PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

________________

No. 12-2701

________________

UNITED STATES OF AMERICA

v.

MATTHEW KLUGER,

Appellant

________________

On Appeal from the United States District Court

for the District of New Jersey

(D.C. Crim. No. 2-11-00858-001)

Hon. Katherine S. Hayden, District Judge

________________

Argued April 24, 2013

BEFORE: JORDAN, GREENBERG, and 

NYGAARD, Circuit Judges

(Filed: July 9, 2013)

________________
2

Mark E. Coyne

Assistant U.S. Attorney

Caroline Sadlowski (Argued)

Assistant U.S. Attorney

Paul J. Fishman

United States Attorney

Office of the United States Attorney

970 Broad Street

Newark, NJ 07102

 Attorneys for Appellee

Harvey Weissbard (Argued)

Genova Burns Giantomasi & Webster

494 Broad Street

Newark, NJ 07102

Alan L. Zegas

Law Offices of Alan L. Zegas

522 Main Street

Chatham, NJ 07928

 Attorneys for Appellant

________________

OPINION OF THE COURT

________________

GREENBERG, Circuit Judge.
3

I. INTRODUCTION

This matter comes on before this Court on an appeal from 

a judgment of conviction and sentence entered against appellant 

Matthew Kluger on June 4, 2012, in which Kluger challenges 

only his sentence. The government initiated this criminal case 

on April 5, 2011, when it filed a complaint against Kluger and 

Garrett Bauer in the District Court.1 The government charged 

Kluger and Bauer as conspirators in a three-man insider-trading 

scheme in which Kenneth Robinson was the third participant. 

The conspiracy spanned 17 years and, so far as is known, 

constituted the longest such scheme in United States history. 

On December 14, 2011, Kluger entered a guilty plea to a 

four-count information charging him with (1) conspiracy to 

commit securities fraud; (2) securities fraud; (3) conspiracy to 

commit money laundering; and (4) obstruction of justice, in 

violation of 18 U.S.C. § 371, 15 U.S.C. §§ 78j(b) and 78ff(a), 

and 17 C.F.R. § 240.10b-5; 18 U.S.C. § 1956(h), 18 U.S.C. § 

1512(c)(2), and 18 U.S.C. § 2. Kluger pled guilty pursuant to a 

plea agreement which did not include a stipulation as to his 

guidelines sentencing range. On June 4, 2012, the District Court 

sentenced Kluger to a 60-month custodial term on Count I and 

144-month custodial terms on each of Counts II, III, and IV, all 

four terms to be served concurrently, for a total custodial term of 

 

1 On December 8, 2011, Bauer entered a guilty plea. The 

District Court sentenced him on June 4, 2012, following which 

he filed an appeal but we have affirmed the judgment in his 

case. See United States v. Bauer, No. 12-2754. 
4

144 months (12 years), a term thought to be the longest insidertrading sentence ever imposed. The sentence included a $400 

special assessment, a three-year term of supervised release to 

follow the custodial term, and occupational restrictions relating 

to Kluger‟s employment in the securities industry. 

Following a separate hearing on the same day, the 

District Court sentenced Bauer to a 60-month custodial term on 

Count I and 108-month custodial terms on each of Counts II, III, 

and IV, all four terms to be served concurrently, for a total 

custodial term of 108 months (9 years). Bauer‟s sentence also 

included a $400 special assessment, a three-year term of 

supervised release, and occupational restrictions. 

On April 11, 2011, Robinson, the third conspirator who 

was the “middleman,” in the insider-trading scheme because 

Kluger passed inside information to him and he, in turn, relayed 

the information to Bauer who executed the trades, pled guilty to 

a three-count information for securities fraud. The District 

Court on June 5, 2011, sentenced Robinson to concurrent 27-

month custodial terms on all three counts for a total custodial 

term of 27 months to be followed by a three-year term of 

supervised release. The Court also included a $300 special 

assessment in Robinson‟s sentence. Robinson‟s sentence was 

far below his guidelines range of 70 to 87 months but the Court 

based it in part on a motion that the government filed pursuant 

to U.S.S.G. § 5K1.1 seeking a downwards departure from his 

guidelines sentencing range because Robinson was cooperating 

with the government in its investigation and prosecution of the 

conspiracy involved in this case. Robinson has not appealed 

from the sentence. 
5

On June 13, 2012, Kluger filed a timely appeal, raising 

the following arguments. First, he challenges the District 

Court‟s calculation of his sentencing guidelines range. Second, 

he contends that the Court procedurally erred in imposing the 

sentence on him by (1) improperly denying him an evidentiary 

hearing prior to his sentencing; (2) failing to resolve his 

objections to the presentence investigation report; and (3) not 

ordering discovery of materials that the government turned over 

to the probation department for use in preparing the presentence 

report. Finally, he contends that the District Court imposed a 

procedurally and substantively unreasonable sentence.2 

II. BACKGROUND

The insider-trading scheme began in the summer of 1994 

and, as we have indicated, involved three individuals: Kluger, 

Bauer, and Robinson. When the parties to the conspiracy 

initiated their scheme, Kluger had finished his second year of 

law school at New York University and was working as a

summer associate at the New York law firm of Cravath, Swaine 

 

2 Kluger also argues that if we remand the case for resentencing 

we should direct that the case be reassigned from the original 

judge to a different judge but inasmuch as we are affirming the 

sentence the reassignment issue is moot and we do not further 

discuss it. Significantly, though Kluger asks that this case be 

reassigned on the remand he seeks he does not seek a new 

sentencing on the ground that the judge was biased against him.
6

& Moore. Kluger knew Robinson from their prior employment 

at a New York real estate company and Bauer knew Robinson 

from their prior employment at a venture capital firm in New 

York.3 Although the conspirators dispute whether Kluger first 

approached Robinson, or vice versa, they agree that Kluger 

served as the sole source of the inside information involved in 

the conspiracy. 

Beginning as a summer associate and then continuing as 

a full-time associate after law school, Kluger passed along 

material, nonpublic information concerning mergers and 

acquisitions to Robinson who then gave that information to 

Bauer, who as a professional stock trader used it to execute 

trades on behalf of the three conspirators.4 Robinson instructed 

Bauer on how many shares to purchase for him and for Kluger, 

intending to keep the purchases to a modest volume to avoid 

drawing attention to the conspirators‟ activities. Nevertheless, 

 

3

In his sentencing memorandum in the District Court, Bauer 

explained that he “met Matt [Kluger] only once long before the 

conspiracy started, and recalls speaking with him on the 

telephone only briefly on perhaps one occasion during the 17-

year period of the conspiracy.” 

