg Should Receive a Substantially
Reduced, Below-Guidelines Sentence
The Court, of course, should not restrict its comparative analysis to a defendant's
own co-conspirators, or to cases only within this district. The purpose behind 18 U.S.C.
3553(a)(6) is to "reduce unwarranted sentence disparities nationwide." United States v. Wills,
476 F.3d 103, 109 (2d Cir. 2007). This Court too has recognized the need to look across judges
when comparing defendants:
It would obviously undermine people's confidence in the system if
defendants got high sentences or low sentences based simply on
who the judge was or who the lawyers were. The goal is to
provide roughly equal sentences for people who are similarly
situated, recognizing that no two people are exactly similarly
situated.
(Drimal Sentencing Tr. 31:4-9). As such, it is important to consider not just the sentences of
Messrs. Newman and Chiasson, but also of other defendants found guilty of similar conduct in
other cases.
Though no other defendant's set of facts will ever be perfectly comparable, there
are several other relevant comparators to Mr. Steinberg, which involve recently sentenced insider
trading defendants who (1) were convicted as tippees, (2) committed their crimes while
employed as hedge fund portfolio managers, and (3) faced similar advisory Guidelines ranges.
1. Doug Whitman
Doug Whitman was sentenced in this district to 24 months' imprisonment after
being found guilty at trial. Mr. Whitman, like Mr. Steinberg, was a hedge fund portfolio
manager, although Mr. Whitman had an even greater role in his hedge fund, since he was
president of Whitman Capital, LLC. Mr. Whitman's gain was just under $1 million (compared
to Mr. Steinberg's portfolio gains of approximately $1.8 million), putting him two levels below
58
KL3 2971449 1
Mr. Steinberg's offense level based on gain. Mr. Whitman, however, received an enhancement
of two levels for obstructing justice by committing perjury at trial bringing him back up to a
comparable Guidelines range of 51 to 63 months. However, the distinctions between Mr.
Whitman's conduct and Mr. Steinberg's conduct show that Mr. Steinberg's offense conduct was
far less egregious.
Mr. Whitman, unlike Mr. Steinberg, was convicted based on allegations that he
engaged in two separate conspiracies with two completely different groups of co-conspirators.
In one conspiracy, he received inside information from Roomy Khan who had inside sources at
two public companies, Polycom and Google, and in exchange he provided Roomy Khan with
information on other publicly traded technology companies. Indictment 11115-23, United States
v. Whitman, No. 12 CR 125 (JSR), (S.D.N.Y. Feb. 8, 2012). In the second conspiracy, Mr.
Whitman paid Karl Motey for inside information from Marvell. (Whitman Indictment 1114-8).
As the government has recognized, involvement in multiple conspiracies reflects a higher level
of culpability. See Sentencing Tr. 23:1-8, United States v. Rajaratnam, No. 09 CR 1184 (RJH),
(S.D.N.Y. Oct. 13, 2011) (citing Mr. Rajaratnam's involvement in "multiple interlocking
conspiracies" as one of the reasons that there is "no one who is Mr. Rajaratnam's equal in terms
of the breadth and scope of his insider trading crimes").
As noted, and significantly, Mr. Whitman also was alleged to have paid his
sources in exchange for the inside information they directly obtained from insiders. Specifically,
Mr. Whitman made payments to Karl Motey for inside information that Mr. Motey obtained
directly from an insider at Marvell. Mr. Whitman then provided the Marvell information to
Roomy Khan and Wesley Wang in exchange for the information they were able to get directly
from insiders at other public companies. (Whitman Indictment 1118, 23).
59
KL3 29711491
The evidence against Mr. Whitman also supported the conclusion that Mr.
Whitman had a higher level of knowledge of and involvement in the details of the conspiracies in
other ways as well. For example, wiretaps showed that Mr. Whitman had encouraged Roomy
Khan "to go out and buy [an inside source] some really nice present" in response to the source's
demand that Roomy Khan "take care of her for . . . giving her the information." Gov't
Sentencing Mem. at 5, United States v. Whitman, No. 12 CR 125 (JSR), (S.D.N.Y. Jan. 17, 2013)
(citing GX 32, 32T). And Mr. Whitman expressed frustration at Roomy Khan's refusal to do so,
because, in Mr. Whitman's words, what she was doing "was illegal to start with." (Whitman
Gov't Sentencing Mem. at 5 (citing GX 32, 32T)). Mr. Whitman also stated that Mr. Wang must
"bring [his Cisco source, his neighbor] over a nice bottle of wine every once in a while . . . [o]r
