Matthew Kluger May Have Benefitted From Not Being Promoted

While reading about Matthew Kluger, the former Wilson Sonsini Goodrich & Rosati lawyer accused of using information about firm clients to conduct a massive insider-trading scheme, several things shocked me.

Obviously, the fact that Kluger allegedly got away with this for 17 years is incredible. That he supposedly did it at some of the most prestigious firms in the country—Cravath, Swaine & Moore, Skadden; possibly Fried, Frank; and his most recent firm, Wilson Sonsini—is even more staggering. These are the kinds of places that—by all appearances—guard their clients’ information like state secrets. At mega-firms, you typically need to swipe a key card a half-dozen times just to get from point A to B. On a recent visit to Skadden’s DC office, I noted what I assume was a security camera keeping watch over the reception area.

But also surprising was Kluger’s job title, given his seniority. At 50 years old and 17 years out of law school, Kluger has never risen beyond the level of senior associate. The usual trajectory at major law firms is to prove yourself as an associate for eight to 11 years before becoming a counsel or partner, or, if you’re not progressing, to simply move on from the firm or the legal profession. There are increasingly more exceptions to this path, thanks to the recession—the financial pressures on firms have made it harder to promote people. Still, an associate as senior as Kluger is a rare find.
Perhaps Kluger never practiced at any one firm long enough to gain the kind of traction necessary to get promoted. His most recent stint, from December 2005 through last month, as a lawyer in Wilson Sonsini’s Washington office, was the most time he spent at a single firm. According to court filings, he practiced in Fried, Frank’s New York office from 2001 to 2002. He was in Skadden’s New York and Palo Alto offices from 1998 to 2001, and Cravath’s New York office from 1994 to 1997.

Staying out of the partner ranks may have had some benefits for Kluger, though, if the charges against him turn out to be true.

Kluger’s past employers haven’t been implicated in any way, and there’s no evidence in the filings that they were privy to Kluger’s alleged activities. Wilson Sonsini spokeswoman Courtney Dorman says the firm conducts “detailed background checks on all lawyers—associates and partners—who accept offers to join the firm.”

According to recruiters who specialize in job placement for lawyers, if an associate’s behavior raises suspicions, it’s less likely to be uncovered by the next firm to hire that person than it would be if the individual was a partner.

Legal recruiters say there’s generally a much more thorough vetting process for partners who change firms. “The associate process is much shorter, much easier, and involves much less due diligence,” says Dan Binstock, a legal recruiter at Garrison & Sisson. “They do background checks,” says Binstock, “but they don’t do the [same] level of reference checking.”

Stephen Nelson, a principal at recruiting firm the McCormick Group, says law firms generally send a detailed questionnaire to prospective new partners, with questions such as whether the lawyer has been accused of malpractice or charged with a crime. Associate hires don’t usually merit that type of questionnaire, Nelson says.

Even when a new employer does call an attorney’s previous firm, there’s no guarantee they’ll learn much. Often, firms decline to comment on employees who have left under contentious circumstances to avoid getting sued by the former employee for jeopardizing his or her job prospects.