4

The law firms employing Kluger gave him training concerning 

inside trading and repeatedly required him to sign internal law 

firm policy statements prohibiting him from engaging in such 

trading. There is no suggestion in the record that any attorney or 

employee of any of the firms that employed Kluger other than 

Kluger himself was involved in the inside trading.
7

Bauer deviated from Robinson‟s instructions by trading in share 

volumes far in excess of the number of shares that the three 

conspirators agreed would be traded.5 This excess trading, 

though originally greatly enhancing Bauer‟s trading profits, 

likely was a catastrophic mistake as it well may have triggered 

the investigation into the conspirators‟ activities. Neither Bauer 

nor Robinson informed Kluger of the extent of Bauer‟s trading. 

In executing his trades, Bauer followed the practice of 

purchasing the shares based on Kluger‟s information before the 

information became public and then selling the shares after the 

announcement. Following successful trades, Bauer would make 

withdrawals from multiple ATM machines and then give 

Robinson cash, minus capital gains taxes, to cover the payments 

to Robinson and Kluger.6 

The first phase of the scheme continued through 2002 

and involved inside information related to approximately 20 

corporate transactions resulting in profits of $13,026,904. 

During that period, Kluger moved from one law firm to the next. 

Thus, following his employment at Cravath, Swaine & Moore, 

 

5

There is some dispute as to the existence and terms of the 

agreement but on this appeal we accept Kluger‟s contention that 

Bauer greatly exceeded the limitations on which the conspirators 

agreed with respect to the number of shares that would be 

traded.

6 We are not suggesting that Kluger did not receive taxable 

income on the money paid to him merely because Bauer may 

have paid taxes on all of the conspirators‟ gains as that issue is 

not before us.
8

Kluger obtained a position with Skadden, Arps, Slate, Meagher 

& Flom which employed him for approximately three years in 

its New York and Palo Alto offices. Thereafter Fried, Frank, 

Harris, Shriver & Jacobson employed Kluger for approximately 

one year in its New York office. In the late 1990s, the Securities 

and Exchange Commission began investigating some of the 

conspirators‟ trades. By 2002, the scheme went on hiatus while 

Kluger worked for Sills, Cummis, Epstein & Gross and then 

served as an in-house counsel for a corporation, two places of 

employment at which Bauer did not gain information useful for 

inside trading. The second phase of the scheme started when 

Kluger joined the Washington, D.C. office of Wilson, Sonsini, 

Goodrich & Rosati as a senior associate in December 2005 and 

this phase continued throughout his tenure at that firm for more 

than five years. Although in some cases the insider trading led 

to losses, overall the insider-trading scheme made substantial 

profits.7 

During the second phase of the insider-trading scheme, 

Kluger provided inside information regarding 13 transactions. 

Presentence Report (“PSR”) ¶ 49. Relying on that information, 

Bauer wagered approximately $124 million through his trading 

accounts and realized $34,465,343 in gross profits. Id. ¶ 98. 

The insider-trading profits allowed Bauer to purchase a $6.65 

million apartment in Manhattan and an $875,000 home in 

 

7

The presentence report describes Cravath, Swaine & Moore, 

Skadden, Arps, Slate, Meagher & Flom, Fried, Frank, Harris, 

Shriver & Jacobson, and Wilson, Sonsini, Goodrich & Rosati as 

“four of the largest and most prominent mergers and acquisition 

law firms in the United States.” PSR ¶ 13. 
9

Florida. Id. ¶ 88. The conspirators took extra precautions 

during the second phase of the scheme to avoid detection, 

especially when they learned in or around 2007 that their trading 

activities had come to the attention of civil regulators. Kluger, 

for example, only misused information related to transactions on 

which he was not working during his employment at Wilson, 

Sonsini, Goodrich & Rosati. Moreover, the conspirators started 

to use pay phones and “throwaway” prepaid cellular phones for 

their communications and Robinson kept some of the illicit cash 

in safe deposit boxes. In spite of the conspirators‟ steps to avoid 

detection, their activities were uncovered and FBI and IRS 

agents executed a search warrant at Robinson‟s home on March 

8, 2011, in furtherance of the investigation. Id. ¶ 53. The agents

inquired about the suspicious trades in his and Bauer‟s accounts 

as well as Robinson‟s “structuring” activities by making 

deposits under the $10,000 mandatory reporting threshold. 

Following the execution of the warrant, Robinson called 

Bauer and Kluger separately to inform them of the search and 

ongoing investigation. In the following weeks, unbeknownst to 

Bauer and Kluger, Robinson began cooperating with the 

government and recording his separate phone conversations with 

them. The incriminating conversations not only implicated the 

parties based on their past conduct but also revealed their plans 

to obstruct justice by destroying key evidence, such as cell 

phones and computers, and by agreeing not to cooperate with 

the government. A bizarre example of their attempts to obstruct 

justice was Bauer‟s proposal that Robinson burn $175,000 in 

cash obtained in the latest ATM withdrawals to eliminate 

Bauer‟s fingerprints, or, alternatively, to run the cash through a 

washing machine, a suggestion that gives a new and literal 
10

meaning to the term “money laundering.” 

During this cover-up phase of the conspiracy, Kluger 

emphasized that he was not going to cooperate with the 

government because he knew he never would get a good deal 

due to his role as the source of the inside information. On April 

6, 2011, federal agents arrested Bauer and Kluger. Five days 

later, federal agents arrested Robinson, who pled guilty that 

same day. 

III. JURISDICTION

The District Court exercised jurisdiction pursuant to 18 

U.S.C. § 3231. We have appellate jurisdiction pursuant to 18 

U.S.C. § 3742(a)(1) and 28 U.S.C. § 1291.

IV. DISCUSSION

A. Sentencing

1. Sentencing Guidelines Calculation

On appeal, “[w]e review the District Court‟s 

interpretation of the Sentencing Guidelines de novo, and 

scrutinize any findings of fact for clear error.” United States v. 

Aquino, 555 F.3d 124, 127 (3d Cir. 2009) (internal citations 

omitted). But “[w]e review the District Court‟s application of 

the Guidelines to facts for abuse of discretion.” United States v. 
11

Tupone, 442 F.3d 145, 149 (3d Cir. 2006) (citation omitted); see

also Aquino, 555 F.3d at 127 n.5 (“[T]he appropriate standard 

when reviewing a district court‟s application of law to fact is 

due deference.”) (citation and internal quotation marks omitted). 

