Back in April 2011, I wrote here about the FBI's use of wiretaps to build a remarkable insider trading case against trader Garrett Bauer, an attorney named Matthew Kluger, and a third alleged co-conspirator ("CC-1"). The Criminal Complaint contained snippets of many telephone conversations, and one of the recorded calls involving Bauer stuck in my mind. In the March 18, 2011 call, Bauer tells CC-1:

I know 100% in my mind, no matter what happens I will never mention you and never mention him [KLUGER] as doing anything. I have not even a question in my mind. I will never ever do that because if I go down for something I want it to just be me because there is no reason to bring more people into - because nothing is going to help me.... 

Okay, well they're eventually - there is a good chance they're eventually going to catch on but, like, if we all say nothing about each other - like, there, that is the only thing we can do. Like, that is the only way people get caught.

Nine months later I had nearly forgotten about Garrett Bauer and his 100% certitude that he would never mention his co-conspirators "no matter what happens," but earlier this week I saw the Bloomberg headline: "Garrett Bauer Pleads Guilty to Trading on Stolen Merger Tips." Bloomberg reports that last week, Bauer pleaded guilty and came clean about the entire scheme--when it began, Kluger and CC-1's specific roles through the years, how they tried to cover it up--everything. 

Bauer's change of heart was probably inevitable given that CC-1 had already pleaded guilty (and taped their incriminating phone calls), but it still goes to show the "value" of your co-conspirator's promise never to talk about your insider trading scheme. Kluger is now reportedly in plea negotiations with the U.S. Attorney's Office, as well.

Topics