M&A lawyer charged in $32m insider trading scheme
By Shannon Bond in New YorkPublished: April 6 2011 15:58 | Last updated: April 6 2011 17:40
An attorney and a trader were charged on Wednesday in a $32m insider trading scheme involving information about corporate mergers allegedly obtained from three prominent US law firms.
Federal prosecutors filed charges in a New Jersey federal court against Matthew Kluger, a former senior associate at Wilson Sonsini Goodrich & Rosati, and Garrett Bauer, a trader who worked at several proprietary trading firms, over the alleged scheme.
The scheme also involved trading on non-public information obtained from Cravath Swaine & Moore and Skadden, Arps, Slate, Meagher & Flom, law firms where Mr Kluger previously worked. None of the law firms were implicated in the scheme.
In his position at the firms, “Kluger had access to inside information concerning clients’ potential sales and mergers, as well as other material, nonpublic information,” according to the complaint. “Kluger was careful to steal and disclose information about deals on which he did not personally work, but which he learned about by searching his law firm’s computer system.”
Among the deals Mr Kluger and Mr Bauer were accused of trading ahead of were Oracle’s acquisition of Sun Microsystems and Adobe’s successful bid for Omniture. The illegal trading dated back as far as Johnson & Johnson’s acquisition of Neutrogena in 1994 and IBM’s bid for Lotus in 1995, the complaint said.
The two men allegedly invested more than $109m from 1994 through March of this year, when they learned they were under investigation by the FBI and Internal Revenue Service.
Mr Kluger and Mr Bauer were charged with 17 counts, including securities fraud, conspiracy to commit insider trading, conspiracy to commit money laundering and obstruction of justice.
Mr Bauer used some of the proceeds to buy a $6.65m condo in New York and a $875,000 home in Boca Raton, Florida, according to prosecutors.
Mr Kluger was arrested at his home in Virginia and Mr Bauer was arrested at his home in New York on Wednesday morning, according to Rebekah Carmichael, a spokeswoman for Paul Fishman, US attorney for New Jersey. They are expected to appear in court later on Wednesday.
Federal prosecutors filed charges in a New Jersey federal court against Matthew Kluger, a former senior associate at Wilson Sonsini Goodrich & Rosati, and Garrett Bauer, a trader who worked at several proprietary trading firms, over the alleged scheme.
Mr Kluger allegedly stole confidential information from Wilson Sonsini about deals involving companies including Oracle, Sun Microsystems, McAfee and 3Com, and passed tips to Mr Bauer through a third unnamed co-conspirator with instructions on how many shares to buy, according to the Federal Bureau of Investigation’s arrest complaint.
The scheme also involved trading on non-public information obtained from Cravath Swaine & Moore and Skadden, Arps, Slate, Meagher & Flom, law firms where Mr Kluger previously worked. None of the law firms were implicated in the scheme.
In his position at the firms, “Kluger had access to inside information concerning clients’ potential sales and mergers, as well as other material, nonpublic information,” according to the complaint. “Kluger was careful to steal and disclose information about deals on which he did not personally work, but which he learned about by searching his law firm’s computer system.”
Among the deals Mr Kluger and Mr Bauer were accused of trading ahead of were Oracle’s acquisition of Sun Microsystems and Adobe’s successful bid for Omniture. The illegal trading dated back as far as Johnson & Johnson’s acquisition of Neutrogena in 1994 and IBM’s bid for Lotus in 1995, the complaint said.
The two men allegedly invested more than $109m from 1994 through March of this year, when they learned they were under investigation by the FBI and Internal Revenue Service.
Mr Kluger and Mr Bauer were charged with 17 counts, including securities fraud, conspiracy to commit insider trading, conspiracy to commit money laundering and obstruction of justice.
Mr Bauer used some of the proceeds to buy a $6.65m condo in New York and a $875,000 home in Boca Raton, Florida, according to prosecutors.
Mr Kluger was arrested at his home in Virginia and Mr Bauer was arrested at his home in New York on Wednesday morning, according to Rebekah Carmichael, a spokeswoman for Paul Fishman, US attorney for New Jersey. They are expected to appear in court later on Wednesday.
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