The first step of the three-step sentencing process 

requires a district court to calculate a defendant‟s guidelines 

sentencing range in the same way that it would have made its 

calculations prior to the Supreme Court‟s decision in United 

States v. Booker, 543 U.S. 220, 125 S.Ct. 738 (2005), in which 

the Court determined that the guidelines would have only an 

advisory status. See United States v. Gunter, 462 F.3d 237, 247 

(3d Cir. 2006). Kluger argues that the District Court improperly 

used U.S.S.G. § 2B1.4 (“Insider Trading”) exclusively for 

calculating the gain attributable to him for the purposes of 

sentencing, thereby ignoring U.S.S.G. § 1B1.3 (“Relevant 

Conduct”). Under § 2B1.4, the District Court attributed all of 

the scheme‟s monetary gain to Kluger even though his share of 

the profits was far less than Bauer‟s share when Bauer was 

trading on Kluger‟s information.8 Of course, the attribution of 

gains to a defendant can be critical in a guidelines sentencing 

range calculation for in general, within ranges of gains, the 

larger the gain attributable to a defendant the higher his 

sentencing range will be.

 

8

The District Court also attributed Robinson‟s trading gains to 

Kluger, but these gains were minimal in comparison to Bauer‟s 

gains. The fact that profits are attributable to one conspirator in 

guidelines calculations does not mean that the same gains cannot 

be attributed to another conspirator as well. 
12

We interpret and apply the guidelines as written. See

United States v. Wong, 3 F.3d 667, 670 (3d Cir. 1993) (citation 

omitted). Therefore, “[a]s with statutory language, the plain and 

unambiguous language of the Sentencing Guidelines affords the 

best recourse9for their proper interpretation.” Id. (citations 

omitted). The Supreme Court has explained “that commentary 

in the Guidelines Manual that interprets or explains a guideline 

is authoritative unless it violates the Constitution or a federal 

statute, or is inconsistent with, or a plainly erroneous reading of, 

that guideline.”10 Stinson v. United States, 508 U.S. 36, 38, 113 

S.Ct. 1913, 1915 (1993). With those holdings in mind, we 

examine the guidelines text and applicable commentary.11 

 

9

The word “recourse” appears in the original opinion. We 

believe that the Court may have intended to say “resource.” 

10 In Stinson v. United States the Supreme Court explained that 

the commentary not only clarifies the guidelines but also 

“provides concrete guidance as to how even unambiguous 

guidelines are to be applied in practice.” 508 U.S. 36, 44, 113 

S.Ct. 1913, 1918 (1993). Though the guidelines are no longer 

mandatory, we still look to the commentary when we calculate 

the guideline sentence as we would have pre-Booker.

11 The District Court used the November 1, 2011 edition of the 

Guidelines Manual in Kluger‟s sentencing as that edition was in 

effect at the time of the sentencing and there were no ex-post 

facto concerns in this case by reason of amendment of the 

guidelines after Kluger committed his offenses barring the use 

of that edition. Therefore, the Supreme Court‟s recent holding 
13

As applicable in this case the insider-trading guideline, 

U.S.S.G. § 2B1.4, states:

(a) Base Offense Level: 8

(b) Specific Offense Characteristics 

(1) If the gain resulting from the offense exceeded 

$5,000, increase by the number of levels from the 

 

in Peugh v. United States, 569 U.S. ____, 133 S.Ct. 2072 

(2013), prohibiting as a violation of the Constitution‟s ex post 

facto clause the sentencing of a defendant under a guideline 

promulgated after the commission of the crime and 

recommending a higher sentencing range than the applicable 

guideline at the time of the crime, is inapplicable. Nonetheless, 

we note that following the passage of the Dodd-Frank Wall 

Street Reform and Consumer Protection Act, Pub. L. No. 111-

203, the guidelines were amended to provide: “If the offense 

involved an organized scheme to engage in insider trading and 

the offense level determined above is less than level 14, increase 

to level 14.” U.S.S.G. § 2B1.4(b)(2). This guideline sentencing 

range increase reflects a continued push to ratchet up the 

penalties for insider trading. The application note applying 

subsection (b)(2) states: “[A]n „organized scheme to engage in 

insider trading‟ means a scheme to engage in insider trading that 

involves considered, calculated, systematic, or repeated efforts 

to obtain and trade on inside information, as distinguished from 

fortuitous or opportunistic instances of insider trading.” 

U.S.S.G. § 2B1.4 cmt. n.1. 

 
14

table in § 2B1.1 (Theft, Property Destruction, and 

Fraud) corresponding to that amount.

. . . 

The commentary‟s application note 2 reads: 

Application of § 3B1.3.--Section 3B1.3 (Abuse of 

Position of Trust or Use of Special Skill) should be 

applied if the defendant occupied and abused a position 

of special trust. Examples might include . . . an attorney 

who misused information regarding a planned but 

unannounced takeover attempt. 

U.S.S.G. § 2B1.4 cmt. n.2. 

The commentary‟s background reads:

. . . Insider trading is treated essentially as a sophisticated 

fraud. Because the victims and their losses are difficult 

if not impossible to identify, the gain, i.e., the total 

increase in value realized through trading in securities by 

the defendant and persons acting in concert with the 

defendant or to whom the defendant provided inside 

information, is employed instead of the victims‟ losses. 

U.S.S.G. § 2B1.4 cmt. background (emphasis added). 

The government relies on the commentary‟s plain 

language to support its argument that in a guidelines calculation 

Bauer‟s gains even when not shared with Kluger are attributable 

to Kluger. In this regard it is significant that Kluger does not 
15

dispute either his role as the source of the information on which 

Bauer traded or the amount of Bauer‟s gains based on that 

information. Rather, he counters that there is no support in the § 

2B1.4 commentary for a conclusion that the “gain” calculation is 

exempted from the application of the reasonable foreseeability 

test under § 1B1.3(a)(1)(B) and that the District Court should 

have applied § 1B1.3(a)(1)(B) to lessen the gains of the 

conspiracy attributable to Kluger. 

U.S.S.G. § 1B1.3 states:

(a) Chapters Two (Offense Conduct) and Three 

(Adjustments). Unless otherwise specified, (i) the base 

offense level where the guideline specifies more than one 

base offense level, (ii) specific offense characteristics 

and (iii) cross references in Chapter Two, and (iv) 

adjustments in Chapter Three, shall be determined on the 

basis of the following:

(1)(A) all acts and omissions committed, aided, 

abetted, counseled, commanded, induced, 

procured, or willfully caused by the defendant; 

and

(B) in the case of a jointly undertaken criminal 

activity (a criminal plan, scheme, endeavor, or 

enterprise undertaken by the defendant in 

concert with others, whether or not charged as 

a conspiracy), all reasonably foreseeable acts 

and omissions of others in furtherance of the 

jointly undertaken criminal activity,
16

that occurred during the commission of the 

offense of conviction, in preparation for that 

offense, or in the course of attempting to 

avoid detection or responsibility for that 

offense; . . . . 

