Federal Agents Couldn't Help But Listen In On Weight Lifter Turned Accused Insider Trader Craig Drimal's "Deeply Personal" Conversation With His Wife

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Remember Craig Drimal? To recap, Drimal was working at a gym called Vertical way back in the day when he met a guy named David Slaine, with whom he “quickly formed a friendship based on a shared passion for weight lifting and their mutual ability to bench-press 400 pounds." Drimal and Slaine became so close that later, when Slaine got a job at this hedge fund called Galleon, he convinced the boss to hire his buddy Craig- then working as a bouncer at the Roxy– as an assistant at the firm. Something must have happened to damage the bond, though (perhaps something at the gym involving spotting) because in 2007, when Slaine was approached by the FBI who told him they'd cut a deal if he helped them build their case, he jumped at the chance to rat out Craig. (Slaine-- who once got into an argument about inside info with his Galleon boss while the two were taking a steam, and proceeded to slap him in the face-- told prosecutors his friend was part of an “insider-trading conspiracy involving a wide ring of other hedge-fund managers and lawyers.”)

Anyway, the Feds have been recording Drimal's conversations for a while now, and as wiretaps seem to be an increasingly effective tool in suggesting one's participation in insider trading (particularly when the individual in question says stuff like "thanks for the non-public material information you gave me that I traded on"), prosecutors would like to use them in Drimal's upcoming trial. His defense team would prefer a jury not hear the wiretaps, and while Judge Richard J. Sullivan denied the request for a dismissal, he did note that the authorities went a bit too far when they listened in on heated convos between Craig and the Mrs. that one can only assume covered topics such as whose turn it was to take out the trash and ED.

"The court is deeply troubled by this unnecessary, and apparently voyeuristic, intrusion into the Drimals' private life," the judge wrote in his ruling Wednesday. The wiretaps of Mr. Drimal's calls, which began in late 2007, were the first in which the technique was used in an insider-trading case, prosecutors have said. In allowing the recordings into evidence, Judge Sullivan said the wiretap as a whole was "professionally conducted and generally well-executed."...But Sullivan, at a hearing in March, called the agents' performance with respect to the spousal calls "an embarrassment" and "disgraceful."

In his ruling, he said an agent had monitored "almost four minutes of a 6½-minute call while Drimal and his wife had a deeply personal and intimate discussion about their marriage." The agent then listened to an entire 19-second call placed a minute later that was a continuation of the same discussion, the judge said. An agent also listened to a 52-second message in which Mr. Drimal's wife discussed intimate aspects of their relationship. Another call was "obviously a marital spat," the judge wrote. In two others, he said, the couple discussed "patently nonpertinent subjects" such as their children and home-renovation projects.

Judge Rejects Wiretap Dismissal [WSJ]

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Convicted Insider Trader Matthew Kluger "Shocked" To Find Out He Couldn't Trust The Guys With Whom He Was Committing Federal Crimes

Remember Matthew Kluger? To recap, he's the mergers and acquisitions lawyer who spent two decades feeding inside information to convicted insider trader Garrett Bauer, that he picked up from partners at the six different law firms he worked at over the years. The operation, which included Kenneth Robinson, an old friend of Kluger who acted as the tips mule between MK and GB, went very smoothly for a very long time (17 years), and would have continued going smoothly had Robinson stuck with the plan instead of deciding to start making the same trades as Bauer, raising suspicion with SEC, which was watching the men and used "relationship analysis" to determine they were "part of the same trading scheme and had a common source: Kluger." In March 2011, federal agents showed up to Robinson's house and after thinking it over for a couple days, he decided to cooperate by giving prosecutors a step-by-step guide to how the scam operated, telling them Kluger's name, and recording conversations with Kluger and Bauer in which the two said things like "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 "I can't sleep. I can't sleep. I'm waiting for the FBI to ride into my apartment" and "We have to get all the fingerprints off that money. Like you wearing gloves or something and wiping every bill down or something" and "There is no way [these cell phone conversations] could ever be recorded." Robinson was ultimately sentenced to 27 months in prison, Bauer got nine years (despite his 147 speeches about how insider trading is a bad idea on the college lecture), and Kluger was handed 12 years, beating Raj Rajaratnam for "the longest insider trading U.S. history." Recently, Kluger sat down with Bloomberg to offer a few more specifics re: how the scheme went down ("Sometimes it was a deal I was working on, sometimes it was a deal I heard being discussed in the office"; "I would call Ken and say 'X/Y/Z company is considering a takeover of Q company") but what he really wants to talk about? What was the biggest surprise and hardest punch to the gut in all of this? Is what it was like finding out that his buddies were stiffing him on cuts of their ill-gotten gains. "On the day I was arrested, when they showed me the criminal complaint against me, finally that day, I saw the amounts that had been traded and I was absolutely shocked. Our agreement from the beginning was always that that profits were being shared equally three ways. I felt very used and manipulated, that he was basically pumping me for information, that he was then lying to me about how he was using and then allowing his obviously better friend to make millions and millions of dollars while telling me that that was not happening. “Maybe you want to laugh and say of course there’s no honor among thieves,” Kluger added. “But even when you’re doing something you’re not supposed to do, I trusted that they were honoring the commitments that they had made.” You can imagine Kluge's utter dismay to find out that such was not the case. It's one thing to get nailed for insider trading, it's another to find out you could've been making 10 times the profits while doing so.

