Friday, April 27, 2012

Attorney, Trader and Middleman Settle SEC Charges in $32 Million Insider Trading Case

Public telephones, disposable prepaid cellphones and anonymous middlemen. And they still got caught. The SEC announced the settlement of a $32 million insider trading case filed by the agency last year against a corporate attorney and a Wall Street trader.

The SEC alleged that the insider trading occurred in advance of at least 11 merger and acquisition announcements involving clients of the law firm where the attorney — Matthew H. Kluger — worked. He and the trader — Garrett D. Bauer — were linked through a mutual friend now identified as Kenneth T. Robinson, who acted as a middleman to facilitate the illegal tips and trades. Kluger and Bauer used public telephones and prepaid disposable mobile phones to communicate with Robinson in an effort to avoid detection. Robinson, now also charged, cooperated in the SEC’s investigation. Bauer, Kluger, and Robinson each agreed to give up their ill-gotten gains plus interest in order to settle the SEC’s charges. Those amounts under the terms of their consent agreements are approximately $31.6 million for Bauer, $516,000 for Kluger, and $845,000 for Robinson.

I do not know anything about the case other than what is in the press, but it is interesting that the settlement was only a repayment of the gains with interest. The SEC seeks repayment of gains in these cases, plus a two time penalty. Given the fact that when the SEC calculates gains in insider trading cases they mean gains - no deductions for losing trades - that can be a significant sum of money. In settlements, that is negotiated, but repaying gains plus interest is an interesting way to resolve the case. Sounds like the Commission had some problems with their case.

A copy of the original complaint is at the SEC's site.

Attorney, Wall Street Trader, and Middleman Settle SEC Charges in $32 Million Insider Trading Case; 2012-77; April 25, 2012

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