August 10, 2016 / 3:36 PM / 3 years ago

N.Y. investment adviser, lawyer indicted for insider trading

NEW YORK (Reuters) - A Long Island investment adviser and a former partner at a major law firm have been indicted on charges that they engaged in insider trading ahead of Pfizer Inc’s acquisition of King Pharmaceuticals Inc in 2010, prosecutors said on Wednesday.

Tibor Klein, who owned advisory firm Klein Financial Services, and Robert Schulman, a Washington, D.C., patent lawyer who at the time was with the law firm Hunton & Williams, were charged in an indictment filed in Central Islip, New York.

Prosecutors said Klein, who lives in Melville, New York, learned about the planned $3.6 billion merger from Schulman, who had been representing King Pharmaceuticals in patent litigation since 2009.

Prosecutors said that on the basis of Schulman’s tip, Klein bought stock in King on behalf of himself, Schulman and his advisory clients, enabling them to make a combined $300,000 in profits when the deal was announced.

Klein had also tipped a broker in Florida about the expected merger, who traded on the information and split the more than $100,000 in profits he made with Klein, prosecutors said.

Prosecutors did not name the broker, but an earlier U.S. Securities and Exchange Commission lawsuit identified him as Michael Shechtman, a former Ameriprise Financial Inc stockbroker and friend of Klein’s.

Shechtman pleaded guilty in November 2014 to conspiracy to commit securities fraud in connection with the case.

Both Klein, 43, and Schulman, 58, were arrested on charges of conspiracy and securities fraud and are expected to appear later on Wednesday in federal courts in Central Islip and Alexandria, Virginia, respectively.

“We are extremely disappointed by the government’s decision to charge Mr. Klein,” said Christopher Bruno, his lawyer. “Mr. Klein intends to vigorously defend these charges at trial.”

Christopher Mead, Schulman’s attorney, in an email said the “evidence at trial will show that my client is innocent.”

The indictment followed an earlier civil lawsuit in 2013 by the SEC against Klein and Shechtman over the same trades.

The criminal case, though, differs in terms of the SEC’s lawsuit by alleging that Schulman, who was most recently a partner at the law firm Arent Fox, intentionally tipped Klein.

The SEC had by contrast alleged that Klein misappropriated the information from Schulman, who during an August 2010 meal at his home after several glasses of wine became intoxicated and blurted out, “It would be nice to be King for a day.”

The case is U.S. v. Klein et al, U.S. District Court, Eastern District of New York, No. 16-cr-442.

Reporting by Nate Raymond in New York; Editing by Chizu Nomiyama and Marguerita Choy

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