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Former Attorney Kluger Hit with History’s Harshest Sentence for Inside Trading
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Former Attorney Matthew Kluger is serving the harshest sentence ever imposed for insider trading — 12 years. And this despite his attorney’s attempt to reduce the sentence on the premise that Kluger was kept ignorant by his cohorts, former stock trader Garrett Bauer and mortgage broker Kenneth Robinson, of the true magnitude of their trading activities.

“A hearing with Ken Robinson on the stand … he would have admitted to doing things on each deal actively to mislead me,” said Kluger, who, though he and the other pleaded guilty to all charges against them, felt that he was ignorant of what the others were doing. The Judge nevertheless blocked the attempt of his attorney — Alan Zegas of Chatham, New Jersey — to get a reduction of his sentence. And as assistant U.S. Attorney Judith Germano stated, she didn’t believe in Kluger’s claims of a “loosey-goosey agreement,” between them that would have kept Kluger so innocently ignorant.

So why was Kluger’s sentence the harshest that’s ever been awarded? U.S. District Judge Katharine Hayden said yesterday she intended to send a strong message about the “radiating effect of the loss of confidence in the market” caused by such insider training as this.

  
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“This particular scheme is tremendously clear,” Hayden said. “People stay out of the stock market, in part, because they think it’s skewed toward the insiders. This case has given insight to the lack of credibility for the small investor.”

Kluger, 46, began his criminal activity early, according to his own testimony, as early as when he was a summer associate at Cravath, Swaine & Moore, in 1994. Since that time, he used inside information gained from his positions at Skadden, Arps, Slate, Meagher & Flom; Fried, Frank, Harris, Shriver & Jacobson; and Wilson Sonsini Goodrich & Rosati; not to mention the information he gained from such companies as Sun Microsystems Inc, 3Com Corp., and Axciom Corp — all of which gained them a net gain of $37 million.

Bauer took in the lion’s share, having to repay $31.6 million upon recent investigations, and with Kluger forfeiting $516,000 and Robinson repaying $845,000.

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Kluger’s attorney is considering appealing the sentence.





 

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