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 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 • Steinberg Ltr. at 5).

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

1111111•1111111111•111111111•1111111111111•1111111

(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.

Steinberg Ltr. at 2).

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) [email protected]

64 KI,3 2971449 I'


[email protected] [email protected]

Counsel for Defendant Michael Steinberg

cc: Antonia M. Apps, AUSA

Harry A. Chernoff, AUSA

65 KL3 2971449 1


steinberg sentencing

Documents

steinbergs sentence

steinbergs devotion

steinbergs dedication

steinbergs work

michael steinbergs altruism

guidelines sentence

behalf of michael steinberg

steinbergs level of