U.S.S.G. § 1B1.3 (emphasis added). According to Kluger, the § 

2B1.4 commentary dealing with insider trading merely provides 

an overview of the importance of gain in the context of insider 

trading; it does not trigger the “[u]nless otherwise specified” 

exception to the application of § 1B1.3, a guidelines section that 

standing alone arguably could have resulted in Kluger having a 

lower offense level and thus a lower sentencing range than the 

range that the District Court applied in his sentencing.12 

Therefore, Kluger argues that the Court erred in not holding a 

presentence evidentiary hearing to determine whether he 

reasonably could have foreseen that Bauer would engage in his 

outsized trades inasmuch as he did not agree to the scale of 

those trades. 

In United States v. Cespedes we explained that “[b]y 

including the phrase „unless otherwise specified,‟ the relevant 

conduct provision admits of exceptions to application of § 

1B1.3(a)(1)(B)‟s reasonable foreseeability test in certain 

instances.” 663 F.3d 685, 689 (3d Cir. 2011). Cespedes, a case 

involving a prosecution following a three-man armed bank 

 

12 As we explain below even if we applied the foreseeability test 

as Kluger urges our result might be the same as that which we 

reach.
17

robbery, dealt with the application of an enhancement in 

U.S.S.G. § 3C1.2 for “recklessly creating a substantial risk of 

death or serious bodily injury to another person in the course of 

fleeing from a law enforcement officer.” 663 F.3d at 686-87. 

Cespedes and Grant, two of the three conspirators, who were 

armed entered a bank while the third conspirator, Whitehurst, 

waited outside in a getaway car. Cespedes flashed his weapon, 

and he and Grant removed the cash stolen in the robbery before 

exiting the bank and jumping into the car. After Whitehurst 

drove from the bank the police attempted to make a traffic stop 

of the getaway car and a high-speed chase through residential 

neighborhoods ensued. At some point, Cespedes and Grant 

jumped out of the car and fled on foot. Whitehurst, however, 

continued on driving recklessly, nearly striking pedestrians 

before eventually hitting a parked minivan and then colliding 

with a police vehicle. See id. at 687. 

The applicable commentary to the sentencing 

enhancement explained that “the defendant is accountable for 

the defendant‟s own conduct and for conduct that the defendant 

aided or abetted, counseled, commanded, induced, procured, or 

willfully caused.” Id. at 689 (citing U.S.S.G. § 3C1.2 cmt. n.5). 

In overturning the district court‟s application of the 

enhancement, we explained that by “specifically describing” 

when the enhancement was applicable the guidelines based the 

enhancement on “something other than reasonable 

foreseeability,” and therefore created an exception to the 

application of § 1B1.3(a)(1)(B)‟s reasonable foreseeability test. 

Accordingly, the application of a reasonable foreseeability test 

impermissibly expanded the scope of the criminal acts 

attributable to Cespedes in direct contravention of the 
18

commentary to the enhancement guideline. 

Kluger‟s case differs from Cespedes‟ because the 

application of the reasonable foreseeability test arguably 

impermissibly would constrict rather than expand Kluger‟s 

responsibility in possible contravention of the commentary to 

the insider-trading guideline. But the key is not the distinction 

between expansion and constriction of responsibility but rather 

the application of the relevant commentary. The plain language 

of the commentary‟s background to § 2B1.4 unequivocally 

attributes all of Bauer‟s gains to Kluger because Bauer was a 

“person[] acting in concert with the defendant,” as well as one 

“to whom the defendant provided inside information.” U.S.S.G. 

§ 2B1.4 cmt. background. Therefore, the insider-trading 

guideline falls under the “unless otherwise specified” exception 

of § 1B1.3, and, as a result, we will not use the reasonable 

foreseeability test in reviewing the District Court‟s calculation 

of the offense level and thus of the guidelines range in imposing 

a sentence on Kluger.13 

 

13 We are not suggesting that if we applied a reasonable 

foreseeability test to Kluger‟s conduct under U.S.S.G. § 

1B1.3(a)(1)(B), we would not hold him responsible for the 

profits that Bauer obtained. Rather, we do not pass on this 

question. Nevertheless, we observe that it is undisputed that 

Kluger passed inside information to Robinson with the intent 

that the information would reach Bauer who Kluger knew was a 

securities trader in order for Bauer to place illicit trades. The 

District Court believed based on the facts in the record, 

including the logistics of the scheme and the taped conversations
19

The accompanying guideline to § 2B1.4, § 2B1.1 

(“Larceny, Embezzlement, and Other Forms of Theft”) supports 

our result. Section 2B1.1 includes a glossary of definitions one 

of which, “Actual Loss,” “means the reasonably foreseeable 

pecuniary harm that resulted from the offense” and “Reasonably 

Foreseeable Pecuniary Harm,” which “means pecuniary harm 

that the defendant knew or, under the circumstances, reasonably 

should have known, was a potential result of the offense.” 

U.S.S.G. § 2B1.1 cmt. n.3. The presence of this foreseeability 

language in § 2B1.1 demonstrates that the Sentencing 

Commission could have inserted an explicit foreseeability 

requirement in § 2B1.4 if it had wanted to do so.14 In the 

 

prior to Kluger‟s arrest, that it was reasonably foreseeable to 

him that Bauer would trade above and beyond any initially 

agreed on limit, assuming that an agreement limiting the number 

of shares to be traded was in place.

14 If Kluger had engaged in the commission of financial fraud 

other than insider trading, and the District Court had used § 

2B1.1 instead of § 2B1.4 in making its calculations, the § 1B1.3 

reasonable foreseeability provision might have been applicable 

in his sentencing. In a recent decision by the Court of Appeals 

for the Tenth Circuit involving a pump-and-dump scheme, the 

court affirmed the attribution of the conspirators‟ profits after 

holding that the profits were reasonably foreseeable to the 

defendant. See United States v. Gordon, 710 F.3d 1124, 1164 

(10th Cir. 2013) (“As long as the gain of a co-conspirator is 

reasonably foreseeable, it can be attributed to a defendant.”) 

(citation omitted). We, however, do not make a determination 

on that point because we are not dealing with a situation parallel 
20

circumstances we should not look beyond the plain language of 

§ 2B1.4 and read a foreseeability test into § 2B1.4. 

In reaching our result, we are aware of certain widely 

publicized recent cases from other courts dealing with insidertrading convictions that the parties on this appeal discuss in their 

briefs. In United States v. Gupta the district court strictly relied 

on § 2B1.4 and its commentary for calculating gain in an 

insider-trading case even though the court believed that the 

guideline „“is not a model of clarity.”‟ 904 F. Supp. 2d 349, 352 

(S.D.N.Y. 2012) (citing United States v. Rajaratnam, No. 09 Cr. 

1184, 2012 WL 362031, at *14 (S.D.N.Y. Jan. 31, 2012), aff‟d, 

No. 11-4416-cr, 2013 WL 3155848, ____ F.3d ____ (2d Cir. 

