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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]


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.