Here’s some friendly advice: when you’re drunk, try to keep your mouth shut. Or at least keep your work-related thoughts to yourself. This is certainly true for junior lawyers, but it goes for partners as well.
According to a complaint just filed by the Securities and Exchange Commission, an IP partner at a leading law firm had a few too many drinks, then got a little “TMII” — “too much (inside) information” — with his investment adviser. That adviser then traded on the material, nonpublic information, the SEC alleges….
Here’s the news, via Law360 (sub. req.):
A Washington attorney drunkenly passed confidential information to a friend about Pfizer Inc.’s planned $3.6 billion acquisition of a pharmaceutical industry client in 2010, the U.S. Securities and Exchange Commission said in a Friday complaint.
The SEC filed an insider trading suit in Florida federal court against Tibor Klein, an investment adviser who allegedly bought shares of King Pharmaceuticals Inc. shortly before the firm was acquired by Pfizer Inc. for $3.6 billion. Klein learned about the planned acquisition in August 2010 from an attorney and investment advisory client named Robert M. Schulman, according to the SEC. Schulman, who was not named as a defendant in the suit, learned about the deal because he represented King Pharmaceuticals in separate litigation, the SEC said.
Hunton & Williams LLP employs a partner in its Washington office named Robert M. Schulman who represented King Pharmaceuticals in a patent case in Virginia federal court. That case was dismissed in August 2010 following a settlement.
You can access Robert Schulman’s bio on the Hunton website, and you can read the complaint on the SEC website. Here’s how the disclosure allegedly went down (according to paragraphs 20 and 21 of the complaint):
During a meal with Klein at their home that weekend, Schulman drank several glasses of wine and became intoxicated. He blurted out to Klein, “It would be nice to be King for a day.”
Schulman intended to imply he was a “big shot” who knew “some kind of information” about King Pharmaceuticals.
The SEC alleges that Tibor Klein then traded on the information and shared the information with a friend, Michael Shechtman, who also traded on the information. Klein and his clients, including Schulman, netted more than $300,000 in profits from their trading in King shares, and Schechtman and his wife earned more than $100,000 from their transactions, according to the SEC.
We reached out to Hunton & Williams and to Robert Schulman. We have not yet heard back; if and when we do, we’ll update this story. (But we’re not expecting comment, since Schulman previously declined to comment to Law360 (sub. req.) and the New York Post.)
On the bright side, Schulman isn’t named in the SEC complaint; perhaps he’s cooperating with law enforcement. When it comes to attorneys accused of involvement with insider trading, we’ve seen so much worse.
Securities and Exchange Commission v. Tibor Klein: Complaint [U.S. Securities and Exchange Commission]
Tibor Klein, financial adviser, sued by SEC for insider trading [New York Newsday]
LI broker risks it all for just $8,824 [New York Post]
Tipsy Lawyer Disclosed Secret $3.6B Pfizer Deal, SEC Says [Law360 (sub. req.)]