June 24, 2013)).15 In that case Rajat Gupta, a former Goldman 

 

to that in Gordon.

 

15 Our internal operating procedures provide that our not 

precedential opinions are not binding on panels in later cases in 

this Court. See Chehazeh v. Attorney Gen., 666 F.3d 118, 127 

n.12 (3d Cir. 2012) (citing Internal Operating Procedures 5.7 (3d 

Cir. 2010)). Consequently, we surely are not bound by 

unpublished district court opinions from courts in other circuits. 

But the parties have discussed Gupta and Rajaratnam and we do 

not think that we simply should ignore these cases. 

Furthermore, we find these insider-trading sentencing decisions 

from the Southern District of New York informative and 

persuasive and consider them in our discussion of the 

interpretation of the sentencing guidelines even though the 

parties only cite to them in their discussion of the “disparity” of 

defendants‟ sentences in insider-trading cases and the 
21

Sachs director, was convicted of one count of conspiracy and 

three counts of securities fraud for providing material, nonpublic 

information to an investor, Raj Rajaratnam, the founder and 

head of the hedge fund Galleon Group. The jury found that 

Gupta tipped Rajaratnam ahead of Warren Buffett‟s $5 billion 

infusion into Goldman Sachs and tipped him again in advance of

Goldman‟s unexpected announcement of quarterly losses in 

2008. Galleon‟s trades based on those tips led to an illicit 

“gain” of $5,032,195. See Gupta, 904 F. Supp. 2d at 353. In 

calculating Gupta‟s guideline range, the district court did not 

assess the extent to which the $5,032,195 figure was foreseeable 

to Gupta.16 In fact, the district court did not make any reference 

to foreseeability under § 1B1.3 even though Gupta, like Kluger, 

was a tipper.17

 

application of the sentencing considerations set forth in 18 

U.S.C. § 3553(a).

 

16 Although the district court in Gupta granted a § 3553(a) 

variance based in part on the fact that Gupta did not derive any 

monetary gain from the information that he provided, the 

variance was an individualized decision that has no bearing on 

the underlying guidelines calculation for other defendants.

17 In United States v. Royer the Court of Appeals for the Second 

Circuit applied a reasonable foreseeability test to a tipper in an 

insider-trading case. 549 F.3d 886 (2d Cir. 2008). The appeals 

court affirmed the district court‟s sentence predicated in part on 

the attribution to the appellant tipper of the acts of another 

defendant, the tippee, on the grounds “that the nature of [the 
22

In Rajaratnam, the district court also relied on the 

commentary to U.S.S.G. § 2B1.4 to calculate gain without 

addressing the foreseeability issue addressed in § 1B1.3. See

Rajaratnam, 2012 WL 362031.18 A jury convicted Rajaratnam 

 

tippee‟s] enterprise was evident to [the tipper] from his earliest 

involvement in it.” Id. at 905. Yet in Royer the gain calculation 

included trades stemming from securities fraud counts of which 

the tipper and tippee were acquitted. And when the tippee 

became the tipper by providing insider information that he 

initially received to paying subscribers via his website, he was 

held responsible for their gains without any reference to 

reasonable foreseeability. The court included the subscribers‟ 

trades in its calculation based on § 2B1.4‟s background 

commentary. See id. at 904 („“Because the victims [of insider 

trading] and their losses are difficult if not impossible to 

identify, the gain, i.e., the total increase in value realized 

through trading in securities by the defendant and persons acting 

in concert with the defendant or to whom the defendant 

provided inside information, is employed instead of the victims‟ 

losses.”‟) (alteration and emphasis added in original) (citing 

U.S.S.G. § 2B1.4 cmt. background). 

18 We reiterate that unpublished opinions are not binding on this 

Court, but we find the opinions we cite to be persuasive in our 

analysis in this case. Furthermore, it is certainly appropriate to 

cite them in our disparity discussion as Kluger advances them in 

support of his appeal. We also are aware that both Gupta and 

Rajaratnam have been appealed and that the Court of Appeals 

for the Second Circuit has affirmed the conviction in 

Rajaratnam without addressing sentencing issues as the 
23

on 14 counts of insider-trading crimes involving trades by 

Galleon. Rajaratnam used inside information gathered from a 

number of sources to execute trades in publicly traded 

companies including Intel, Google, and Goldman Sachs. As the 

tippee, Rajaratnam was not in a position parallel to that of 

Kluger. Moreover, Rajaratnam occupied an unusual position as 

both a Galleon partner entitled to management fees and an 

investor entitled to a percentage of the gains. Nonetheless, 

without any reference to foreseeability, the court explained in its 

detailed analysis of U.S.S.G. § 2B1.4 that the correct 

interpretation of the background commentary “include[s] gains 

from trading by „persons . . . to whom the defendant provided 

inside information‟ and thereby hold[s] tippers responsible for 

gains by their tippees.” Id. at *15 (citing U.S.S.G. § 2B1.4 cmt. 

background). 

 We agree with Rajaratnam and hold that the plain 

language of the background commentary to § 2B1.4 clearly 

indicates that Kluger can be held responsible for the full extent 

of Bauer‟s gains. Bauer is explicitly an individual “to whom the 

defendant provided inside information.”19 U.S.S.G. § 2B1.4 

 

appellant in that case did not challenge his sentence on the 

appeal.

19 We are not concerned with the fact that Kluger directly 

provided the information to Robinson, who then provided the 

information to Bauer. Kluger intended Bauer to be the ultimate 

tippee because Kluger knew that Robinson would not exercise 

the vast majority of the trades on behalf of the conspirators. 
24

cmt. background. Therefore, Bauer‟s gains should be attributed 

to Kluger in their entirety, and the District Court needed to go 

no further in its calculations of the gain attributable to Kluger 

under § 2B1.4.20

Finally with respect to guidelines calculations, we note 

that we do not share the policy concerns that Kluger advances 

that a “sentence [of] an individual for unforeseeable conduct by 

a co-conspirator [] accomplish[es] no recognized penological 

aim.” Appellant‟s br. at 30. By punishing the conspirator who 

is the source of the information for all gains made by his coconspirators, we are reinforcing the deterrence message sent to 

would-be tippers by many courts. Moreover, we are sending a 

clear warning to individuals, such as Kluger, who, in an attempt 

to limit their responsibility and the extent of their potential 

sentencing exposure allege that they had agreements with their 

co-conspirators to cap the illicit gains. Would-be tippers will 

know that they cannot be certain that they will restrict their 

responsibility by coming to limiting agreements with their coconspirators prior to commission of their offenses and will come 

to realize the inherent risk in leaking inside information. We 

also point out that both what we recognize was a long sentence 

that the Court imposed on Kluger and this opinion are likely to 

come to the attention of would-be insider traders who may be 

better educated and informed than persons engaging in other 

criminal activity, particularly inasmuch as insider-trading cases 

seem to be well publicized even in the general media.