Convicted Insider Trader Garrett Bauer Hoping College Kids Will Help Him Get Off

Remember Garrett Bauer? For those who need a refresher, GB was a trader (who "mostly worked from home") who was charged last year for running a decades-long insider trading scam with an M&A attorney, Matthew Kluger, that involved stealing information from several law firms. (In April 2011, 20 FBI agents knocked on Bauer's door to arrest him which, while terrifying, didn't come as much of a shock-- the duo had recently become suspicious that the authorities were onto them and, naturally, went about destroying evidence, a process Bauer recounted to a cooperating witness in a conversation he didn't realize was being recorded, telling the CC: "My heart was beating ten thousand miles an hour. 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 garabage 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...I can't sleep. I am waiting for the FBI to ride into my apartment. I am on edge all night thinking they are coming in.") Anyway, Bauer ultimately pleaded guilty and is set to be sentenced today. Though he could receive up to 11 years in the big house, a judge will be taking into consideration letters "expressing support or urging leniency" sent on Bauer's behalf, some of which were written by fans he's gained working the college lecture circuit the past few months, explaining to undergrads why they don't want to follow in his footsteps (hint: it involves sleeping on bunk-beds). “I’m here hoping you won’t commit the same crime I committed, insider trading,” Bauer told the students at NYU’s Stern School of Business in February. “I feel remorse. That’s why I’m here. It’s my way of trying to apologize to everyone for what I’ve done and try to make amends.” Bauer said he hopes that his “scared straight” message, delivered in 147 speeches since last fall at business schools, law schools, churches and synagogues, will move the judge to grant him leniency. Sentencing judges can consider whether a defendant has accepted responsibility and shown remorse for his acts. “I’m not blind anymore,” Bauer said in an interview. “I see how wrong it was, how unfair it was to everybody else that’s trading. You get away with it once, and then you think you can get away with it every time. I almost never considered the question of getting caught. It was more a question of let’s figure out a way to make money and not lose money.” Bauer spoke several times a week in person or via Skype at schools including Harvard University, Yale University, the University of California at Berkeley, the University of Texas, the University of Michigan and Duke University. He booked his own speeches, sometimes called “Confessions of an Inside Trader.” Bauer gave the same basic narrative in two appearances observed at NYU, as well as at Cardozo Law School in New York, Drexel University in Philadelphia and a Rutgers University class in Jersey City, New Jersey. Bauer, lean at 5-foot-11 and 145 pounds, favors button-down shirts and khaki pants. He speaks rapidly in a nasal voice, lacing his account with jokes...In every talk to students, Bauer discussed how 20 FBI agents came to his apartment to arrest him and how they played the tapes for him, as well as his time in the Hudson County Jail. He tried hard to show no emotion to violent criminals. “Saying it’s a scary place kind of understates it,” he said. “It’s the scariest place on earth.” At least one professor believes Bauer's talk scarred his students for life, which should count for something. And according to Sameen Singh, a recent Stern grad who will soon start a job at Morgan Stanley, U.S. District Judge Katharine Hayden ought to go easy on the guy, who is just another bro. “I was impressed by how human he was and how his friendships and relationships played a role in his crimes. My friends were quite taken aback by how similar he was to them. He came from humble beginnings, and he’s not a deviant mastermind criminal. He’s just a regular guy.” Prison-Bound Bauer Reprises ‘Confessions Of An Inside Trader’ [Bloomberg]

Accused Insider Trader Gave Ill-Gotten Gains To The Homeless

And for this he should do time? Gautham Shankar, of New Canaan, Connecticut, who also worked as a trader at Schottenfeld Group LLC, is scheduled to be sentenced later today by U.S. District Judge Richard Sullivan in New York. Shankar, who faces as long as 25 years in prison, earned less than $450,000 in the insider-trading scheme, his lawyer said. Shankar, who worked on the sales desk at Goldman Sachs from July 2000 until February 2003, pleaded guilty to conspiracy and a count of securities fraud in October 2009. He admitted that while working at Schottenfeld, he passed and profited from illegal tips he obtained from Zvi Goffer, a former Galleon Group LLC employee, and Thomas Hardin, a former analyst at Lanexa Global Management. “As the government learned during its meetings with Mr. Shankar, he has always, quite literally, given large sums of money away to the homeless on the streets of New York, including cash given to him by his co-conspirators for passing tips from Hardin,” his lawyer, Frederick Sosinsky, said in court papers.Helped People “From bringing the homeless a cup of coffee in the morning and sharing time with them to handing them hundreds of dollars at a time, Mr. Shankar has always been unable to simply walk past those in the most distress,” Sosinsky said. Ex-Goldman Employee Seeks Leniency for Insider Scheme [Bloomberg]