Pair charged with high-tech insider dealing

The Securities and Exchange Commission (SEC) has arrested a lawyer and Wall Street trader and charged them with insider trading.

The charges would put the two as making a killing out of the 11 biggest proposed or completed corporate acquisitions in the IT business.

SEC officials claim  that the pair and a third unnamed middleman made more than $32 million in illegal profits as a result of insider-trading.

The deals involved include HP’s $2.7 billion acquisition of 3Com and Oracle’s $7.4 billion purchase of Sun, in 2009 and Chipzilla’s $7.68 billion acquisition of McAfee in 2010.

Matthew Kluger who worked for Messers Wilson, Sonsini, Goodrich & Rosati and from 1994 he would access information about the 11 proposed mergers and acquisitions involving the firm’s clients, and then would tell the middleman.

The middleman passed the information to Garrett Bauer, who would trade on the information.

Kluger and Bauer didn’t know each other but both knew the middleman. There was an elaborate scheme involving public telephones, disposable mobile phones and cash withdrawals as the three worked out how to share all the lolly.

Bauer would withdraw cash from his various bank accounts and send money to the middleman, who would then give some of it to Kruger. It seems that Kruger took the greatest risk and earned the least cash out of it. He seems to have collected $500,000, while the middleman also made $690,000 on two trades he made on the information.

The two were charged with conspiracy to commit securities fraud, conspiracy to commit money laundering, and obstruction of justice. Bauer also faces nine charges of securities fraud; Kruger 11 charges.