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Appeals Court Unmoved By Insider-Trader's Precociousness

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There are all sorts of metrics to determine how bad an insider-trader you were. How many trades did you make on secret information? How many different securities? How much money did you make for/save Steve Cohen? My personal favorite, however, is severity of sentence, and on that count, Matthew Kluger is still the worst insider-trader in U.S. history.

Kluger received the longest insider-trading sentence this side of Raj Rajaratnam, a dozen years, in part because the lawyers who prosecuted him and the lawyer who sentenced him were offended that he was giving lawyers a bad name. Well, the lawyers who decided his appeal concur with their peers.

Matthew Kluger, who worked at a number of top U.S. law firms, was sentenced last year to 12 years in prison, the longest sentence ever imposed for insider-trading. Mr. Kluger allegedly began sharing nonpublic information when he was a summer associate.

Mr. Kluger, 52 years old, admitted in 2011 to passing along corporate secrets through a middleman to Garrett Bauer, a former trader in a scheme that allegedly generated more than $34 million in illicit profits. The information involved a few of the biggest tech deals of the past decade.

On appeal, lawyers for Mr. Kluger argued in part that there was a large disparity between his sentence and others convicted of insider trading, including Mr. Bauer, who was sentenced to nine years in prison and allegedly received the bulk of the profits.

The U.S. Third Circuit Court of Appeals found that there was “good reason” to impose a longer sentence on Mr. Kluger—namely that he was the longtime source of corporate secrets and, as an attorney, he took an oath to uphold the law.

“Moreover, it is really quite remarkable that Kluger could not even wait to graduate from law school before using his employment at a law firm to initiate his illegal activities and it is equally remarkable that during most of his legal career he was involved in criminal activity, so that in an actual though perhaps not in a legal technical sense as the term is used in the sentencing guidelines, he truly was a career criminal,” U.S. Circuit Judge Morton Greenberg wrote in a 48-page opinion.

In other insider-trading news, lawyers for SAC's Michael Steinberg would like to have a word with potential jurors about people like us (well, actually, the New York Times, Wall Street Journal and New York Post) casting aspersions about their innocent-until-proven-guilty client and his whiter-than-white employer.

“The coverage has not only been ubiquitous, but its qualitative content has also been inflammatory, thereby heightening the risk that it could interfere with the ability of potential jurors to assess impartially the government’s case against Mr. Steinberg and Mr. Steinberg’s defense,” the filing said….

“For almost a year, stories about alleged insider trading involving Mr. Steinberg, Mr. Cohen, SAC and the legal troubles of others associated with SAC have saturated media outlets,” wrote Barry H. Berke, Mr. Steinberg’s lawyer at Kramer Levin Naftalis & Frankel.

Mr. Steinberg’s lawyers noted that The New York Times, The Wall Street Journal and The New York Post have together run at least 181 articles since September about Mr. Steinberg and/or SAC Capital, with 15 on the front page. The court filing also tabulated social media references.

“Mr. Steinberg and/or SAC Capital were the subject of 531 Tweets, and 3,454 re-Tweets,” the filing said.

Appeals Court Upholds Longest Insider-Trading Sentence [WSJ Law Blog]
Lawyers in SAC Case Question Coverage of News Media [DealBook]