Feeds

SEC charges two with insider trading in Oracle-Sun deal

And Intel-McAfee. And HP-3Com

Next gen security for virtualised datacentres

The US Securities and Exchange Commission has charged two people for running an alleged insider trading scam involving such marquee mergers and acquisitions as Oracle's Sun purchase, Intel's McAfee buy, and HP's acquisition of 3Com.

According to the complaint filed on Wednesday by the SEC, the miscreants include a corporate lawyer, a Wall Street trader, and a unnamed middleman, all of whom benefitted illegally on trades involving eleven different high-tech companies in the past five years. The lawyer and the trader have been charged.

Central to to the complaint, filed in the US District Court for the District of New Jersey, is Matthew Kluger, a corporate associate who worked in the mergers and acquisitions department of the private equity and venture capital law firm of Wilson Sonsini Goodrich & Rosati (WSGR).

The filing alleges that Kluger stole non-public information relating to the mergers and acquisitions of the eleven firms, then passed this information to an unnamed middleman, who executed trades and profited illegally to the tune of $693,000 on HP's acquisition of 3Com in 2009 and Intel's acquisition of McAfee last year.

The middleman allegedly passed the information on to Garrett Bauer, a Wall Street trader who executed trades on the other nine companies, based on other insider information that came from Kluger, raking in $31.7m in ill-gotten gains.

According to the SEC, the trades were done ahead of the mergers or acquisitions, and once the stocks went up, Bauer sold his shares at a profit, passing a portion of his take back to the middleman, who in turn passed a portion back to Kluger. Kluger and the middleman each got approximately $342,000 back from Bauer – mostly in cash – the SEC says. From the HP-3Com and Intel-McAfee trades conducted by the middleman, Kluger received an additional $160,000 in cash, according to the SEC.

The SEC says that the unnamed middleman worked with Kluger at a real estate firm from 1987 to 1991, before Kluger went to New York University, from which he graduated in 1995 with a law degree. The middleman was a broker-dealer like Bauer, the SEC complaints says, and in the early 1990s they worked at the same firm (which was unnamed in the suit).

Bauer and the middleman met in Atlantic City, New Jersey, to exchange cash from the stock trades, with gambling providing their cover stories, according to the SEC.

For fear of leaving an audit trail, the complaint says, Kluger never opened any documents stored at WSGR that related to the pending mergers and acquisitions. He merely looked at the names that people had put on documents – board resolutions, press releases, and merger agreements – to divine what was going down. According to the SEC, this insider information was then passed from Kluger, to middleman, to Bauer over public phones or disposable cell phones that were subsequently destroyed.

In the middle of March 2011, when Kluger and Bauer thought their scheme had been exposed, they started destroying any records of their communications, according to the SEC, including Kluger destroying his iPhone and the disk drive in his computer, from which he had monitored the stocks that he had tipped Bauer to trade on.

"There is a good chance they're gonna eventually catch on," Bauer told the middleman in March, according to the SEC, "but if we all say nothing about each other, that's the only thing we can do, and that's the only way people can get caught. Because they have nothing until someone says something."

Looks like someone said something – such as the unnamed middleman, who is presumably cooperating with the SEC's investigation.

The SEC has asked to court to order Kluger and Bauer to "to disgorge, jointly and severally," their illegal gains, and to tack on a civil penalty of up to three times their shady profits. ®

Secure remote control for conventional and virtual desktops

More from The Register

next story
6 Obvious Reasons Why Facebook Will Ban This Article (Thank God)
Clampdown on clickbait ... and El Reg is OK with this
BBC: We're going to slip CODING into kids' TV
Pureed-carrot-in-ice cream C++ surprise
Kaspersky backpedals on 'done nothing wrong, nothing to fear' blather
Founder (and internet passport fan) now says privacy is precious
TROLL SLAYER Google grabs $1.3 MEEELLION in patent counter-suit
Chocolate Factory hits back at firm for suing customers
Twitter: La la la, we have not heard of any NUDE JLaw, Upton SELFIES
If there are any on our site it is not our fault as we are not a PUBLISHER
Facebook, Google and Instagram 'worse than drugs' says Miley Cyrus
Italian boffins agree with popette's theory that haters are the real wrecking balls
Sit tight, fanbois. Apple's '$400' wearable release slips into early 2015
Sources: time to put in plenty of clock-watching for' iWatch
Facebook to let stalkers unearth buried posts with mobe search
Prepare to HAUNT your pal's back catalogue
prev story

Whitepapers

Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Advanced data protection for your virtualized environments
Find a natural fit for optimizing protection for the often resource-constrained data protection process found in virtual environments.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.