buy him some dinners, or just something to thank him for the help." Gov't Appellee Br. at 10,
United States v. Whitman, No. 13-491 (2d Cir. July 15, 2013) (citing A. 2085). The government
argued that this evidence demonstrated that Mr. Whitman knew about and encouraged the
exchange of a personal benefit to the insiders for the illegal information. By contrast, Mr.
Steinberg did not know about or encourage the exchange of any personal benefits to insiders.
Further, the evidence showed that during the course of the conspiracies Mr.
Whitman specifically instructed his sources to hide their communications with their inside
sources. For example, Mr. Whitman suggested to both Roomy Khan and Karl Motey that they
use a Skype number when contacting insiders to prevent their telephone numbers from being
recognized. (Whitman Gov't Appellee Br. at 6, 14 (citing A. 2060-61, 2077)). In one wiretap,
when Roomy Khan expressed reticence at Mr. Whitman's suggestion that she call her inside
source at Polycom, saying that she could "go to jail for doing that," Mr. Whitman responded that
she could "use a skype phone number" to avoid detection. (Whitman Gov't Sentencing Mem. at
60
KL3 2971449 I
18 (citing GX 22T-E-2)). Mr. Steinberg, on the other hand, never asked Mr. Horvath to use
untraceable forms of communication in fact, Mr. Steinberg generally encouraged his analysts
to put things in writing, requesting comprehensive sizing worksheets and EPS Preview emails to
support trading recommendations. (Trial Tr. 892:1-9; 968:3-10).
In light of these numerous distinctions evincing Mr. Whitman's more egregious
offense conduct, his sentence of 24 months should be considered pursuant to 3553(a)(6) to
avoid an unwarranted sentencing disparity.
2. James Turner
Another hedge fund portfolio manager, James Turner, was recently sentenced to a
12-month term of imprisonment for insider trading in the District of New Jersey. See Sentencing
Tr., United States v. Turner, No. 11 CR 868 (DMC), (D.N.J. Apr. 16, 2012). Mr. Turner pled
guilty to charges that he traded multiple times on illegal inside information that he received
directly from two insiders at public software companies. 21
Mr. Turner's Guidelines range included a three-level reduction for acceptance of
responsibility, but also a two-level enhancement for obstruction of justice. (See Turner
Sentencing Tr. 20:16-18); see also Ltr. from AUSA Christopher J. Kelly to Joseph S. Bush (Nov.
4, 2011) (Plea Agreement), United States v. Turner, No. 11 CR 868 (DMC), (D.N.J. Dec. 19,
2011). Mr. Turner's gain of approximately $3.5 million was higher than Mr. Steinberg's
portfolio gains, and resulted in a Guidelines range of 57 to 71 months (based on a total offense
level of 25) similar to Mr. Steinberg's recommended Guidelines range of 51 to 63 months
(based on a total offense level of 24).
21
Although Mr. Turner pled guilty, he did not cooperate with the government.
61
KL3 2971449 1
Like Mr. Steinberg, Mr. Turner was a tippee and hedge fund portfolio manager,
whose trades were made on behalf of hedge fund investors. However, Mr. Turner also placed
larger trades in his personal accounts, where he reaped 100% of the profits. (Turner Sentencing
Tr. 15:9-18, 18:16-24). Additionally, unlike Mr. Steinberg, Mr. Turner himself directly
corrupted insiders by convincing his brother-in-law and an old college friend to breach their
respective fiduciary duties to their companies. Information 1111, 3-4, United States v. Turner,
No. 11 CR 868 (DMC), (D.N.J. Dec. 19, 2011).
Aside from his guilty plea (which was accounted for in calculating his advisory
Guidelines range), Mr. Turner's conduct is distinguishable from Mr. Steinberg's only for its
greater culpability. Accordingly, Mr. Turner's 12-month sentence should be considered in the
Court's 3553(a)(6) analysis, and further suggests a substantially below-Guidelines sentence is
appropriate for Mr. Steinberg.
3. Donald Longueuil
Donald Longueuil, also a hedge fund portfolio manager, was recently sentenced
in this district to 30 months' imprisonment for his involvement as a tippee in a large insider
trading scheme. Mr. Longueuil pled guilty to conspiracy to commit securities fraud and wire
fraud and substantive securities fraud. Gov't Sentencing Mem. at 7, United States v. Longueuil,
No. 11 CR 161 (JSR), (S.D.N.Y. July 21, 2011). In his plea agreement, he stipulated to a
Guidelines range of 46 to 57 months, which included credit for his acceptance of responsibility,
as well as an enhancement for obstruction of justice. 22
Numerous aspects of Mr. Longueuil's offense conduct demonstrate that he had a
higher level of culpability than Mr. Steinberg. For example, Mr. Longueuil and his co-
22
Mr. Longueuil did not cooperate with the government.

