The probe fizzled without the SEC suing anyone or prosecutors filing charges. Kluger and Robinson agreed to be more careful by speaking only on pay phones.
"They had us in the crosshairs and backed off," Kluger said. "They were incompetent all the way through. We were emboldened, somewhat."
They were unable to outsmart the SEC a decade later.
Skadden Arps
Kluger began work in 1998 at another prominent firm in New York, Skadden Arps. Based on his tips, the illicit profits were more than $1 million on inside information that Intel would buy DSP Communications Inc., according to prosecutors. Kluger said he made about $50,000 on that deal, and Robinson told him the three made a total of $150,000 after Bauer paid taxes. In any deal, Bauer would take out about 45 percent for taxes and fees, Kluger said.
Kluger left Skadden Arps in 2001, and the scheme continued while he worked at Fried Frank Harris Shriver & Jacobson LLP in New York. After a year, he was fired. In 2002, Kluger filed a sex-discrimination lawsuit against the firm, claiming he was harassed and fired because he was gay. The case was settled confidentially in 2004 in state court in New York.
The scheme took a hiatus when Kluger left Fried Frank. From 2002 until early 2004, he worked at Sills Cummis & Gross PC, a firm in Newark. He then joined Asbury Automotive Group as the associate general counsel. After conflict with his boss, he went to Tampa to run a Pontiac-GMC dealership.
Final Shot
Kluger got his final shot at the action of big mergers when Wilson Sonsini hired him at its office in Reston, Virginia, in December 2005. The firm later moved to a Washington office, and his salary eventually rose to $300,000 a year. In April 2006, Bauer bought 477,600 shares of Advanced Digital Information Corp. before its acquisition by Quantum Corp. The illicit profit was $1.7 million.
Ten more insider trades followed during Kluger's time at Wilson Sonsini, including the Sun Microsystems deal that made $11.4 million in illicit profit.
In the scheme's early years, when Kluger lived in New York, Robinson met him at his office or a street corner to hand him cash. When Kluger was at Wilson Sonsini, he drove from Washington to New York several times to get the cash in small, cheap gym bags.
The men employed several techniques to avoid detection, such as disposable cellular phones. Kluger was adept at searching the titles of documents in Wilson Sonsini's computer system to determine how far a merger had progressed. He didn't want to open documents and leave an electronic fingerprint. He listened closely to what his colleagues said around the office. Sometimes he overheard conversations about deals and confirmed them in the documents.
'Big Mouth'
"People at law firms yap about things they're not supposed to yap about," he said. "Ninety percent of what I learned about the Sun Microsystems deal came from my hearing about it from an antitrust partner who had a big mouth."