 

20 We also note that we are not faced with and therefore leave to 

another day whether this rationale applies outside the criminal 

context.
25

2. Hearing, Objections and Discovery 

When reviewing a district court‟s interpretation of the 

sentencing guidelines we exercise plenary review, but when 

reviewing a district court‟s application of the guidelines to the 

facts, we utilize an abuse of discretion deferential standard of 

review. See Aquino, 555 F.3d at 127 n.5. Kluger argues that 

the District Court denied him a presentence evidentiary hearing 

at which he could have addressed the foreseeability issue with 

respect to the scope of the agreement among the conspirators 

through direct testimony and cross-examination.21 At 

sentencing, Kluger explained that he did not stipulate to the total 

amount of “gain” because he expected to address that issue at 

the hearing that he contemplated the Court would conduct prior 

to his sentencing. Kluger also argues that the Court failed to 

resolve his objections to the presentence report and also erred in 

not ordering discovery regarding information the government 

provided to the probation officer. In particular, Kluger objected 

to the presentence report‟s characterization of the agreement 

among the conspirators and the portrayal of Kluger as the 

initiator of the conspiracy. 

Under U.S.S.G. § 6A1.3(a) (emphasis added): 

 

21 We review a refusal to grant such an evidentiary hearing for 

abuse of discretion. See United States v. Cantero, 995 F.2d 

1407, 1412 (7th Cir. 1993) (citations omitted). The government 

put Robinson, the “middleman,” on notice that he might need to 

testify at Kluger‟s sentencing hearing, but the District Court 

determined that this testimony was not necessary because the 

Court did not conduct an evidentiary hearing. 
26

When any factor important to the sentencing 

determination is reasonably in dispute, the parties shall 

be given an adequate opportunity to present information 

to the court regarding that factor. In resolving any 

dispute concerning a factor important to the sentencing 

determination, the court may consider relevant 

information without regard to its admissibility under the 

rules of evidence applicable at trial, provided that the 

information has sufficient indicia of reliability to support 

its probable accuracy. 

U.S.S.G. § 6A1.3(b) provides that, “[t]he court shall resolve 

disputed sentencing factors at a sentencing hearing in 

accordance with Rule 32(i), Fed. R. Crim. P.” Rule 32(i) 

(emphasis added) provides that at sentencing, the court:

(A) must verify that the defendant and the defendant‟s 

attorney have read and discussed the presentence report 

and any addendum to the report; 

. . . 

(C) must allow the parties‟ attorneys to comment on the 

probation officer‟s determinations and other matters 

relating to an appropriate sentence; and 

. . . 

(2) The court may permit the parties to introduce evidence on 

the objections. . . . 

(3) At sentencing, the court: 
27

. . . 

(B) must--for any disputed portion of the presentence 

report or other controverted matter--rule on the dispute or 

determine that a ruling is unnecessary either because the 

matter will not affect sentencing, or because the court 

will not consider the matter in sentencing . . . .

a. Evidentiary Hearing

The District Court held an extensive sentencing hearing 

for Kluger in which the parties addressed the Court. The 

sentencing guidelines and Federal Rules of Criminal Procedure 

do not require that a district court conduct an evidentiary hearing

in addition to a sentencing hearing at which the parties can be 

heard. Thus, “[a]n evidentiary hearing need not be afforded on 

demand because there is no „right‟ to a hearing.” United States 

v. Cantero, 995 F.2d 1407, 1413 (7th Cir. 1993) (citations 

omitted); see also United States v. Real-Hernandez, 90 F.3d 356, 

362 (9th Cir. 1996) (“There is no general right to an evidentiary 

hearing at sentencing, and a district court has discretion to 

determine whether to hold such a hearing.”) (internal citations 

omitted). In Cantero the Court of Appeals for the Seventh 

Circuit held that the district court did not abuse its discretion in 

denying the defendant in a drug conspiracy case an evidentiary 

hearing to contest the sentencing enhancement for his 

supervisory role in the conspiracy, even though the defendant 

argued that the determination of his role in the conspiracy raised 

a question of fact and that he needed to cross-examine his coconspirators so that the court could determine how to 

characterize his role. In this regard, the defendant was given a 
28

copy of the presentence report in advance of sentencing and the 

government and he submitted written memoranda on the issue. 

See Cantero, 995 F.2d at 1413. The district court, after 

considering the materials submitted on the issue, held that the 

defendant was not a leader or organizer of the criminal activity 

but rather was a manager or supervisor of the activity. 

In United States v. Collado, a case involving two brothers 

serving as heroin suppliers in a broader drug conspiracy, we 

remanded the case for resentencing because the district court 

failed to make any factual findings beyond those in the 

presentence report concerning the scope of their involvement. 

975 F.2d 985 (3d Cir. 1992). We emphasized that when a 

district court is applying § 1B1.3 “a searching and 

individualized inquiry into the circumstances surrounding each 

defendant‟s involvement in the conspiracy is critical to ensure 

that the defendant‟s sentence accurately reflects his or her role.” 

Id. at 995. But in Collado the record was unclear as to when 

the brothers initially became involved in the conspiracy, and 

therefore the record did not clearly establish the date after which 

the brothers could be held accountable for the proceeds of the 

conspiracy. See id. at 996. There is, however, no uncertainty as 

to the time during which Kluger participated in the conspiracy in 

this case because the conspiracy could not have been carried out 

prior to his involvement inasmuch as he served as the source of 

the information that made the execution of the scheme possible. 

In United States v. Rennert, building on Collado, we 

clarified that “[a]lthough we required individualized inquiry [in 

Collado], we did not impose an immutable requirement that the 

district court hold extensive hearings to make explicit, 
29

particularized findings as to the exact date on which each 

defendant committed to the conspiracy or the precise contours of 

each conspirator‟s agreement.” 374 F.3d 206, 214 (3d Cir. 

2004), vacated in part on other grounds, Miller v. United States, 

544 U.S. 958, 125 S.Ct. 1744 (2005). Consequently, we agree 

with the Court of Appeals for the Seventh Circuit “that § 6A1.3 

of the Guidelines requires the district court to provide a 

procedure — but not necessarily an evidentiary hearing — in 

which the parties may argue contested sentencing issues.” 

Cantero, 995 F.2d at 1413 (citation omitted); see also Fed. R. 

Crim. P. 32(i)(2) (“The court may permit the parties to introduce 

evidence on the objections.”) (emphasis added). Here, the 

extensive sentencing hearing before the District Court gave 

Kluger a sufficient opportunity to present his case. 

