Ex-Lawyer Gets Longest Insider Trading Sentence Ever

Matthew KlugerBy DAVID PORTER

NEWARK, N.J. -- A former attorney who admitted feeding privileged information to two confederates over the course of a 17-year insider stock trading scheme was sentenced Monday to 12 years in prison, the longest sentence ever handed out for insider trading, and the trader who reaped more than $20 million in profits from the tips received a nine-year sentence, authorities said.

U.S. Attorney Paul Fishman said former attorney Matthew Kluger's sentence is the longest handed out for that crime. The scheme was carried out from 1994 to 2011 and is believed to be the longest ever uncovered by law enforcement, though the crimes charged dated only to 2005.

"At the end of the day, the judge agreed that these were extraordinarily serious crimes that betray people's trust in the stock market and were motivated purely by greed," Fishman said.

The 51-year-old Kluger, of Oakton, Va., and former trader Garrett Bauer, 44, of New York, admitted last year they conspired with a third man, New York mortgage broker Kenneth Robinson, who acted as the middleman.

Robinson was arrested in 2011 and secretly recorded conversations with the other men, including one in which Bauer discussed lighting $175,000 on fire to erase his fingerprints, according to court documents.

Robinson, who pleaded guilty to his role in the scheme, is scheduled to be sentenced Tuesday.

Kluger admitted passing advance information on company mergers to Robinson, who would give it to Bauer. The trio was estimated to have made $11 million on tech company Oracle's acquisition of Sun Microsystems.

Assistant U.S. Attorney Judith Germano told the judge that Kluger was the mastermind.

"He had wealth, intelligence and family support," she said. "He abused it all. Why? Because he could."


Defense Attorney Alan Zegas argued for a shorter sentence for Kluger and said that Bauer realized the lion's share of the profits while Kluger took only a small fraction of the total and was not aware of many trades that Bauer made on his own.

U.S. District Judge Katharine Hayden rejected Zegas' argument and said that every one of more than 30 insider trades made by Bauer was based on information provided by Kluger, whom she characterized as "amoral" and "thuggish." She compared the trio to drug dealers for the way they used throwaway cellphones and multiple ATM accounts to withdraw cash and exchange it in envelopes or bags.

Zegas said he would appeal the sentence.

Kluger, who said in remarks to the court that he was "deeply, deeply sorry," insisted afterward that the sentence was too harsh. Hedge fund billionaire Raj Rajaratnam was sentenced to 11 years in October after being convicted in the biggest insider trading case in U.S. history.

"I guess it's better to take $68 million and go to trial and be unwilling to accept responsibility for what you did," Kluger said, referring to Rajaratnam, who maintained that he traded only on publicly available information.

Defense attorney Michael Bachner attempted to persuade the judge to reduce Bauer's sentence by mentioning the numerous public speaking appearances Bauer has made since his arrest at business schools and law schools and the extensive work he has done with children's charities.

"He is not like Gordon Gekko," Bachner said, referring to the Michael Douglas character who said in the 1987 movie Wall Street that "Greed is good."

Assistant U.S. Attorney Matthew Beck painted a contrasting picture to the court, pointing out that after Securities and Exchange Commission regulators began probing his activities in 2007, Bauer upped his trading volume.

"That's a moment of self-reflection for anyone," Beck said. "That's not what they did. Garrett Bauer instead began increasing the size of his trades. This is hubris like you've never seen."


Increase your money and finance knowledge from home

What are Penny Stocks

The lucrative and dangerous world of penny stocks.

View Course »

Finding Stock Ideas

Learn to do your research and find investments.

View Course »

Add a Comment

*0 / 3000 Character Maximum

70 Comments

Filter by:
lorlan4

There are many more that should be in prison with him!!!!

June 06 2012 at 11:50 PM Report abuse rate up rate down Reply
jimburg

Now...if they would only impose the same standards on congress.

