M&A Attorney Charged with Insider Trading
A merger and acquisition attorney and a trader have been charged with insider trading, in one of the largest U.S. insider trading cases on record. Matthew H. Kluger was an attorney at Wilson Sonsini Goodrich & Rosati, PC, a prestigious Washington, DC corporate firm, and had previously been associated with Cravath Swaine & Moore, LLP and Skadden Arps Slate Meagher & Flom, LLP, both preeminent New York firms, where he had also passed on tips based upon upcoming mergers and acquisitions. With the help of the trader, Garrett D. Bauer, and an unnamed third conspirator they reaped more than $32.2 million of illicit profits on secrets stolen from the prominent law firms.
In a complaint filed in federal court in Newark, New Jersey, Kluger was said to have passed on tips about mergers such as Oracle Corporation’s takeover of Sun Microsystems, Adobe Systems Incorporated’s takeover of Omniture, Incorporated, America Online’s purchase of MovieFone and IBM’s merger with Lotus Development and Tivoli Systems. The co-conspirator, Bauer, worked at a variety of trading firms, including Lighthouse Financial group from June 2009 to August 2010, according to prosecutors. Kluger lived in Oakton, Virginia and Bauer lived in New York.
It all began in 1994, when Kluger was a law student at New York University and a summer associate at Cravath, where he discovered easy access to valuable and potentially lucrative information. He asked his friend, the unnamed conspirator, to help find people who would buy and sell stocks based on tips. The middleman enlisted Bauer and the scheme was established. Kluger would give the tips to the middleman who gave the information to Bauer who placed the trades. Bauer and the middleman met in an Atlantic City, New Jersey meeting, where Bauer decided to use gambling as a cover to explain cash withdrawals he was making to send the illegal profits to Kluger. After an FBI search on March 8th, they began destroying everything linking them to the crime. Prosecutors said that Bauer spent roughly $7.5 million of the illegal proceeds in 2009 to buy two homes: a $6.65 million condominium on Manhattan’s Upper East Side and a $875,000 home in Boca Raton, Florida. The 17 year old scheme is the largest insider trading case in U.S. history, resulting in a 17 count criminal complaint, including 11 counts of insider trading, 4 counts of obstruction of justice, conspiracy to commit insider trading and conspiracy to commit money laundering.