Sometimes Drunk People Actually Know What They're Talking About: Insider Trading Edition

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Much like being a first, second, or third year analyst on Wall Street, a lot of being a non-partner employee at a law firm is being shit on. Not respected. Treated like an idiot. That many of these attorneys have six-figure debt and are, in some cases, decades out of their early twenties makes the day to day treatment by their superiors all the more harsh. They can't ease the pain with a visit to the Murray Hill Brother Jimmy's; all the can do is go home and wonder "What kind of a life is this? Why do I put up with this," cry, or some combination thereof. Some quit; others resign themselves to the way of life; a select few go out and get drunk on pinot grigio and decide, "I'm not some paper pusher. I'm an an esquire. I'm important. I know stuff. I'm gonna show them. I'm gonna show ALL of them [knocks over glass]."

An alleged insider trading scheme involving a claim about an intoxicated lawyer and his wealth manager has drawn the attention of US prosecutors...The SEC sued Tibor Klein, a New York investment adviser, in September for allegedly buying securities of King Pharmaceuticals after learning from one of his clients that the drug company was in talks to be acquired by Pfizer. Mr Klein’s client and friend, Robert Schulman, a patent attorney at Washington law firm Hunton & Williams, allegedly became intoxicated after drinking several glasses of wine over dinner and “blurted out to Klein, ‘It would be nice to be King for a day,’” according to the SEC complaint filed in a Florida court... In the lawsuit, the SEC alleges Mr Schulman “intended to imply he was a ‘big shot’ who knew ‘some kind of information’ about King Pharmaceuticals.” Hunton & Williams was representing King in its takeover talks although Mr Schulman was not personally involved, the SEC said.

The next trading day Mr Klein allegedly began buying King securities for his own account and for his clients, and subsequently called his friend, Michael Shechtman, who also bought King securities. Mr Shechtman, who made more than $100,000, agreed to settle the SEC’s civil charges in late December, without admitting or denying wrongdoing. Mr Klein, who allegedly made $8,824 from the trades, is fighting the allegations. Mr Schulman’s account made $15,500 from trades made by Mr Klein, the SEC alleges.

SEC Claims Drunk Lawyer Had Insider Tipple [FT via LaurenLaCapra]

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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.