NEWARK, N.J., Dec 14 (Reuters) - An attorney who worked for
some of the top merger-and-acquisition law firms in the country
pleaded guilty on Wednesday to stealing merger secrets from his
employers and using the information in a massive
Matthew Kluger, 50, of Oakton, Virginia, admitted that he
was part of a scam that the government said spanned 17 years and
reaped more than $37 million in profits by trading on
information Kluger provided.
Kluger appeared before U.S. District Judge Katharine Hayden
in Newark and pleaded guilty to one count each of conspiracy to
commit securities fraud, securities fraud, conspiracy to commit
money laundering and obstruction of justice.
In April, the U.S. Attorney's Office for the District of New
Jersey accused Kluger and two others of collaborating to trade
on the information Kluger culled from the law firms. Garrett
Bauer, 44, a stock trader, and Kenneth Robinson, 45, a mortgage
broker, have already pleaded guilty for their roles in the
Over the years, Kluger worked at major law firms including
Cravath Swaine & Moore; Skadden, Arps, Slate, Meagher & Flom;
Fried, Frank, Harris, Shriver & Jacobson; and Wilson Sonsini
Goodrich & Rosati. While at those firms, he regularly stole
nonpublic information on pending corporate mergers and
acquisitions on which the firms were working, the government
said, and delivered the information to Robinson.
"Not only did Matthew Kluger defraud the investing public,
he betrayed the colleagues and clients who depended on his
confidentiality in some of the biggest deals of the last
decade," Paul Fishman, U.S. Attorney for the District of New
Jersey, said in a statement. "In order to be confident in our
markets, investors must have comfort that those with inside
information won't abuse positions of trust for personal gain."
CO-DEFENDANTS PLEADED GUILTY
As part of the scheme described by prosecutors, Kluger would
pass the merger information to Robinson, who in turn shared it
with Bauer. Bauer would use the tips to make trades for all
On Dec. 8, Bauer pleaded guilty to the same charges as
Kluger, admitting that as part of the scheme he traded ahead of
more than 30 different corporate transactions. He took the
lion's share of the proceeds and used $7 million of it to buy
two properties, a $6.65-million condominium on Manhattan's Upper
East Side and an $875,000 home in Boca Raton, Florida. He is
scheduled to be sentenced on March 13, 2012.
Robinson pleaded guilty on April 11 to one count of
conspiracy to commit securities fraud and two counts of
securities fraud. He is awaiting sentencing.
Assistant U.S. Attorney Judith Germano told Hayden that
Kluger's plea agreement does not include a stipulation on the
amount of prison time he could face. Kluger will also have to
forfeit $415,000 in proceeds from recent transactions derived
from the scheme, Germano said.
'HE DID IT FOR SELFISH REASONS'
After court, Kluger's defense attorney, Alan Zegas, said his
client has been cooperating with authorities since his arrest.
"He did it for selfish reasons that he recognizes and feels
terribly about," Zegas said.
While Kluger admitted his role in the conspiracy, Zegas
added, he only learned after his arrest that Bauer had been
trading "far in excess of what had been agreed upon."
"He would not have agreed to what Mr. Bauer was doing,"
Zegas said. "This is not a stipulated plea where the defendant
agrees with the government on the amount lost."
Kluger is currently free on $1 million bail and is subject
to home confinement and electronic monitoring.
His sentencing is scheduled for April 9, 2012, when he faces
up to 20 years each on the charges of securities fraud,
conspiracy to commit money laundering and obstruction of
justice. The securities fraud conspiracy charge carries a
maximum penalty of up to five years in prison.
The case is United States v. Bauer et al, U.S. District
Court, District of New Jersey, 11-03536.
For the prosecution: Judith Germano and Matthew Beck.
For Kluger: Alan Zegas of the Law Offices of Alan Zegas.
(Reporting by Jennifer Golson)
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