Feds Bust 17-Year Trading Scheme
The Wall Street Journal reports:
For 17 years, Matthew Kluger and Garrett Bauer assiduously avoided each other, communicating through a go-between—and over that time, made each other rich in one of the longest-running insider-trading schemes ever uncovered, federal prosecutors alleged Wednesday.
Once they were caught—after allegedly netting $32 million in profits—prosecutors say that Mr. Kluger, a lawyer, and Mr. Bauer, a trader, scrambled to wriggle out of the government net: Burning $175,000 in cash, disposing of a prepaid cellphone in McDonald's trash cans and destroying fingerprints by running money through a washing machine were all discussed.
"We have to get all the fingerprints off that money," said Mr. Bauer in one of a flurry of frantic phone calls secretly taped by the go-between.
The complaint, filed in Newark by New Jersey U.S. Attorney Paul Fishman, accuses Mr. Kluger, who worked at two of the country's top mergers-and-acquisitions law firms, of obtaining secret information from the firms and passing it to the go-between. That person would then hand off the tips to Mr. Bauer, who would allegedly make the trades. The transactions involved some of the biggest tech deals of the past decade, including Intel Corp., Hewlett-Packard Co. and Oracle Corp.
Mr. Kluger allegedly started to share confidential information as a summer associate 17 years ago, when he was working at Cravath, Swaine & Moore LLP. He also passed on information from Skadden, Arps, Slate, Meagher & Flom LLP, where he worked from 1998 to 2001, according to the criminal complaint, and most recently, from his job at the law firm of Wilson Sonsini Goodrich & Rosati PC.
Mr. Kluger was arrested at his home in Virginia Wednesday morning and was ordered by a judge to be held in custody pending a bail hearing. Officials also arrested Mr. Bauer at his Manhattan apartment on Wednesday. He most recently worked at Lighthouse Financial Group LLC, according to the complaint. The securities brokerage recently filed for bankruptcy protection.
Click here to read more.
