A corporate attorney and a Wall Street trader were charged by The Securities and Exchange Commission (SEC (News - Alert)) today with insider trading in what the complaint characterized as “a longstanding serial insider trading ring that made at least $32 million in illegal profits.”
The case involves at least 11 merger deals between clients of the law firm where the attorney worked, according to ABA Journal. The SEC alleges the merger deals included Oracle’s acquisition of Sun Microsystems.
The individuals charged by the SEC in the alleged scheme are Matthew H. Kluger, who previously worked at Wilson Sonsini Goodrich & Rosati where he earned $290,000 a year, and Garrett D. Bauer, a stock trader who made the trades based on Kluger’s information. The complaint states that the two did not have a direct relationship with each other, but were linked only through a mutual friend who acted as a middleman to carry out the illegal scheme.
An SEC government news release today said, “Kluger tipped the middleman, who passed the material nonpublic information along to Bauer, using public telephones or prepaid disposable mobile telephones to avoid detection. Bauer then placed trades for himself, and on behalf of, and for the benefit of Kluger and the middleman on the basis of the material non-public information. Once the merger or acquisition was announced, Bauer sold the stock, keeping the majority of the proceeds for himself, and passing a portion of the profits, in cash, to the middleman, who distributed a portion of the profits to Kluger.
“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, in a press release today. “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.”
The SEC’s complaint indicates that over the course of the past five years Kluger obtained confidential information and then tipped that information in advance of the following 11 mergers and acquisitions between April 2006 and March 2011:
--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 Sun Microsystems Inc. by Oracle Corp., announced April 20, 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.
Daniel M. Hawke, chief of the SEC’s Market Abuse Unit and director of its Philadelphia Regional Office, said, “This was a brazen and deplorable scheme.
In other news, TMCnet reported that Blue Coat Systems has attained Oracle (News - Alert) Validated Integration with the Oracle E-Business Suite 11.5.10 and 12.1 and Siebel CRM release 7.8 and 8.1 through Oracle PartnerNetwork (OPN).