Matthew Kluger, a former lawyer who spearheaded a 17-year insider-trading scheme, must serve his 12-year prison term, the longest ever in such a case, an appeals court said in denying his bid for a new sentence.
The U.S. Court of Appeals in Philadelphia today upheld Kluger’s sentence for stealing corporate merger tips from four law firms, including Wilson Sonsini Goodrich & Rosati PC. The plot generated $37 million in illegal profits, most of which went to a New York stock trader to whom Kluger passed the information. Kluger pleaded guilty.
“Kluger was an attorney who took an oath to uphold the law,” the appeals court said in a 48-page ruling, turning aside his claim that he got an “unreasonable” sentence. “It is really quite remarkable that Kluger could not even wait to graduate from law school before using his employment at a law firm to initiate his illegal activities.”
Last week, an appeals court in New York upheld the 10-year prison term handed down to ex-Galleon Group LLC trader Zvi Goffer for trading on tips from lawyers. Galleon Group co-founder Raj Rajaratnam, sentenced to 11 years after his 2011 conviction for leading an insider-trading ring, lost his bid for a new trial last month.
Alan Zegas, Kluger’s lawyer, said he was “disappointed with the result.” U.S. Attorney Paul Fishman in New Jersey, who prosecuted the case, said in a statement that “a severe penalty was appropriate for one of the longest-running insider-trading schemes ever.”
Kluger, 52, pleaded guilty in December 2011, admitting he stole data on about 30 transactions while at law firms including Wilson Sonsini and Skadden Arps Slate Meagher & Flom LLP. Companies included Sun Microsystems Inc. and 3Com Corp.
He passed tips to middleman Kenneth Robinson, who gave them to trader Garrett Bauer. Both men also pleaded guilty. Bauer got nine years, a prison term earlier upheld, and Robinson, who cooperated with prosecutors, was sentenced to 27 months.
Federal prosecutors in New Jersey said Bauer made about $32 million. Kluger, mistakenly believing the three men were splitting profits equally, earned less than $1 million, Zegas has previously said.
Kluger, of Oakton, Virginia, is the son of Richard Kluger, a Pulitzer Prize-winning social historian. Mathew Kluger is jailed at a federal prison in Butner, North Carolina.
The case is U.S. v. Kluger, 12-2701, U.S. Court of Appeals, Third Circuit (Philadelphia).
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