DD Support Board and Research Team

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Employee of Law Firm Wilson Sonsini Charged With Insider Trading

By Matthew Goldstein
September 16, 2014 2:48 pm
http://dealbook.nytimes.com/2014/09/16/employee-of-law-firm-wilson-sonsini-charged-with-insider-trading/?_php=true&_type=blogs&_r=0

Federal authorities, for the second time in three years, charged an employee of Wilson Sonsini Goodrich & Rosati, a prominent law firm, with using confidential information about corporate deals to make illegal trades in stocks.

Dmitry Braverman, an information technology employee with Wilson Sonsini, was charged Tuesday with generating about $297,000 in illegal profits from insider trading in eight stocks. Mr. Braverman, 41, was arrested by F.B.I. agents in San Mateo, Calif., a law enforcement spokesman said.

He traded on confidential information about corporate deals the law firm was working on during a three-year period, according to a criminal complaint filed in federal court in Manhattan. Mr. Braverman was charged with one count of securities fraud. An attorney for Mr. Braverman could not be immediately identified.

Mr. Braverman’s arrest comes more than three years after federal authorities charged Matthew Kluger, a former Wilson Sonsini lawyer, with taking part in a 17-year insider trading conspiracy that netted him and his associates more than $32 million in illegal profits. Mr. Kluger is serving a 12-year prison sentence after pleading guilty in December 2011 to stealing confidential information about corporate deals from Wilson Sonsini and three other law firms where he had worked.

The arrest of Mr. Kluger in April 2011, however, appears to have only stopped Mr. Braverman for a short time.

Federal authorities said that after Mr. Kluger was arrested, Mr. Braverman and an unidentified person “abruptly closed out” positions they had in shares of Seagate Technology, a client of the law firm that was in the middle of working on a corporate deal. Authorities contend that Mr. Braverman then waited for about 18 months before resuming to trade on confidential information about the firm’s clients like Dealertrack Technologies Inc. and Xyratex Ltd.

The person to whom Mr. Braverman also passed on inside information was not charged with any wrongdoing.

It has been debated just how much of deterrence effect there is from the federal government’s latest insider trading crackdown involving hedge fund traders, Wall Street analyst and lawyers. The complaint against Mr. Braverman would suggest that Mr. Kluger’s arrest and conviction was only a temporary deterrent.

Courtney Dorman, a spokeswoman for Wilson Sonsini, said Mr. Braverman was placed on an unpaid administrative leave upon his arrest. “Today’s charges against a staff member are deeply disturbing to say the least,” she said.

The criminal complaint filed by federal prosecutors in New York notes that after Mr. Kluger’s arrest, the law firm sent an email to all employees reminding them of their obligation to maintain client confidences and to not trade on inside information. Mr. Kluger was arrested about a month after he left Wilson Sonsini.

In a parallel civil lawsuit, the Securities and Exchange Commission said when Mr. Braverman resumed trading in 2012, he sought to conceal his activities by using a brokerage account held in the name of a relative living in Russia. But the plan did not work and law enforcement was able to trace the trading back to Mr. Braverman.

http://dealbook.nytimes.com/2014/09/16/employee-of-law-firm-wilson-sonsini-charged-with-insider-trading/?_php=true&_type=blogs&_r=0