Trading Places
TP
Garrett’s Little Secret
The Bauer-Robinson-Kluger team was committed to the scheme and agreed to keep the operation small so as to not arouse suspicion. However, Garrett had developed a “go big or go home” mentality. Unbeknownst to Ken and Matthew, he was trading in bigger and bigger numbers. Garrett would often purchase stocks for Ken and Matthew in the range of 20,000 to 30,000 shares; but if the deal seemed good, he would often double and triple the purchase in the hundreds of thousands and even millions. One such deal was Oracle’s acquisition of Sun Microsystems in 2009. Bauer was able to net almost $11.4 million in profits from Matthew’s tip with the vast majority of the money going into his own pockets.
In total, Garrett traded on at least nine pending deals involving companies on Wilson Sonsini’s client list and brought in a profit of nearly $33 million. Only $350,000 went to his two partners, according to court documents. Thirty-three million dollars is hardly chump change; it was no surprise that Garrett attracted the attention of the SEC.
Garrett received information requests from the SEC about some of his trades and was requested to hand over banking and phone records. When nothing suspicious was detected by the SEC, Garrett felt like the plan had worked. Although Garrett and Ken were best friends and spoke almost on a daily basis, the SEC hadn’t yet connected the dots between Garrett, Ken and Matthew.
The SEC scare was enough for Garrett to get out of the insider trading racket, and he broke the news to Ken that he was ending his role in the scheme. Garrett warned Ken to no longer trade on any of the information from Matthew. Garrett believed that the direct connection between the two of them would surely be noticed by the SEC, and it was just too risky. Ken promised, “No more trades.”