December 5, 2023

DealBook: Two Charged in Insider Trading Scheme Linked to Law Firms

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 nonpublic 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. Shortly thereafter, Mr. Bauer purchased more than four million shares of Sun Micro. The deal closed in early 2010.

The scheme, according to the government, dates back to the 1990s when Mr. Kluger was a 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 March.

Prosecutors also charged the men with obstruction of justice, alleging that they moved to cover up their insider trading once they discovered 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.

The men were arrested on Wednesday and were expected to appear in court later in the day. The United States Attorney’s office in New Jersey, which is leading the government’s case, has scheduled a press conference at noon on Wednesday.

U.S. v. Bauer and Kluger

S.E.C. v. Kluger and Bauer

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