In holding Kluger responsible for the profits from the 

insider trading under the plain language of § 2B1.4 in which 

foreseeability as Kluger raises the issue in this case is not an 

issue, we agree with the District Court that there was no need 

for an evidentiary hearing. Kluger does not dispute the total 

amount gained by Bauer on which the District Court made its 

calculations and he does not deny that his tips to Bauer via 

Robinson made the gains possible. No matter what the terms of 

the agreement among the conspirators, those terms would not 

have altered the fact that Kluger provided the information that 

reached Bauer via Robinson and made it possible for Bauer to 

make substantial gains by trading on that information. 

Furthermore, even if the foreseeability to Kluger of the extent of 

Bauer‟s trades had been an issue in Kluger‟s sentencing, as he 

claims it should have been, as the District Court explained, 

Kluger could not have “made one of his regular trips north to 
30

pick up his cash proceeds, [and then] return[ed] back resting 

comfortably in the idea that nobody else had a dollar more than 

he did of gain.” App. at 63. 

b. Objections

In a May 25, 2012 letter to the District Court, Kluger 

complained that the presentence report did not adequately 

address his objections. As noted above, Kluger objected to the 

characterization of the scheme, which he alleged was based on 

an underlying agreement regarding the division and targeted 

range of profits, thereby altering the calculation of the gains 

attributable to him and explaining the absence of a loss 

stipulation in the plea agreement. Kluger also objected to the 

presentence report‟s description of him as the initiator of the 

scheme, a characterization that he would have attempted to rebut 

in testimony at a presentence evidentiary hearing. The 

presentence report read:

In the summer of 1994, Kluger, who was then in 

law school at NYU and working as a summer 

associate at Cravath [,Swaine & Moore], 

contacted Robinson and told him „I‟ve got 

something,‟ meaning that he had access to inside 

information through his employment at the law 

firm. Kluger explained that he could learn of 

merger activity before the information was public 

through his work at the firm. At Kluger‟s request, 

Robinson agreed to help find individuals willing 

to buy and sell stocks based on the inside 

information Kluger provided. Robinson 
31

approached Bauer, a professional stock trader and 

Robinson‟s friend, who agreed to trade based on 

the inside information provided by Kluger.

PSR ¶ 34. Kluger, however, proposed the following paragraph:

Kluger and Robinson remained friends after their 

brief stint working together at the Manhattan real 

estate company, REQuest, and would speak on 

the phone from time to time. In the summer of 

1994, Kluger was in law school at NYU and 

working as a summer associate at Cravath, 

Swaine & Moore. In several telephone 

conversations in which Kluger and Robinson 

discussed each other‟s work and current lives, 

Robinson became aware that Kluger was working 

on potentially high profile [merger and 

acquisition] deals and that he was learning of 

merger activity before the information became 

public through his work at the firm. Robinson 

then told Kluger about his friend Garrett Bauer, a 

professional stock trader and Robinson‟s friend. 

Robinson approached Bauer who agreed to trade 

based on the inside information provided by 

Kluger. Kluger, Bauer and Robinson agreed that 

profits from any inside information provided by 

Kluger would be split equally among the three of 

them. From the beginning of the scheme, Bauer 

did not honor his agreement to split profits 

equally among the three participants and, instead, 

kept the majority of the profits for himself. 
32

Kluger was unaware that Bauer was trading over 

and above the amounts discussed between Kluger 

and Robinson.

PSR ¶ 57. 

The Probation Department, however, is not required to 

resolve all objections. Following Fed. R. Crim. P. 32(g), the 

probation officer “submit[ted] to the court and to the parties the 

presentence report and an addendum containing any unresolved 

objections, the grounds for those objections, and the probation 

officer‟s comments on them.” Fed. R. Crim. P. 32(g).

In considering the presentence report the District Court 

complied with the applicable federal rules of criminal procedure.

Fed. R. Crim. P. 32(i)(3)(B) provides that the sentencing court 

“must--for any disputed portion of the presentence report or 

other controverted matter--rule on the dispute or determine that 

a ruling is unnecessary either because the matter will not affect 

sentencing, or because the court will not consider the matter in 

sentencing . . . .” The District Court made its disposition with 

respect to the dispute concerning the existence of a limiting 

agreement among the conspirators by refusing to grant a hearing 

on the grounds that Kluger could not prove anything at the 

hearing that would impact on the Court‟s determination of his 

sentence. The Court reached its conclusion as to how to proceed 

by relying on the plain language of § 2B1.4 and by taking into 

account its concern over the potential for unreliable testimony 

regarding the agreement. At the sentencing hearing, the Court 

explained that it was “fully satisfied that the background note to 

the insider trading . . . guideline[] fully covers Mr. Bauer‟s 
33

activities and Mr. Kluger‟s activities. And that the gain 

attributable to Bauer‟s activities is attributable to Kluger in 

terms of the exposure to the guideline,” regardless of the 

existence of an agreement. App. at 63. 

Clearly, in Kluger‟s proposed changes to the presentence 

report quoted above he attempts to describe his role in the 

scheme in more benign terms than the report described his role. 

Thus, Kluger suggests that the presentence report should have 

recited that “Robinson became aware,” of Kluger‟s access to 

inside information whereas the report states that Kluger directly 

contacted Robinson and informed him that he had access to 

inside information. The presentence report also states that 

Kluger asked Robinson to locate an individual capable of 

executing the trades on their behalf whereas Kluger claims that 

Robinson told him about Bauer and approached Bauer on his 

own. 

Kluger concedes that he did not object to the presentence 

report at sentencing but attributes his failure to object to his 

expectation that the Court would resolve factual disputes at the 

evidentiary hearing that he contemplated that the Court would 

hold before imposing sentence. Kluger argues that even though 

the District Court did not directly address his alleged initiating 

role in the scheme, the Court could not have failed to consider it. 

Kluger, however, is in no position to make assumptions as to 

what the District Court did or did not take into consideration in 

rendering its sentence. Ultimately, Kluger was the source of the 

information that Bauer used to make his trades; the 

identification of the originator of the underlying scheme was of 

minimal significance in view of the circumstance that Kluger 
34

was a full participant in the conspiracy, and therefore an inquiry 

into the originator of the scheme did not merit an individualized 

sentencing hearing. 

c. Discovery

Kluger claims that there are materials, including recorded 

conversations and emails, that would prove that there was an 

agreement among the three conspirators regarding the limits of 

the insider-trading scheme.22 He maintains that the government 

violated his due process rights by not supplying to him all of the 

materials that it provided to the probation office which he argues 

functions as “an independent arm of the court,” not as “an arm 

of the government.” Appellant‟s br. at 57. But Fed. R. Crim. P. 

32, which deals with presentence reports does not provide for 

such broad discovery with respect to presentence materials. 

