c.2013 New York Times News Service

c.2013 New York Times News Service

NEW YORK — The insider trading trial of Michael S. Steinberg, a former senior employee of SAC Capital Advisors, offered a glimpse inside the wildly successful hedge fund Thursday as the first two witnesses took the stand.

Daniel Berkowitz, SAC’s chief financial officer and the government’s first witness, told the 12-member jury that portfolio managers were encouraged to come up with good ideas and were rewarded special “Cohen tag bonuses” — named for the hedge fund’s founder, Steven A. Cohen — for ideas that translated into windfall gains.

Berkowitz said that, if Cohen liked the ideas, they “would receive a bonus, depending on how big the trade was.”

As one of the 100 portfolio managers at the fund, Steinberg oversaw a team of five analysts who provided research and data for his investment ideas, Berkowitz said.

The second witness, Jesse Tortora, a former technology stock analyst at another hedge fund, Diamondback Capital Management, testified that he had felt pressured to come up with inside information and that he and one of Steinberg’s analysts, Jon Horvath, had formed a circle of friends and analysts at other firms to share tips.

Steinberg has been accused of using confidential information to trade the technology stocks Dell and Nvidia, gaining over $1 million in returns for SAC. His trial is at the heart of a decade-long government investigation into the firm that has led to criminal charges against eight former SAC employees, six of whom have pleaded guilty to securities fraud.

This month, SAC agreed to pay $1.2 billion and plead guilty to charges of insider trading violations. Steinberg is the first former employee to stand trial. And Thursday, Sol Kumin, SAC’s chief operating officer, announced that he was resigning, underscoring the firm’s transformation from one of the most powerful hedge funds on Wall Street to a symbol of corporate crime.

Tortora pleaded guilty to insider trading and conspiracy to commit insider trading in April 2011 and is cooperating with the government in exchange for a lighter sentence. He told the jury that his sentence would be decided after Steinberg’s trial.

In their opening arguments Wednesday, Steinberg’s lawyers contended that Horvath, who has also pleaded guilty to insider trading, had rewritten the facts to strike a deal similar to Tortora’s. “He needed to trade his freedom for that of another,” said Barry H. Berke, Steinberg’s lead lawyer.