Could Matthew Kluger, a mergers and acquisitions attorney arrested on April 6, 2011, on charges of insider trading, have been caught before he did so much damage? That was the disturbing question CIOs discussed behind closed doors at many law firms this spring. Although it’s possible to discover the kind of information theft that Kluger allegedly committed, the odds are stacked against it, say CIOs, software vendors, analysts, and IT security experts. That has law firms increasingly worried. Kluger’s is just the latest in a string of law firm insider trading cases over the last two years, but it has ratcheted up the level of concern throughout BigLaw. Perhaps it’s because the case involved three of the most respected firms in the world: Cravath, Swaine & Moore; Skadden, Arps, Slate, Meagher & Flom ; and Wilson Sonsini Goodrich & Rosati. If it happened to them, it could happen to any law firm.
What, exactly, happened? Kluger and two accomplices — a Wall Street trader and a mortgage broker — allegedly stole and traded on material nonpublic information about M&A deals over a period of 17 years, according to federal authorities. The trio, facing charges from the U.S. Securities and Exchange Commission and the Department of Justice, allegedly made at least $32 million from the trades.
