A defense attorney for a suspended Linklaters associate said Thursday that the young lawyer hadn’t done “anything wrong” in connection with an alleged insider trading scheme involving her husband, Fei Yan.
U.S. authorities arrested Yan on July 12, alleging the Massachusetts Institute of Technology research scientist pocketed nearly $120,000 in illegal stock trades based on confidential information shared with him by his wife, Menglu Wang, an associate in Linklaters’ New York office.
Yan was released the same day on a $500,000 bond. Wang, a corporate and M&A lawyer, co-signed the bond the next day. Wang was not charged with any crimes and was not named in the criminal or civil securities fraud complaints filed against her husband. She was referred to only as “Spouse-1.”
Yet what was up until a week ago a pristine start to a Big Law career has been at least temporarily derailed as questions linger around Wang, a former editor-in-chief of Harvard Law School’s International Law Review who joined Linklaters in 2015.
Was Wang aware her husband was using her knowledge of pending corporate transactions to make profitable trades? Or was she, as one law professor put it, potentially the “victim” of a husband who breached her trust?
Wang has retained criminal defense lawyer Wayne Gosnell of Clayman & Rosenberg, who declined to answer questions about what Wang knew regarding her husband’s trading.
“She is a dedicated and brilliant lawyer,” Gosnell said. “She’s confident when all the facts are known that the government will conclude she didn’t do anything wrong.”
There is no doubt that Wang’s story is a cautionary tale for Big Law dealmakers and their associates about the potential perils of talking about work, even with loved ones. Linklaters said it has suspended an associate pending further investigation into the case, but declined to comment on Wang. Her bio has been removed from the firm’s website.
Yan is alleged to have profited from trades involving the mining company Sibanye Gold Ltd. and the furniture retailer Steinhoff International Holdings, both clients of Linklaters. Wang worked on major, nonpublic transactions for both companies while her husband amassed purchase options of their stock, according to complaints filed by the U.S. Attorney’s Office in Manhattan and the U.S. Securities and Exchange Commission.
In both instances, Yan unloaded all his options in the companies’ stock on the day the acquisitions Wang advised on were announced. He also searched the Internet for tips on how to avoid prosecution for insider trading, the government alleges, accessing an article titled “Want to Commit Insider Trading? Here’s How Not to Do it.”
Duty of Trust
One clue as to prosecutors’ thinking about Wang’s involvement in Yan’s alleged scheme is the term “misappropriation” in both the criminal and civil complaints. The government says Yan used misappropriated information to make the trades. It also says he owed a “duty of trust or confidence” to Wang.
Adam Pritchard, a professor at University of Michigan Law School who teaches corporate and securities law, said laws related to insider trading carve out a duty of trust or confidence in husband-wife relationships. In layman’s terms, Pritchard said a husband is essentially stealing the information from his wife in a misappropriation case involving a spouse.
“In a misappropriation case, the source of the information hasn’t done anything wrong,” Pritchard said. “They are, in a certain sense, the victim. Whereas, if she had told him the information with the expectation that he would trade on it, that would be a tipper-tippee relationship and he would be complicit in her breach.”
Yan is represented in his criminal case by Joshua Kirshner of Brafman & Associates, the firm led by Benjamin Brafman, who currently represents pharmaceutical CEO Martin Shkreli.
Wang earned an undergraduate degree from Tufts University and graduated in 2015 from Harvard Law School. She interned at the World Bank Group in the summer of 2013, working on anti-corruption legal investigations, according to her bio on LinkedIn. She was a Linklaters summer associate in 2014 before joining the firm as an associate in September 2015.
While Wang has not been named as a defendant in any cases, law professors said it is still possible that she could face charges. That could occur if prosecutors determine that Wang was fully aware of her husband’s trades as she shared information with him.
“It wouldn’t be out of left field for him to take a plea deal and rat out his wife,” Pritchard said. “Indictments do put a stress on a marriage.”
Whatever the legal ramifications for Wang, there are also possible professional repercussions.
Linklaters has a policy that lawyers “maintain the confidentiality of client-related information and not use this information to trade in securities, or disclose it to others to trade on it,” according to the criminal complaint against Yan. Pritchard said Linklaters would be “well within their rights” to fire Wang for talking about client privileged work.
Joan MacLeod Heminway, a professor at University of Tennessee College of Law who previously did M&A work as a lawyer at Skadden, Arps, Slate, Meagher & Flom, said lawyers can also be suspended or disbarred for breaching client confidences.
Heminway said she has studied so-called pillow-talk insider trading cases that result from casual conversation between spouses and families. Part of her intrigue stems from her own fear of being caught up in such a scenario while working on big deals in New York.
“I would scoot my husband out of the room and say, ‘You can’t listen to this conversation’,” Heminway said. “I don’t know if she just wasn’t as vigilant with this information.”
Roy Strom, based in Chicago, covers the business of law with a focus on how law firm business models are changing. He can be reached at firstname.lastname@example.org. On Twitter: @RoyWStrom