Middleman Robinson Gets 27 Months for Insider Trading

Kenneth T. Robinson
Kenneth T. Robinson exits federal court in Newark, New Jersey, U.S., on Monday, April 11, 2011. Photographer: Craig Ruttle/Bloomberg

Kenneth T. Robinson, a middleman in an insider-trading scheme that generated $37 million in illicit profits, was sentenced to 27 months in prison by a U.S. judge who credited him for cooperating with authorities.

Robinson, 46, pleaded guilty in April 2011 after helping authorities describe how he passed corporate merger tips for 17 years from attorney Matthew Kluger to trader Garrett Bauer. Robinson then secretly recorded Kluger and Bauer for the Federal Bureau of Investigation.

Kluger was sentenced to 12 years in prison yesterday, the longest term ever for insider trading.

“It’s very clear to me and everybody who’s been involved in the case that Mr. Robinson is the only one of the defendants who is in this world and breathing the air we breathe,” U.S. District Judge Katharine Hayden said today at a hearing in Newark, New Jersey. “One does genuinely have a sense that Mr. Robinson, of these defendants, will return to the world and resume a place where he can hold his head up.”

Robinson, a mortgage broker, faced a sentence of 70 to 87 months under advisory guidelines.

He had admitted he knew both men before he began funneling tips from Kluger to Bauer in 1994. The scheme grew into one of the largest insider-trading plots ever, with Kluger stealing data on about 30 transactions from four law firms where he worked. Bauer, who was sentenced yesterday to nine years in prison, made almost $32 million.

Confidence in Market

Hayden said yesterday that she wanted to send a strong message about the “radiating effect of the loss of confidence in the market” caused by insider trading. She said Kluger stole tips from “white shoe firms” in a “brazen” scheme that was conducted in a “thuggish” manner.

At today’s hearing, Robinson attorney, Francis Murray, said Hayden should send a different message that would encourage offenders to approach the government in insider-trading cases.

“The message is one of incentivizing the unknown people out there who are in Mr. Robinson’s situation, for them to do what is right versus fighting the government every step of the way,” Murray said. “Mr. Robinson made that decision with some guts.”

Robinson, of Long Beach, New York, made two large trades on his own that attracted suspicion. He agreed to cooperate with the FBI soon after agents searched his house in March 2011. During the search, agents missed $175,000 in cash that Bauer gave him to split with Kluger.

Cash Surrendered

Within days, Robinson surrendered the cash and recorded Bauer and Kluger making incriminating statements, Murray said.

Robinson signed a plea agreement on April 5, 2011, the day before Kluger and Bauer were arrested. He pleaded guilty on April 11, 2011, to charges of securities fraud and conspiracy to commit securities fraud.

“I always knew what I was doing was wrong,” Robinson told the judge today. “I just wasn’t smart enough to stop.”

After his arrest, he said, he vowed to make amends.

“I was going to do everything I can to try to make matters right,” he said. “I knew I had to tell the truth. I knew there was no way I was going to lie to an FBI agent or a U.S. attorney or a judge.”

He said it was difficult when the FBI asked him to tape Bauer and Kluger, whom he has known for two decades.

“I was afraid I couldn’t,” he said. “These were my friends. I didn’t want to hurt them. But it was the right thing to do, and I knew it.”

Government Urges Lenience

Assistant U.S. Attorney Matthew Beck urged Hayden to grant leniency, citing Robinson’s “extraordinary cooperation” in the case.

“Those tapes were remarkable,” Beck said. “They demonstrate the seriousness of the offense, the closeness of the conspirators and devastating evidence of the guilt of those three individuals. But for those tapes, the case would have been much harder.”

Murray said Robinson agreed to forfeit more than $757,700 in illicit profits and interest to the U.S. Securities and Exchange Commission.

Lawyers for both Kluger and Bauer, a day trader, said they would appeal their sentences.

The case is U.S. v. Robinson, 11-cr-223, U.S. District Court, District of New Jersey (Newark).

Before it's here, it's on the Bloomberg Terminal. LEARN MORE