June 06 2012 at 9:17 AM Report abuse +1 rate up rate down Reply
HonknDodge

He'll probably be out in four years or even sooner.

June 06 2012 at 7:47 AM Report abuse rate up rate down Reply
Johns List

This is why polticians come out as millionaires after they leave office. They have knowledge to insider trading. If we as Americans can reap from the benefits of insider trading, neither should they.

June 06 2012 at 6:46 AM Report abuse +1 rate up rate down Reply
swabbymcnasty

ANY LAWYER OR POLITICIAN,, SHOULD BE BARRED FROM ANY PUBLIC JOB, FOREVER, THEN JAILED FOR AT LEAST 10 YEARS

June 06 2012 at 6:26 AM Report abuse +1 rate up rate down Reply
ha6ai

Hopefully now the Feds will go after Democrat Big Shot Jon CORZINE. Over a BILLLION dollars of CUSTOMERS' MONEY gone! Insider trading is bad, but "disappearance" of customer money in your care, custody and fiduciary control is beyond OUTRAGEOUS!

Lets see if Democrat radical Obama political operative Attorney General Eric Holder goes after previous Obama front-man and Democrat Governor and Democrat Big-Wig Jon Corzine.

June 06 2012 at 3:23 AM Report abuse +3 rate up rate down Reply
1 reply to ha6ai's comment
swabbymcnasty

WITH HOLDER THERE,, YOU GOTTA BE JOKIN

June 06 2012 at 6:27 AM Report abuse +1 rate up rate down Reply
1 reply to swabbymcnasty's comment
Setanta

heeeeee heeeeeeeeeeeee--corzine's white and NOT ONE OF eric_mypeople_holdeRs group.

June 06 2012 at 7:52 PM Report abuse rate up rate down
edgarlongenecker

As if, real estate movie stars, don't do insider trading, with impunity. We see their greedy grins, in their ads, as if, they're celebrities. The law requires them to submit all offers, but, how do you know, they do, and, how does the seller know ? Also, where's the assurance, that, they are not conflicting buyer and sellers' interests, with and for, whatever causes, the greedy grins, as if, these hustlers, are not skimming the deals for themselves, by misrepresenting the offered terms, so as to buy for terms, what the real estate movie stars, claim, requires, cash...???

June 06 2012 at 2:04 AM Report abuse +1 rate up rate down Reply
1 reply to edgarlongenecker's comment
gmydogbud

It is only the American Middle Class who is not allowed to get in on this GRAVY TRAIN! Members of Congress have become Millionaires by Allowing Themselves To Engage In Insider Trading & It IS All - LEGAL - WHY - Because THEY - WRITE - THE - LAWS - ! How about the American People CLAW - BACK - That Money from every member of Congress Who Has Taken Part In INSIDER - TRADING - ???

June 12 2012 at 7:41 AM Report abuse rate up rate down Reply
Setanta

well.......being all the USELESS SPAMMERS can freely post/pimp websites for love,penny sales etc--
I POST a few questions-

1.when is the next recount as the diMs aren't going to ACCEPT THIS-
2.how HIGH will the increased UNION DUES BE ? LOL--you know THEY HAVE TO increase them to cover THEIR LOSSES--
3.and simply for the hellUVa it--WHEN does the dimOgenic WAR ON WOMEN ! end ???

______________\__________
++++++++++++++++++++++++++++++++

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

June 06 2012 at 1:20 AM Report abuse +1 rate up rate down Reply
ZPLAYR

why is it that no one goes after the politicians for doing the same thing for years
i guess they really are above the law. i hope they all rot in hell

June 05 2012 at 11:27 PM Report abuse +3 rate up rate down Reply
1 reply to ZPLAYR's comment
swabbymcnasty

BECAUSE THEY COVER EACH OTHERS ASS, THATS WHY

June 06 2012 at 6:28 AM Report abuse +2 rate up rate down Reply
mimsysc

Was he in congress at all?

June 05 2012 at 10:54 PM Report abuse rate up rate down Reply