Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Lawyer in M&A firm accused of insider trading

By Laura Batchelor, CNN assignment editor


NEW YORK (CNNMoney) -- A 50-year-old attorney who worked at three prominent merger-and-acquisition law firms has been arrested and charged with passing insider information on anticipated deals to a professional stock trader, federal prosecutors said Wednesday.

The insider trading scheme allegedly involving the attorney, Matthew Kluger, and trader Garrett Bauer, 43, earned $32 million over the past five years, according to Paul Fishman, the U.S. Attorney for New Jersey. Kluger and Bauer were charged with securities fraud and conspiracy.

Fishman said the scheme began in 1994. He said Kruger stole and shared information on deals he was working on when he was a corporate associate at Cravath Swaine & Moore and a corporate associate at Skadden Arps Slate Meagher & Flom.

Fishman said that, in 2005, Kruger began working at Wilson Sonsini Goodrich & Rosati. In an attempt to avoid detection by the authorities, Kluger took information from the firm's computer system, rather than information on deals on which he was working, according to Fishman.

The prosecutor said Kluger provided the information to an unnamed coconspirator, and the coconspirator would then pass it to Bauer, who would purchase shares of stock and then quickly sell them after the deal became public knowledge.

Fishman said that, in one particular instance in April 2009, Kluger went into Wilson Sonsini's computer system to get information about Oracle Corp. (ORCL, Fortune 500)'s bid for Sun Microsystems, Bauer then purchased more than 4 million shares of Sun stock and earned more than $11 million.

The three conspirators also took great steps in efforts to hide their tracks, according to the prosecutor. Fishman said they would only talk about the deal on payphones and prepaid cell phones. He said Bauer told the coconspirator to burn $175,000 in cash because of fears his finger prints would be found on the money, while Kluger destroyed his home computer and iPhone.

"The subjects in this case illegally attempted to cover their tracks with the tradecraft of which Gordon Gecko would have been proud," FBI Special Agent in Charge Michael Ward said in a press release, referring to a character in the film "Wall Street" who was involved in insider trading.

Klauer did not yet have an attorney. Calls to Bauer's attorney were not returned.  To top of page

Index Last Change % Change
Dow 17,550.69 -47.51 -0.27%
Nasdaq 5,105.55 -9.83 -0.19%
S&P 500 2,093.32 -4.72 -0.22%
Treasuries 2.21 0.06 2.84%
Data as of 11:28pm ET
Company Price Change % Change
Apple Inc 114.64 -3.80 -3.21%
Baxter International... 40.31 0.80 2.02%
Bank of America Corp... 17.80 0.03 0.17%
Baxalta Inc 37.10 3.95 11.92%
Frontier Communicati... 5.25 0.10 1.94%
Data as of 4:02pm ET
Sponsors

Sections

The company's movie studios went up 13% thanks in large part to "Avengers: Age of Ultron." More

Facebook patented a technology to allow lenders to survey your friends' credit scores and use them to approve or reject your loan application. More

Candle-Lite is committed to manufacturing in America -- which is a good thing because it contributes more than $300 million to Ohio's economy. More

You can't blame it on the economy anymore. More Millennials now have jobs, but are still living at home. More