Chicago environmental lawyer indicted in insider trading plot

A man walks through the street carrying a briefcase in Manhattan, New York City
REUTERS/Andrew Kelly
  • David Sargent, listed as a Loyola University faculty member, received company financials from a friend, prosecutors said
  • SEC lawsuit also filed

(Reuters) - A Chicago lawyer is facing insider trading charges that claim he used information from a longtime friend and business partner to buy shares in an education-technology company just before it announced a major jump in earnings.

David Sargent, 37, an environmental attorney who is identified as a faculty member at Loyola University Chicago's School of Environmental Sustainability, was indicted on Monday after prosecutors said he received nonpublic information about the earnings from Chegg Inc manager Christopher Klundt, and then used it to make about $110,000 in profit on trades of Chegg stock.

On Tuesday, the U.S. Securities and Exchange Commission charged Sargent in a parallel lawsuit over the trades. Klundt is named in that case and the one brought by the U.S. Attorney's Office for the Northern District of Illinois. Sargent, whom the SEC said was a lawyer at Sargent Law Offices in Chicago, was identified as of Tuesday evening as a faculty member on Loyola's website, which says that he is a graduate of University of Illinois College of Law.

Chegg, listed on the New York Stock Exchange, reported about $570 million in revenue in the first nine months of 2021, according to financial reports.

Sargent and Klundt founded a company called StudyBlue as college friends, according to court records. Sargent left the company, but Klundt stayed on. StudyBlue was acquired in 2018 by Chegg in a deal worth more than $20 million.

Prosecutors said that in May 2020 Klundt attended a Chegg pre-earnings discussion, where he was told the company would be reporting strong earnings.

Klundt called Sargent, who immediately bought nearly 300 shares of Chegg stock and Chegg call options, spending more than $41,000, according to the SEC. Sargent made more than $100,000 a few days later, after Chegg publicly announced its first quarter earnings had increased by 35% over the previous year, according to the SEC's complaint.

Klundt texted Sargent an emoji smiley face with dollar signs for eyes after the announcement, according to the SEC.

James Kopecky of Kopecky Schumacher Rosenburg, who is representing Sargent, said his client was not tipped off.

“What they have is an emoji, not a case,” Kopecky told Reuters.

Klundt’s attorney, Terence Campbell of Cotsirilos, Tighe, Streicker, Poulos & Campbell, said in an email his client is innocent of the charges.

A Chegg spokesperson said Klundt is no longer an employee of the company, but it is cooperating with the SEC and DOJ.

Representatives for Loyola University did not respond to requests for comment.

The case is U.S. v. Christopher Klundt and David Sargent, case number 1:22-cr-00015 in the U.S. District Court for the Northern District of Illinois.

For Sargent: James Kopecky of Kopecky Schumacher Rosenburg

For Klundt: Terence Campbell of Cotsirilos, Tighe, Streicker, Poulos & Campbell

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