By Chad M. Kohler, Esq.
White collar criminals who plead guilty to, or are convicted of, financial
crimes are traditionally given probation or light sentences, with only
brief terms in prison. But there are notable exceptions. In 2011,
hedge fund manager Raj Rajaratnam was given an 11-year term in prison for insider
trading. A year later, Matthew Kluger got 12 years, the longest sentence
ever for insider trading.
Kluger was an attorney working on mergers and acquisitions for large law
firms. For 17 years, he was meeting up with a friend, Kenneth T. Robinson,
who then passed confidential information on forthcoming mergers to a friend
of his, a trader named Garrett Bauer. There was never any direct communication
between Kluger and Bauer. But when Robinson eventually conducted a trade
in his own name, rather than through Bauer, the SEC caught on. Bauer pled
guilty to conspiracy to commit securities fraud and other crimes. He is
serving a nine-year sentence. Robinson pleaded guilty securities fraud
and conspiracy in April 2011 and, after cooperating with authorities in
the investigation, was sentenced to 27 months.
recent article published in Fortune magazine covers an in-depth interview with Kluger
from his federal correctional institution in Morgantown, WV. On the length
of his sentence, Kluger said that he "got a New Jersey judge who
wanted to send a flashing red message of caution." The total profits
from the information Kluger provided to the conspiracy approached $37
million with Bauer receiving the majority of the money. Kluger was sentenced
according to the Federal Sentencing Guideline based on the amount of the
total gain, not the amount he personally realized from the trades (which was
around $600,000). His sentence was affirmed on appeal.