Kenneth T. Robinson Pleads Guilty to Role in $32 Million Insider Trading Scheme

Source- http://newark.fbi.gov/dojpressrel/pressrel11/nk041111.htm

NEWARK, NJ—Kenneth Robinson admitted today that he engaged in a long-term insider trading scheme with Garrett Bauer and Matthew Kluger that netted at least $32 million in illicit profits, New Jersey U.S. Attorney Paul J. Fishman announced.

Kenneth T. Robinson, 45, of Long Beach, N.Y., was previously identified as a coconspirator referred to in court documents as “CC-1.” Robinson pleaded guilty before U.S. District Judge Katharine S. Hayden to an information charging him with one count of conspiracy to commit securities fraud and two counts of securities fraud.

According to documents filed in this and the related case and statements made in Newark federal court:

Robinson, a mortgage broker, engaged in an insider trading scheme with Bauer and Kluger that began in 1994. During the last five years, the conspirators invested more than $109 million and made more than approximately $32 million in illicit profits.

Over time, Kluger worked at four of the nation’s premier mergers and acquisitions law firms. From 1994 to 1997, he worked first as a summer associate and later as a corporate associate at Cravath Swaine & Moore in New York. From 1998 to 2001, he worked at Skadden, Arps, Slate, Meagher & Flom as an associate in their corporate department. From 2001 to 2002, he worked at Fried, Frank, Harris, Shriver & Jacobson LLP in New York. From December 5, 2005 to March 11, 2011, Kluger worked at Wilson Sonsini Goodrich & Rosati (“Wilson Sonsini”), as a senior associate in the Mergers & Acquisitions department of the firm’s Washington office.

While at the law firms, Kluger regularly stole material, nonpublic information regarding anticipated corporate mergers and acquisitions on which his firms were working, and disclosed that information to Robinson. Robinson admitted that once Kluger provided him the inside information, he usually passed it to Bauer, a professional trader. Bauer then purchased shares for himself, Kluger, and Robinson in Bauer’s trading accounts. Bauer quickly sold the shares once the relevant deal was publicly announced and the stock price rose. Bauer gave Robinson and Kluger their shares of the illicit profits in cash—often tens or hundreds of thousands of dollars—that Bauer withdrew in multiple transactions from ATMs. Robinson admitted that between 1994 and 2011, the conspirators traded ahead of at least 15 different corporate transactions.

Robinson admitted that he personally made the trades on at least two transactions: the acquisition of 3Com Corp. by Hewlett-Packard, announced November 11, 2009; and the acquisition of McAfee Inc. by Intel Corp., announced August 19, 2010.

Robinson also admitted that after Kluger joined Wilson Sonsini, the three conspirators generally only spoke to each other about proposed transactions on payphones or prepaid cellular phones that they referred to as “throwaway phones” and purchased with cash. They often got a new phone for each of their insider trading deals.

The conspiracy to commit securities fraud charge to which Robinson pleaded guilty carries a maximum potential penalty of five years in prison and a $250,000 fine, or twice the aggregate loss to victims or gain to the defendants. The two securities fraud charges to which Robinson pleaded guilty each carry a maximum penalty of 20 years in prison and a $5 million fine. Sentencing is scheduled for July 26, 2011.

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