United States Attorney
District of New Jersey
APRIL 11, 2011
Previously Unnamed Co-conspirator Pleads Guilty in New Jersey to Role in $32 Million Insider Trading Scheme
NEWARK, N.J. – Kenneth T. Robinson, 45, of Long Beach, N.Y., admitted today that he engaged in a long-term insider trading scheme with Garrett Bauer and Matthew Kluger that netted at least $32 million in illicit profits, announced New Jersey U.S. Attorney Paul J. Fishman.
Robinson, who was previously identified as a co-conspirator referred to in court documents as “CC-1”, pleaded guilty before U.S. District Judge Katharine S. Hayden to an information charging him with one count of conspiracy to commit securities fraud and two counts of securities fraud.
According to documents filed in this and the related case and statements made in Newark federal court:
Robinson, a mortgage broker, engaged in an insider trading scheme with Bauer and Kluger that began in 1994. During the last five years, the conspirators invested more than $109 million and made more than approximately $32 million in illicit profits.
Throughout his career, Kluger worked at four of the nation’s premier mergers and acquisitions law firms. From 1994 to 1997, he worked first as a summer associate and later as a corporate associate at Cravath, Swaine & Moore in New York. From 1998 to 2001, he worked at Skadden, Arps, Slate, Meagher & Flom as an associate in their corporate department. From 2001 to 2002, he worked at Fried, Frank, Harris, Shriver & Jacobson LLP in New York. From December 2005 to March 2011, Kluger worked at Wilson Sonsini Goodrich & Rosati as a senior associate in the mergers & acquisitions department of the firm’s Washington office.
While at the law firms, Kluger regularly stole material, nonpublic information regarding anticipated corporate mergers and acquisitions on which his firms were working, and disclosed that information to Robinson. Robinson admitted that once Kluger provided him the inside information, he usually passed it to Bauer, a professional trader. Bauer then purchased shares for himself, Kluger and Robinson in Bauer’s trading accounts. Bauer quickly sold the shares once the relevant deal was publicly announced and the stock price rose. Bauer gave Robinson and Kluger their shares of the illicit profits in cash – often tens or hundreds of thousands of dollars – that Bauer withdrew in multiple transactions from ATM machines. Robinson admitted that between 1994 and 2011, the conspirators traded ahead of at least 15 different corporate transactions.
Robinson admitted that he personally made the trades on at least two transactions: the acquisition of 3Com Corp. by Hewlett-Packard, announced Nov. 11, 2009; and the acquisition of McAfee Inc. by Intel Corp., announced Aug. 19, 2010.
Robinson also admitted that after Kluger joined Wilson Sonsini, the three conspirators generally only spoke to each other about proposed transactions on payphones or prepaid cellular phones that they referred to as “throwaway phones” and purchased with cash. They often got a new phone for each of their insider trading deals.
The conspiracy to commit securities fraud charge to which Robinson pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants. The two securities fraud charges to which Robinson pleaded guilty each carry a maximum penalty of 20 years in prison and a $5 million fine. Sentencing is scheduled for July 26, 2011.
U.S. Attorney Fishman credited special agents of the FBI, under the direction of Special
Agent in Charge Michael B. Ward in Newark, for the investigation leading to today’s guilty plea. He also thanked special agents of the Internal Revenue Service, under the direction of Special Agent in Charge Victor W. Lessoff, and the U.S. Securities and Exchange Commission’s Market Abuse Unit and Philadelphia Regional Office, under the direction of Daniel M. Hawke.
The government is represented by Assistant U.S. Attorneys Matthew E. Beck of the U.S. Attorney’s Office Economic Crimes Unit and Judith H. Germano, Chief of the Economic Crimes Unit, in Newark.
The charges and allegations contained in the Complaint charging Bauer and Kluger are merely accusations, and the defendants are considered innocent unless and until proven guilty.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.