Gambling’s so much easier when you cheat, that’s for sure.
But doesn’t it ever cross the minds of gamblers who cheat that they’re going to get caught?
Or is that what being a cheating gambler’s all about?
Anyhow, the latest episode of Busted: Inside Trading to have piqued my interest is the one that involves attorney Matthew Kluger, trader Garrett Bauer, and middleman Kenneth Robinson, whose greed, apparently brought the entire operation down.
The trio’s Tinkers to Evers to Chance went like this:
Kluger, who worked at Wilson, Sonsini, and who years earlier had worked at both Cravath and Skadden, firms so widely known that we all feel we’re on a first last name basis with them would relay confidential info to Bauer via way of Robinson. Bauer would make the trade, hand part of his “winnings” off to Robinson, who would take his cut and give the rest to Kluger.
Over seventeen years, the crew reputedly amassed over $32M in profits – and that’s with taking six years off when they felt that the heat was on. They’re time off of bad behavior occurred when Bauer was under investigation by the SEC for a suspicious trade involving Clorox’ acquisition of First Brands. (Nothing came of this investigation.” The trio laid low, but, hey, the lure of easy money was too great for them, so they stepped back in.
All good things must come to an end, however, and the end came when Robinson decided on a little side action, exploiting his status as middle-man to clear $200K on the HP acquisition of 3-Com.
I knew Gordon Gekko and you, Mr. Robinson, are no Gordon Gekko. Some greed is just no damned good.
When Bauer learned that Robinson’s house had been tossed by the Feds, his heart went pitter pat.
"I felt like I was in shock. My heart was beating 10,000 miles an hour," Mr. Bauer said, according to the criminal complaint. "I went right up to my apartment, and I broke the phone in half and went to McDonald's and put it in two different garbage cans. And someone was watching me. I thought it was an FBI agent. And I asked him, 'Do you know me? You look familiar.' And, like, I was so panicked. I literally didn't sleep that entire night." (Source: NY Times.)
Bauer no doubt has a few more sleepless nights ahead of him, including that first night in Federal lock-up where he ends up doing his time.
Bauer offered to take care of Robinson, claiming that he had over $20M squirreled away for just such an occasion. He also advised Robinson to burn $175K that he was holding from a recent deal. It is so not easy being the bag man.
It may be easier being the guy in the know.
Mr. Kluger, of Oakton, Va., allegedly stole information regarding 11 deals while at Wilson, Sonsini, which he left last month. Mr. Kluger circumvented Wilson Sonsini's computerized document-management system by looking at the titles of documents related to deals he wasn't working on but not opening the documents, prosecutors said.
Looks like Wilson, Sonsini will need to come up with a better document naming scheme than acquirer-target. (HP-3Com Acquisition.)
By mid-March, Kluger realized, in his own words, that “things could get ugly.”
Which they have: both civil and criminal charges have been filed against Kluger and Bauer.
Robinson – who was described by one of his neighbors as
“the nicest guy”, and, curiously, as “American pie”, under the mistaken assumption that American pie is the equivalent of “American as apple pie”, and not the name of a raunchy gross-out movie - has taken the deal and has pled guilty.
Meanwhile, it was NY Times Deal Book column that had Robinson by name. The earlier NYT story had him as a ““Co-Conspirator 1.” Deal Book also had the skinny on the hiatus that the group had taken, and the info on Robinson’s greed having been the event the resulted in the trio’s downfall.
Once Robinson took the deal and started stealth recording, they got Kluger talking about how careful they’d been, and how the Feds probably didn’t have enough to overcome “reasonable doubt.” The taped conversations will help with that problem.
Kluger, by the way, is the son of Richard Kluger, a social historian who won the Pulitzer for his book, Ashes to Ashes, a history of the tobacco industry. This has to be the best connect-the-dots since Pulitzer-winning poet Mark Van Doren’s son Charles was swept up in the infamous quiz show scandal of the 1950’s. Of course, that was only about tricking the television audience, not about screwing shareholders who didn’t have inside info on what Clorox or HP was up to.
Interesting that Bauer had suggested that Robinson turn some of the ill-gotten gain to ashes, isn’t it?
You just can not make this stuff up.