* Wilson Sonsini at center of insider trading case
* Law firm trusted by many companies across Silicon Valley
* Firm has survived controversies such as HP board spying
By Nadia Damouni
NEW YORK, April 6 Larry Sonsini's Wikipedia entry is only one paragraph long even though the top corporate lawyer has presided over more technology deals than anyone else in Silicon Valley.
Sonsini keeps a determinedly low profile but several times in the past five years, his firm, Wilson Sonsini Goodrich & Rosati PC, has hit the headlines for the wrong reasons. The latest puts it at the center of one of the largest U.S. insider trading cases ever.
U.S. prosecutors on Wednesday accused a former Wilson Sonsini lawyer, Matthew Kluger, of leaking confidential information about multi-billion dollar tech deals that the firm worked on, in news that stunned dealmakers across the country.
Wilson Sonsini hasn't been accused of wrongdoing, and industry bankers and lawyers say it could have happened to any firm. Indeed, Kluger had also worked at Cravath Swaine & Moore LLP and Skadden, Arps, Slate, Meagher & Flom LLP during his 17-year practice, according to prosecutors. [ID:nN06204005]
But the case is a black mark for a successful firm that has nevertheless been dogged by previous controversy: Sonsini was hauled before Congress about his firm's role in Hewlett-Packard Co's (HPQ.N) boardroom spying tactics, and many Wilson Sonsini clients got caught up in the options backdating scandal in 2006.
"It is a reputational issue for them, and they have had several of these things. Wilson needs to be careful," said an M&A lawyer familiar with the firm, who spoke on condition of anonymity.
The Palo Alto, California-based Wilson Sonsini is ranked as the number one law firm in high technology M&A transactions, with over $325 billion worth of deals since 2000, according to Thomson Reuters data. (r.reuters.com/tap88r)
Its clientele include nearly all the top U.S. tech companies, and the powerful firm has presided over such landmark deals as HP's $25 billion purchase of Compaq in 2001.
Ironically, Kluger is accused of leaking details on Oracle Corp's ORCL.O takeover of Sun Microsystems Inc, HP's purchase of 3Com Corp and Intel Corp's (INTC.O) purchase of McAfee Inc -- all very high-profile deals that the firm was working on.
However, senior tech bankers and lawyers say Wilson Sonsini will likely remain the go-to firm in the Valley, pointing to examples of other practices that have survived insider trading cases.
"Sonsini will go out to clients and say 'look there is a bad guy, we found out about him and fired him on the spot. This isn't the sort of stuff we tolerate here," said an industry banker who did not want to be identified because he does business with the law firm.
Sonsini, 70, is crowned "King of the Valley" as he often rubs shoulders with the likes of Apple Inc's (AAPL.O) Steve Jobs and Google Inc's (GOOG.O) Sergey Brin and Larry Page.
In an interview with Reuters last month, Sonsini described how he built his empire by getting involved with companies at early or even start-up stages, thus winning client loyalty.
His M&A team develops deep relationships by advising clients on numerous matters, whether or not a deal is in process. They act like general counsels, advising on capital raising, licensing deals, and even security litigations.
"There are firms that do venture work, there are firms that represent public companies, there are firms that do just billion dollar transactions. No one has consciously built a firm or a practice to serve the enterprise in each stage group," said Sonsini, chairman of the firm.
The father of three and grandfather of seven is normally up at 5 a.m. California time to talk to east coast clients, before heading into the office to deal with local issues. He is very hands-on with clients, and was integral in creating the firm's model of the lawyer being a critical adviser and trusted confidante, tech bankers say.
"He is not just the guy who gets the contract done but the guy who influences the decision that is made ... they occupy a position of trust in a board room," said a tech banker.
This position of trust means that Wilson Sonsini is privy to many important decisions in the technology world, from initial public offerings to transformational M&A deals.
One of the firm's M&A lawyers, Marty Korman, told Reuters last month that a member of his team often gets invited into the board rooms of their clients.
"We are often the ones designing the decision-making process," he said. "We are not just deal jockeys that are brought in to do a deal."
Wilson Sonsini said on Wednesday it was shocked by the insider trading case against its former employee, and would cooperate with the investigation. It declined further comment.
The firm has about 600 lawyers across the United States, Hong Kong and Shanghai. In addition to Sonsini and Korman, other lawyers who spearhead the M&A practice include Mike Ringler, Rob Ishii, Bob Sanchez, Larry Chu, and Todd Cleary.
Deal advisers say M&A transactions typically involve so many people -- from players directly in the deal to others at the firms who become privy to confidential information -- it's near impossible to track down or prevent insider trading.
"You can never design a system that is full-proof, there is always some element of trust involved. Law firms have a lot of confidential information and a lot of it is inside information," said the first M&A lawyer. [ID:nN06276648] (Editing by Tiffany Wu and Bernard Orr)