Unnamed Third Person to $32.2B Insider Trading Scheme Fesses Up
We previously reported that a merger and acquisition attorney, with preeminent law firms in Washington, DC and New York, had passed on tips of upcoming mega-mergers to a trader, who with the help of an unnamed third conspirator reaped more than $32.2 million in illicit gains from the insider trading. The attorney, Matthew Kluger, passed on the confidential information concerning the mergers to the trader, Garrett Bauer, who was associated with Lighthouse Financial Group. Until now the third conspirator was unknown.
The Wall Street Journal reported that the third person involved was Kenneth T. Robinson, a 45 year old mortgage banker, who has pleaded guilty to securities fraud and conspiracy, while aiding the Securities and Exchange Commission (SEC) in making their case against the others. Initially, Kluger contacted Robinson with a tip about a merger he had caught wind of at the firm where he was working as a summer associate in 1994. Robinson then contacted Bauer, who had been his co-worker at a securities firm, to actually make the trades. The two became very close friends, socializing and traveling together. Robinson’s relationship with the tipster, Kugler, was virtually non-existent and very secretive.
The trio made the most of their profits in 2009, which is when Bauer’s lifestyle changed dramatically. He paid cash for a $6.65 million for a five bedroom duplex in Manhattan with wrap around views of Central Park. He also paid $875,000 cash for a home in Boca Raton, Florida. His lifestyle was so extravagant that Robinson became concerned and told Bauer that “he should stop” or they were going to get caught. Ironically, it was Robinson’s negligence that ultimately led to the trio’s downfall. In the fall of 2009 Robinson had a tip on the Hewlett-Packard/3Com deal where he and Kugler executed trades making around $200,000, in addition to making nearly $500,000 on the Intel/McAfee deal. The feds began to suspect the connection between the three and showed up at Robinson’s home in Long Beach in March 2011, five days after he had gone to Bauer’s apartment to pick up $182,000 from one of their deals.