A former attorney for Palo Alto-based law firm Wilson Sonsini Goodrich & Rosati pleaded guilty in a New Jersey federal court Wednesday (Dec. 14) to four felony charges in connection with a securities-fraud scheme.
Kluger stole information on Silicon Valley and other company mergers and acquisitions and passed the material on to New York trader Garrett Bauer, 43, through a middleman, Kenneth Robinson of Long Beach, N.Y., according to federal criminal complaints against the men filed by the U.S. government in April.
The Securities and Exchange Commission filed a separate 22-page civil complaint on April 6.
Kluger faced one count of conspiracy to commit securities fraud -- insider trading; 11 counts of securities fraud -- insider trading; one count of conspiracy to commit money laundering; and four counts of obstruction of justice. He pleaded to four counts and agreed to forfeit $415,000 in assets.
Under the plea agreement with the U.S. Department of Justice, Kluger will be sentenced to one count of conspiracy to commit securities fraud, one count of securities fraud, conspiracy to commit money laundering and obstruction of justice.
The first count carries a maximum five-year prison sentence and maximum $250,000 fine. The other three counts each carry a maximum of 20 years in federal prison and a total of $5.75 million in fines. Bauer and Robinson have also entered separate guilty pleas, according to court records.
Kluger worked for Wilson Sonsini at its Washington, D.C., office from December 2005 through March 2011 as a corporate associate with a focus on mergers and acquisitions.
The insider-trading ring began around 1994, according to court documents. At the time, Kluger worked for prominent New York law firm Cravath, Swaine & Moore, LLP. In 1998, he worked for Skadden, Arps, Slate, Meagher & Flom, LLP.
Beginning in April 2006, four months after he began working at Wilson Sonsini, Kluger searched the firm's computer network to identify documents that showed a client was about to participate in a merger or acquisition.
He tipped Robinson, who passed the information along to Bauer using public telephones or prepaid disposable mobile phones to avoid detection, according to court documents.
Bauer placed trades for himself and on behalf of Kluger and Robinson. Once the merger or acquisition was announced, Bauer sold the stock and passed on a portion of the profits in cash to Robinson and Kluger, according to the criminal complaint.
Kluger and Bauer traded at least nine pending mergers and acquisitions in advance that were Wilson Sonsini clients.
Kluger accessed information on Silicon Valley companies, including HP's acquisition of 3Com Corp.; Intel Corp.'s acquisition of McAfee, Inc.; Adobe Systems, Inc.'s acquisition of Omniture, Inc.; and Oracle Corp.'s acquisition of Sun Microsystems, Inc., according to the complaint.
Kluger currently resides in Oakton, Va. He had his license to practice law in New Jersey revoked in September 2010 for failing to make certain required payments, according to court documents.
Kluger is scheduled for sentencing April 9, 2012, U.S. Attorney's Office spokeswoman Rebecca Carmichael said.
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