Matthew Kluger Pleads Guilty on Insider Trading

Hands down, one of the most fascinating stories we have ever covered in Law Technology News was our June 2011 cover story, "Catch Me If You Can," about how lawyers and their organizations responded to the astounding insider trading prosecution against Matthew Kluger. (LexisNexis subscribers can access it here.)

In the article, Tam Harbert detailed how Kluger, who worked at four of the world's most prestigious law firms, managed to acquire approximately $37 million (with two accomplices) by simply reading file labels to figure out information about pending mergers and acquisitions.

This week, Kluger pleaded guilty Wednesday to all four counts against him. Check out the report by Tom Huddleston Jr. in The Am Law Daily.

Our package looked at the lessons learned by law firms, and how they are balancing the difficult tightrope between protecting confidential data while still providing as open an environment as possible internally to faciliate collaboration and innovation. In addition to ramping up ethics training and security, one of the interesting themes that emerged was whether law firms may need to rethink the traditional "MYOB" (mind your own business) hands-off posture of dealing with employees, and become more proactive about offering support services (overt or subtle).

While no firm will be able to completely outwit brilliant sociopaths, organizations should watch for red flags that might signal potential employee meltdowns big or small. Especially in the aftermath of the economic earthquakes. A recent PriceWaterhouse Coopers poll of 1,600 adults who make $30,000+/year found that 61% of respondents are stressed about finances, and 49% have a hard time paying monthly bills --- even 36% of high earners ($100K+). As I wrote in my editor's note in June, "No doubt, there is a huge difference between thefts fueled by arrogance and those fed by desperation, but both can lead to tragedy. Perhaps it's time ... to reach out."

Check out my conversation with with Harbert here.