62
KL3 2971449 I
conspirators, Noah Freeman and Samir Barai, all reached out directly to employees at numerous
public companies in order to get material, non-public information. (Longueuil Gov't Sentencing
Mem. at 3). They also all employed deceptive techniques to hide their illegal activities, such as
communicating through personal email accounts instead of their hedge fund email accounts,
using email addresses composed solely of numbers rather than a name, and communicating over
Skype believing that those calls could not be tracked. (Longueuil Gov't Sentencing Mem. at 3-
4). All three were involved with paying their sources, mostly through expert network consulting
fees as much as $10,000 a month. (Longueuil Gov't Sentencing Mern. at 4). Notably, none of
these factors are present in Mr. Steinberg's case he never contacted any employees of public
companies for illegal inside information, he did not try to use his personal email account to
evade detection, and he was never involved in providing payments or benefits to any inside
sources.
Considering the more serious conduct engaged in by Mr. Longueuil, we
respectfully submit that his sentence of 30 months should also be considered in the Court's
3553(a)(6) analysis and also supports a sentence for Mr. Steinberg substantially below the
Guidelines range. 23
23
We are also mindful that this Court recently imposed a 66-month sentence on Craig
Drimal for insider trading. But there are many distinctions between Messrs. Drimal and
Steinberg that render a comparison inapt. For instance, Mr. Drimal was a core participant in the
Goffer insider trading conspiracy. He also traded "more aggressively and perhaps brazenly than
others," leading to gains that "were greater than most anyone else perhaps not Zvi Goffer, but
certainly in his own count, greater than anyone else." (E. Golfer Sentencing Tr. 13:13-17).
Among other things, Mr. Drimal also directly helped pay cash bribes to the lawyers who
breached their duties by providing illegal insider information. (Drimal Sentencing Tr. 40:5-6).
In addition, Mr. Drimal was found to be "intimately familiar with the operation of the insider
trading scheme," and wiretaps revealed that he "knew he was breaking the law." (Drirnal Gov't
Sentencing Mern. at 1).
63
KL3 2971449 1
CONCLUSION
For all of the reasons set forth above, we respectfully urge the Court to impose a
sentence of no more than 24 months in prison. Such a sentence would fairly balance the factors
under 3553(a) and be "sufficient, but not greater than necessary" to achieve the purposes of
sentencing: it would send a strong message of deterrence through a significant term of
incarceration; account for the vital and continuing role Mr. Steinberg plays in the life of his
young family and his many admirable individual characteristics, good deeds, and charitable
works; proportionally account for Mr. Steinberg's substantially less culpable offense conduct
relative to Mr. Newman and less culpable conduct relative to similarly situated defendants; and
guard against unwarranted sentencing disparities.
We also respectfully request that the Court grant bail pending appeal in light of
the substantial question of law raised by the overlapping jury instruction issue presently on
appeal in the case of Messrs. Newman and Chiasson, concerning whether the government must
prove a tippee's knowledge of the benefit conferred to the tipper. See 18 U.S.C. 3143(b). We
have conferred with the government and they consent to the request for bail pending appeal.
Dated: New York, New York
May 2, 2014
Respectfully submitted,
KRAMER LEVIN NAFTALIS & FRANKEL LLP
By: /s/ Barry H. Berke
Barry H. Berke
Steven S. Sparling
Megan Ryan
1177 Avenue of the Americas
New York, New York 10036
(212) 715-9100 (Phone)
(212) 715-8000 (Fax)
bberke@krarnerlevin.com
64
KI,3 2971449 I'
ssparling@krarnerlevin.corn
rnryan@kramerlevin.com
Counsel for Defendant Michael Steinberg
cc: Antonia M. Apps, AUSA
Harry A. Chernoff, AUSA
65
KL3 2971449 1

Steinberg Sentencing

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Steinberg Sentencing

Uploaded by

Copyright:

Available Formats

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

S4 12 Cr. 121 (RJS)

Mr. Longueuil did not cooperate with the government.

You might also like