Stock Trading Board

A former attorney and associate at several large nationally-recognized firms was sentenced on June 4 to a 12-year term of imprisonment for his role in an insider trading scheme.  The scheme began in 1994 and resulted in $37 million in illegal gains.  Matthew Kluger faced 11 to 14 years in jail under the United States Sentencing Guidelines, which are advisory.

 U.S. District Court Judge Katherine Hayden, sitting in Newark, New Jersey, sentenced Kluger to what the Judge referred to as a harsh sentence.  Kluger passed on information concerning corporate mergers he learned as an associate at four different law firms to co-defendant Kenneth Robinson who passed it on to a stock trader Garret Bauer.  Bauer traded ahead of public announcements for the accounts of the three co-defendants.  The law firms involved are:  Cravath, Swaine & Moore; Skadden, Arps; Fried, Frank; and Wilson; Sonsini.  All are recognized nationally as top-quality law firms. 

According to the New Jersey Law Journal, the conspiracy involved more than 30 separate transactions.  Bauer took the greatest portion of the proceeds and was forced to give back $31.6 million.  Kluger forfeited $516,000, while Robinson forfeited $845,000 of illegal profits.

Conspirators are liable for the reasonably foreseeable acts of their coconspirators.  While Kluger argued he was misled as to the amount of the trading undertaken by his coconspirators, his sentence did not reflect the Court’s crediting of that argument.  The sentence also likely reflected the extent of the breach of trust by Kluger as an associate lawyer at four different law firms.

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