The SEC charged a corporate attorney and Wall Street trader with insider trading involving confidential information from at least 11 mergers and acquisitions. The attorney accessed information from his law firm involving clients and tipped off a middleman, who passed the information to the trader. Through an illegal scheme using disposable phones and cash withdrawals, they obtained nearly $32 million in illicit profits. In a parallel criminal case, both individuals were arrested by the U.S. Attorney's Office for insider trading violations.

1. SEC Charges Corporate Attorney and Wall Street Trader in $32 Million Insider Trading Ring
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SEC Charges Corporate Attorney and Wall Street Trader
in $32 Million Insider Trading Ring
FOR IMMEDIATE RELEASE
2011-85
Washington, D.C., April 6, 2011 – The
Securities and Exchange Commission today Chart: Tracking
charged a corporate attorney and a Wall the Trades
Street trader with insider trading in advance
of at least 11 merger and acquisition
announcements involving clients of the law
firm where the attorney worked.
The SEC alleges that Matthew H. Kluger, who
formerly worked at Wilson Sonsini Goodrich
& Rosati, and Garrett D. Bauer did not have
a direct relationship with each other, but Full-size (PDF)
were linked only through a mutual friend
who acted as a middleman to facilitate the
illegal scheme. Kluger and Bauer communicated with the middleman using
public telephones and prepaid disposable mobile phones in order to avoid
detection. According to the SEC’s complaint, Kluger accessed information on
11 mergers and acquisitions involving the law firm’s clients and then tipped
the middleman. In at least nine instances, the middleman passed the
information on to Bauer, who illegally traded for illicit profits totaling nearly
$32 million.
Additional Materials
SEC Complaint
Litigation Release No. 21917
In a parallel criminal action, the U.S. Attorney’s Office for the District of
New Jersey today announced the arrests of Kluger and Bauer.
“They plotted to fly under law enforcement radar by using disposable
phones to hide their communications, cash withdrawals to obscure the flow
of tainted money, and a middleman to conceal Kluger as the secret source
of inside information,” said Robert Khuzami, Director of the SEC’s Division
of Enforcement. “Now, those same schemes and devices serve only to make
it clear beyond any doubt that Kluger and Bauer were involved in an illegal
scheme.”
Daniel M. Hawke, Chief of the SEC’s Market Abuse Unit and Director of its
Philadelphia Regional Office, added “This was a brazen and deplorable
scheme in which Kluger, a lawyer, repeatedly abused his access to
confidential client information. As this and recent cases demonstrate, the
Division of Enforcement is working aggressively to root out and identify
hard-to-detect insider trading by connecting patterns of trading to sources
of material non-public information - whether those sources are law firms or
others who are under a duty to keep such information confidential.”
According to the SEC’s complaint filed in federal court in Newark, N.J.,
http://www.sec.gov/news/press/2011/2011-85.htm[28-12-2011 20:04:26]

2. SEC Charges Corporate Attorney and Wall Street Trader in $32 Million Insider Trading Ring
Kluger, Bauer and the middleman deliberately structured their
communications and trading so that Kluger and the middleman could share
in the insider trading proceeds while Bauer could illegally trade and profit
without being connected to Kluger as a possible source of information.
Bauer withdrew cash from his bank accounts and kicked back hundreds of
thousands of dollars to the middleman, who in turn delivered at least
$500,000 to Kluger for his role in the scheme.
According to the SEC’s complaint, over the past five years Kluger accessed
and then tipped confidential information in advance of the following 11
mergers and acquisitions between April 2006 and March 2011:
The acquisition of Advanced Digital Information Corp. by Quantum
Corp., announced May 2, 2006.
The acquisition of Acxiom Corp. by multiple entities, announced on
May 17, 2007.
The strategic recapitalization of Palm Inc. with Elevation Partners LP,
announced June 4, 2007.
The planned acquisition of 3Com Corp. by Bain Capital LLC,
announced Sept. 28, 2007.
The acquisition of Visual Sciences Inc. by Omniture Inc., announced
Oct. 25, 2007.
The acquisition of Ansoft Corp. by Ansys Inc., announced March 31,
2008.
The acquisition of Sun Microsystems Inc. by Oracle Corp., announced
April 20, 2009.
The acquisition of Omniture Inc. by Adobe Systems Inc., announced
Sept. 15, 2009.
The acquisition of 3Com Corp. by Hewlett-Packard Co., announced
Nov. 11, 2009.
The acquisition of McAfee Inc. by Intel Corp., announced Aug. 19,
2010.
The acquisition of Zoran Corp. by CSR PLC, announced Feb. 20, 2011.
The middleman traded in two deals on the basis of information that he
received from Kluger and profited at least $690,000.
The SEC alleges that Kluger and Bauer violated Sections 10(b) and 14(e) of
the Securities Exchange Act of 1934 and Rules 10b-5 and 14e-3
thereunder. The SEC is seeking permanent injunctions, disgorgement of ill-
gotten gains with prejudgment interest, and financial penalties.
The SEC’s investigation was conducted by Colleen K. Lynch, David W.
Snyder and John S. Rymas, members of the Market Abuse Unit in the
Philadelphia Regional Office. G. Jeffrey Boujoukos and Scott A. Thompson
are handling the litigation.
The SEC brought this enforcement action in coordination with the U.S.
Attorney’s Office for the District of New Jersey. The SEC also appreciates
the assistance of the Federal Bureau of Investigation, the Financial Industry
Regulatory Authority and the Options Regulatory Surveillance Authority.
The SEC’s investigation is continuing.
http://www.sec.gov/news/press/2011/2011-85.htm[28-12-2011 20:04:26]

3. SEC Charges Corporate Attorney and Wall Street Trader in $32 Million Insider Trading Ring
# # #
For more information about this enforcement action, contact:
Daniel M. Hawke
Chief of SEC Market Abuse Unit and Director of SEC Philadelphia Regional
Office
(267) 226-7081
Elaine C. Greenberg
Associate Regional Director, Philadelphia Regional Office
(215) 597-3107
Sanjay Wadhwa
Deputy Chief, Market Abuse Unit and Associate Director, New York Regional
Office
(212) 336-0181
http://www.sec.gov/news/press/2011/2011-85.htm
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