Former Law Partner, Adviser Arrested For Insider Trading
August 10 2016 - 2:20PM
Dow Jones News
A former partner at law firm Hunton & Williams LLP and an
investment adviser were arrested Wednesday and accused of
participating in an insider-trading scheme ahead of a Pfizer Inc.
acquisition.
Prosecutors say Robert Schulman, an intellectual property lawyer
at Hunton & Williams, tipped off his investment adviser Tibor
Klein in 2010 about a pending merger between Pfizer and King
Pharmaceuticals Inc. Mr. Klein, 43, was president of the investment
advisory firm Klein Financial Services.
Mr. Schulman, Mr. Klein and their co-conspirators allegedly
traded in King securities ahead of the deal and reaped more than
$400,000 in profits, according to a federal indictment unsealed
Wednesday.
Both men were charged by the Brooklyn U.S. attorney's office
with securities fraud and securities fraud conspiracy charges. Each
faces a maximum sentence of 20 years in prison.
Mr. Klein was sued by the Securities and Exchange Commission in
Miami federal court three years ago, where he was accused of the
same alleged scheme. The other defendant in the SEC case, Michael
Shechtman, a former Ameriprise Financial Inc. employee, pleaded
guilty in 2014 to one count of conspiracy to commit securities
fraud.
Mr. Schulman, 58, appeared in the SEC's allegations, but he
wasn't sued at the time. The SEC case was put on hold in 2014 in
order for the criminal investigation by Brooklyn federal
prosecutors to proceed, according to court filings.
Lawyers for Mr. Schulman and Mr. Klein either didn't respond to
requests for comment or couldn't be identified.
According to the government, Mr. Schulman found out about the
pending Pfizer deal because he was representing King in separate
litigation at the time.
In August 2010, Mr. Schulman and Mr. Klein met at Mr. Schulman's
home in McLean, Va., to discuss Mr. Schulman's investment
portfolio, the indictment said. During a meal that weekend, after
several glasses of wine, Mr. Schulman blurted out to Mr. Klein, "It
would be nice to be King for a day," according to the SEC.
Prosecutors say Mr. Schulman revealed the pending merger between
King and Pfizer at that dinner.
A few days later, Mr. Klein allegedly bought hundreds of King
shares for himself and thousands more for his clients, including
Mr. Schulman, for a total of $585,216.
Mr. Klein also worked with an unnamed co-conspirator who bought
hundreds of call options for King, according to the government. The
co-conspirator matches the description of Mr. Shechtman in the SEC
complaint. Prosecutors say the co-conspirator made over $109,000 in
profits and gave $28,000 to Mr. Klein.
Pfizer publicly announced its acquisition of King in October
2010. Mr. Klein then sold all the King shares he and his clients
owned and reaped more than $319,000 in profits, according to the
indictment. He allegedly made a personal profit of over $8,800,
while Mr. Schulman made $15,500.
Christopher M. Matthews contributed to this article.
Write to Nicole Hong at nicole.hong@wsj.com
(END) Dow Jones Newswires
August 10, 2016 14:05 ET (18:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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