Posted Jul 10, 2013 04:34 pm CDT
A federal appeals court was not persuaded by a former BigLaw associate’s argument that a record 12-year prison term for insider trading should be reduced.
Matthew Kluger “was an attorney who took an oath to uphold the law,” said the 3rd U.S. Circuit Court of Appeals in its Tuesday opinion (PDF) rejecting his argument that the sentence was unreasonable. “It is really quite remarkable that Kluger could not even wait to graduate from law school before using his employment at a law firm to initiate his illegal activities.”
His scheme began in 1994, the opinion says, when Kluger was a New York University law student and working as a summer associate at Cravath Swaine & Moore. During the next 17 years he also funneled to a securities trader confidential law firm information about pending mergers and acquisitions while working at Skadden Arps Slate Meagher & Flom in New York and Palo Alto, Calif.; Fried Frank Harris Shriver & Jacobson; and after a several-year break, during a five-year period when he worked in the Washington, D.C., office of Wilson Sonsini Goodrich & Rosati.
While Kluger says he got only a small fraction of the $37 million in profits that authorities say were generated by the illegal scheme, he is still responsible for its consequences, the appellate panel held, noting that the hefty sentence he received from a federal judge in Newark, N.J., is likely to serve as a deterrent to others.
“By punishing the conspirator who is the source of the information for all gains made by his co-conspirators, we are reinforcing the deterrence message sent to would -be tippers by many courts. Moreover, we are sending a clear warning to individuals, such as Kluger, who, in an attempt to limit their responsibility and the extent of their potential sentencing exposure allege that they had agreements with their co-conspirators to cap the illicit gains,” the court wrote. “Would-be tippers will know that they cannot be certain that they will restrict their responsibility by coming to limiting agreements with their co-conspirators prior to commission of their offenses and will come to realize the inherent risk in leaking inside information.
“We also point out that both what we recognize was a long sentence that the court imposed on Kluger and this opinion are likely to come to the attention of would -be insider traders who may be better educated and informed than persons engaging in other criminal activity, particularly inasmuch as insider-trading cases seem to be well publicized even in the general media.”
ABAJournal.com: “Ex-BigLaw Associate Sentenced to Record 12 Years Says ‘Excitement’ Drove $37M Insider-Trading Scheme”