Federal prosecutors have charged a
corporate lawyer and a trader with operating a decades-long insider trading
scheme that earned the men $32 million.
Matthew Kluger, who until February
was a lawyer in the mergers and acquisitions department of the California law
firm Wilson, Sonsini Goodrich & Rosati, is accused of “stealing” material
non-public information about deals that his firm was working on, according to
federal prosecutors in New Jersey.
Mr. Kluger, the government’s
complaint said, shared the information with Garrett Bauer, a trader who then
used the tidbits to place bets on certain firms involved in the deals.
In April 2009, for instance, Mr.
Kluger tapped Sonsini’s computer system to gather information about the Oracle
Corporation’s proposed bid for Sun Microsystems, Inc. Shortly thereafter, Mr.
Bauer purchased more than 4 million shares of Sun Microsystems.
The deal closed in early 2010.
The scheme, according to the
government, dates back to the 1990s when Mr. Kluger was lawyer at two of the
biggest Wall Street law firms, Cravath Swaine & Moore and Skadden, Arps,
Slate, Meagher & Flom. Mr. Kluger left Sonsini’s Washington office in
Prosecutors also charged the men
with obstruction of justice, alleging that they moved to cover up their insider
trading once they discovered that the government was investigating.
Mr. Kluger, prosecutors said,
destroyed a computer, iPhone, and prepaid cellular phone that he used to
operate the scheme.
Mr. Bauer is accused of instructing
an unnamed middleman to “burn” some $175,000 in cash proceeds from the scheme.