Ex-BigLaw Associate Sentenced to Record 12 Years Says 'Excitement' Drove $37M Insider-Trading Scheme
Posted Jul 31, 2012 05:28 pm CDT
Sentenced to a record 12-year prison term for insider trading, a former BigLaw associate–who admittedly revealed to his partners in white-collar crime confidential information from four of the six law firms at which he worked–says he carried on with the long-running scheme largely for the thrills he got from it.
Matthew Kluger, who is now 51, got only about $1 million of the approximately $37 million that federal prosecutors said the participants earned from their 17-year, nearly $110 million scheme. He says he didn’t find out how much his two co-defendants got until after the criminal case began, reports Bloomberg in a lengthy article based on multiple interviews with the now-convicted attorney.
But it was the thrill of the addictive money chase that motivated him, as much as the profits he withdrew from an automated teller machine, he tells the news agency.
“There was an excitement on finding a deal that looked promising,” says Kluger. “It was excitement and relief to get in on the stock and know the train wasn’t leaving without you. There was an excitement on reading what the profits were. The final excitement was picking up a bag of cash.”
Although he understood from the outset that he could go to jail, Kluger said greed and his belief that insider-trading was rampant and that the stock purchases he was involved were relatively minimal helped him to rationalize what he now calls “the stupidest decision of my entire life.” The extra money he got from providing information about pending deals to a longtime friend who served as a conduit to a wealthy day trader amounted to around $50,000 or $60,000 cash a year, Kluger told Bloomberg.
Kluger was making $300,000 a year in his final major-firm job, in the Washington, D.C., office of Wilson Sonsini Goodrich & Rosati, as he and his cohorts reportedly earned $11.4 million through illegally buying Sun Microsystems stock based on insider information.
He tells Bloomberg he got a certain amount of confidential information simply by listening closely to what was being said around the office. Then he was able to confirm a fair amount by looking at document titles in the law firm’s word-processing system, which allowed him to avoid leaving an electronic footprint by opening the document and potentially alerting the firm to his eavesdropping.
“People at law firms yap about things they’re not supposed to yap about,” Kluger told Bloomberg. “Ninety percent of what I learned about the Sun Microsystems deal came from my hearing about it from an antitrust partner who had a big mouth.”
A law firm spokeswoman declined to comment when contacted by the news agency.
A couple of investigations by the Securities and Exchange Commission over more than a decade seemingly went nowhere. But eventually, as the trio continued to trade using confidential information, computerized data analysis helped the SEC see that there was a connection between Kluger’s friend and the day trader. That eventually led them to a common source of information for the two men–Kluger, explains Daniel M. Hawke, who oversees the SEC’s regional office in Philadelphia.
Recorded evidence obtained with the help of a cooperating member of the trio helped convict Kluger, and at a sentencing hearing last month in Newark, N.J., he got the heaviest sentence ever given to a defendant in an insider-trading case.
A press release from the U.S. Attorney for New Jersey provides additional details about the case.
ABAJournal.com: “Associate Charged in Alleged $32M Insider Trading Scheme Involving 3 BigLaw Firms”
ABAJournal.com: “Accused Middleman ID’d, Expected to Plead in Alleged Insider Info Theft By BigLaw Attorney”
ABAJournal.com: “Report: BigLaw Attorney in Insider-Trade Case Didn’t Open Firm Docs, Allegedly Just Used Title Info”
ABAJournal.com: “Former BigLaw Associate Gets Record Sentence in Insider Trading Case”