Greedy Associate's 12-Year Sentence for Insider Trading Upheld
Despite making hefty salaries, including a reported $300,000 annually during his final pre-prison BigLaw stop as an associate at Wilson Sonsini, Matthew Kluger admits that he was simply greedy.
Now, thanks to that greed, his broken oaths as a lawyer, and the longest running insider trading scheme in United States history, he’ll spend the next 12 years in prison. The Third Circuit affirmed his record-breaking sentence yesterday, leaving little hope of reversal absent a rehearing or a SCOTUS miracle.
The surprisingly forthcoming former job-hopping mergers-and-acquisitions associate provided tips to a long-time friend, Kenneth Robinson, the middleman who turned on Kluger for a lenient sentence. Robinson passed the tips to a day trader, Garret Bauer, in a mini-conspiracy that stretched over seventeen years and netted over $34 million in profits.
In an interview with Boomberg, Kluger provided the details of disposable phones, gym bags stuffed with cash, and how he gathered and passed tips without anyone catching on, despite at least two known inquiries by the Securities and Exchange Commission over the years.
Kluger began passing stock tips regarding upcoming mergers when he was a mere summer associate at Cravath, Swaine & Moore and continued through stops at multiple other firms before he temporarily left the BigLaw mergers-and-acquisitions field. He returned to BigLaw in 2005, when he joined Wilson Sonsini. It was the trades made from that final stop that finally led to the capture and conviction of Kluger and his two co-conspirators.
The scheme itself reaped over $34 million in profit, though thanks to the day trader Bauer's own greed, Kluger saw far less than his agreed-upon one-third share. That same greed also led, at least in part, to the federal inquiries, as Bauer made trades in far larger quantities than the parties had agreed upon.
Kluger's main argument on appeal was that he only received about $500,000 in profits, a relatively small amount compared to other insider traders with shorter sentences. The court, however, took issue with the broken oath to uphold the law and his career-long criminal conduct:
Kluger was an attorney who took an oath to uphold the law. Moreover, 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 and it is equally remarkable that during most of his legal career he was involved in criminal activity, so that in an actual though perhaps not in a legal technical sense as the term is used in the sentencing guidelines, he truly was a career criminal.
The court also noted that though Bauer received a shorter sentence, his pre- and post-arrest community service, including hundreds of lectures at universities about his illegal activities, justified his within-guidelines leniency. Kluger, on the other hand, received sentence at the top of the guidelines.
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