Insider trader tells students his story
A man convicted of insider trading warned Tepper School of Business students in a video conference on Tuesday not to make the same mistakes he did.
Garrett Bauer, a proprietary trader, pled guilty to insider trading in December 2011. Bauer was the “tippee,” as he put it: The person who trades on secrets given to him by an insider.
In Bauer’s case, the insider was his long-time friend, mortgage banker Kenneth Robinson, as well as lawyer Matthew Kluger. Bauer traded on Robinson and Kluger’s secrets for $37 million, according to the federal government’s estimates. The proceeds were split among the three men.
Since being released on a $4 million bail, Bauer has spoken at numerous business schools about the consequences of insider trading.
“I really want to prevent you from committing my crime, insider trading, or really any crime in general,” Bauer said in the short prepared speech that began the conference. “There are catastrophic consequences which nobody believes is going to happen to them.” Bauer said that insider trading is common in the field of business, and he wants to ensure that today’s students do not engage in it, for their and others’ sake.
In his prepared remarks and during the question-and-answer session that followed, Bauer described in detail how he had committed his crimes, how he was prosecuted, and what the future likely holds for him.
Roshan Sriram, a first-year Tepper student, said that one of the most interesting aspects of Bauer’s speech was his descriptions of life in jail. “It was really interesting [hearing about] everything from his whole experience in the process, his whole time in jail,” Sriram said.
Bauer shared many details of his experiences in jail, from finding a spork that he used for every meal to being issued a phone card that never worked. He said that if he gets his anticipated sentence of nine to 11 years, he will probably be held in a minimum-security prison, which is arranged more like a camp than a jail.
Jennifer Cai, first-year business administration major and activities director of the Undergraduate Finance Association, which coordinated the event, said that she hoped the talk gave students a personal look at insider trading.
“His personal anecdotes were amazing. Some of it was so emotional for me,” Cai said. “I could really imagine being in jail.... I liked how he shared so much of his personal experience. He could have talked a lot more about investment and trading, but instead he talked a lot about how he felt.”
The questions students asked ranged from personal to business-oriented. One student asked whether Bauer had spoken to Robinson since he had turned him in. Another student asked whether Bauer had ever heard a trader refuse to trade on insider secrets. To both questions, Bauer said he had not. One student asked for the specific names of firms that Bauer had gotten good deals with, but Bauer did not provide them.
Sriram felt that the conference was effective. “You hear about [insider trading] a lot. It’s a very present problem in this country,” he said. “I didn’t know that the consequences were that severe. His future is basically ruined.”
Cai agreed. She said that Bauer was an important and unusual speaker to have. “We’re interested in preparing our members for careers in finance, and I think a lot of times some ethical issues are overlooked, and I thought this was a good chance to emphasize the ethical issues,” she said. “I thought it added a lot of value to what we do as an organization.”