On Thursday, a former trader admitted that he engaged in a long-running insider trading scheme that created more than $37 million in profits. The money was taken from nonpublic information about mergers and acquisitions that the guilty party stole from law firms, according to the Wall Street Journal.
Garrett Bauer, a former trader, and Matthew Kluger, a former corporate lawyer, used a go-between for 17 years to conduct the scheme. Kluger provided the secret information that he stole from the various law firms he worked for during his career. Back in 1994, when Kluger was a summer associate, he began leaking information for the scheme.
The middleman, Kenneth T. Robinson, pleaded guilty to criminal charges back in April and has been cooperating with authorities.
“Garrett Bauer admitted that he used confidential information, stolen from major law firms, to make tens of millions in one of the largest, longest-running insider-trading schemes ever prosecuted,” said Paul Fishman, the U.S. attorney in New Jersey. “After taking the lion’s share of the $37 million in profits, Bauer now faces punishment for conduct that undermines the fairness of our financial markets and the public’s trust in the safety of its investments. We have no tolerance for corporate insiders and their cronies who benefit themselves by using their positions and access to cheat the investing public.”
Bauer pleaded guilty at a federal court in Newark, New Jersey this week. He pleaded guilty to securities fraud, conspiracy to commit securities fraud, obstruction of justice and conspiracy to commit money laundering. Bauer faces up to 20 years in prison for each fraud, money-laundering conspiracy, and obstruction charge. The sentencing date for him is set for March 13. Bauer is forfeiting more than $23 million in assets and property as part of the plea deal.
Kluger worked as a summer associate at Cravath Swaine & Moore LLP, which is when he began feeding information for the scheme. From 1998 to 2001, he worked at Skadden Arps Slate Meagher & Flom LLP, where he also forwarded along information. He worked at Fried Frank Harris Shriver & Jacobson LLP from 2001-2002. His most recent job was at Wilson Sonsini Goodrich & Rosati PC.
The men involved in the scheme, in order to avoid being caught, used prepaid cell phones and pay phones. When Robinson informed Bauer he had been contacted by authorities, Bauer broke a cell phone in two pieces and threw it in two trash cans at a McDonald’s in New York. Bauer also told Robinson to burn more than $175,000 in cash to make sure if found that authorities would not find fingerprints.
Some of the deals included the planned acquisition of Sun Microsystems by Oracle Corp. in 2009; Adobe System Inc.’s purchase of Omniture Inc. in 2009; the purchase of McAfee by Intel Corp. in 2001; and the merger of CSR PLC with Zoran Corp.