Rather, Rule 32(e)(2), requires that the probation officer give 

the report itself to the defendant, the defendant‟s counsel, and a 

government attorney at least 35 days prior to sentencing unless 

the defendant waives the time requirement. Rule 32(f) provides 

that the parties have 14 days to object in writing and to provide 

 

22 In particular, Kluger maintains that he should have received 

tapes/transcripts of Robinson‟s post-arrest conversations with 

Bauer. We believe he is referring to the conversations between 

Robinson and Bauer following Robinson‟s decision to cooperate 

with the government. The presentence report provides a 

detailed overview of those conversations. We are not aware of 

any communications between Bauer and Robinson after their 

arrests on the charges involved in this case. 
35

those objections to the probation officer and to the opposing 

party. The probation officer then may meet with the parties to 

review their objections. See Rule 32(f)(3). At least seven days 

before sentencing, the probation officer must provide the report 

and related objections to the court and parties.23 See Rule 32(g). 

Thus, Rule 32 did not require that Kluger be given the 

discovery that he sought. 

In any event, even if the rules provided that such 

discovery materials should have been supplied, Kluger does 

nothing more than speculate with respect to the existence of 

such materials, especially in the absence of any indication that 

the government failed to comply with the rule‟s disclosure 

requirements that should be made. The government counters 

that it already disclosed all of the information, such as the 

transcripts and copies of the calls that Robinson covertly 

recorded, and, at sentencing, the District Court accepted the 

 

23 The only additional disclosure occurs at sentencing when the 

court “must give to the defendant and an attorney for the 

government a written summary of--or summarize in camera--any 

information excluded from the presentence report under Rule 

32(d)(3) on which the court will rely in sentencing, and give 

them a reasonable opportunity to comment on that information.” 

Fed. R. Crim. P. 32(i). Rule 32(d)(3) requires the presentence 

report to exclude: “(A) any diagnoses that, if disclosed, might 

seriously disrupt a rehabilitation program; (B) any sources of 

information obtained upon a promise of confidentiality; and (C) 

any other information that, if disclosed, might result in physical 

or other harm to the defendant or others.” 
36

government‟s assertion.24 

3. Reasonableness 

We review the procedural and substantive reasonableness 

of the sentence for abuse of discretion. See United States v. 

Friedman, 658 F.3d 342, 360 (3d Cir. 2011) (citation omitted). 

“At both [the procedural and substantive] stages of our review, 

the party challenging the sentence has the burden of 

demonstrating unreasonableness.” United States v. Tomko, 562 

F.3d 558, 567 (3d Cir. 2009) (en banc) (citation omitted)). 

a. Procedural Reasonableness

In the wake of United States v. Booker, 543 U.S. 220, 

125 S.Ct. 738, we have instructed district courts to adhere to a 

three-step sentencing process. See Gunter, 462 F.3d at 247. 

First, the district “[c]ourts must continue to calculate a 

 

24 The government indicates in its brief that the only information 

that it provided to the probation office that it did not provide to 

Kluger were copies of his personnel files from his employment 

at the law firms where he obtained inside information. These 

files provided the support for the parts of the presentence report 

outlining the dates of his employment, his salary, and the 

training he received. But the government contends that Kluger 

had independent access to these files. Moreover, with or 

without such access to the files Kluger surely had the 

information that the files contained with respect to his salary, 

training, and dates of employment and he knew that the firms 

gave him instructions with respect to insider trading. 
37

defendant‟s Guidelines sentence precisely as they would have 

before Booker.” United States v. Brown, 578 F.3d 221, 225 (3d 

Cir. 2009) (footnote, internal quotation marks, and citations 

omitted). Second, “they must formally rule on the motions of 

both parties and state on the record whether they are granting a 

departure and how that departure affects the Guidelines 

calculation, and take into account our Circuit‟s pre-Booker case 

law, which continues to have advisory force.” Id. (internal 

quotation marks and citations omitted). Third, the district courts 

“are to exercise their discretion by considering the relevant § 

3553(a) factors . . . in setting the sentence they impose 

regardless whether it varies from the sentence calculated under 

the Guidelines.” Id. (internal quotation marks and citations 

omitted). In order to satisfy step three, “[t]he record must 

disclose meaningful consideration of the relevant statutory 

factors and the exercise of independent judgment, based on a 

weighing of the relevant factors, in arriving at a final sentence.” 

United States v. Grier, 475 F.3d 556, 571-72 (3d Cir. 2007) 

(citation omitted). In accordance with Gunter, the District Court 

calculated that Kluger had an adjusted offense level of 33 and a 

sentencing range of 135-168 months. After reviewing the 

applicable § 3553(a) factors, the District Court sentenced Kluger 

to a custodial term of 144 months, in the middle of his 

guidelines range. 

We focus our review on Kluger‟s challenge to the District 

Court‟s application of step three of the sentencing process. 

Under 18 U.S.C. § 3553(a), the district court should impose a 

sentence that is “sufficient, but not greater than necessary” to 

comply with the purposes discussed in the second criterion 

below. In particular, the court should consider:
38

(1) the nature and circumstances of the offense and the 

history and characteristics of the defendant;

(2) the need for the sentence imposed--

(A) to reflect the seriousness of the offense, to 

promote respect for the law, and to provide just 

punishment for the offense; 

(B) to afford adequate deterrence to criminal conduct;

(C) to protect the public from further crimes of the 

defendant; and 

(D) to provide the defendant with needed educational 

or vocational training, medical care, or other 

correctional treatment in the most effective manner; 

(3) the kinds of sentences available;

(4) the kinds of sentence and the sentencing range 

 established for--

(A) the applicable category of offense committed by 

the applicable category of defendant as set forth in 

the guidelines--

. . . 

(5) any pertinent policy statement--

 (A) issued by the Sentencing Commission 
39

 . . . 

(6) the need to avoid unwarranted sentence disparities 

among defendants with similar records who have been 

found guilty of similar conduct; and 

(7) the need to provide restitution to any victims of the 

 offense. 

The sentencing court “meaningful[ly] consider[s]” the 

factors by “acknowledg[ing] and respond[ing] to any properly 

presented sentencing argument which has colorable legal merit 

and a factual basis.” United States v. Begin, 696 F.3d 405, 411 

(3d Cir. 2012) (internal quotation marks and citations omitted). 

Yet the court does not need to “discuss and make findings as to 

each of the § 3553(a) factors if the record makes clear the court 

took the factors into account in sentencing.” United States v. 

Jackson, 467 F.3d 834, 841 (3d Cir. 2006) (internal quotation 

marks and citations omitted). After considering the factors, the 

District Court imposed a custodial sentence within the 

guidelines sentencing range of 144 months on Kluger, which, as 

we have indicated, was the longest insider-trading sentence in 

history. But as we noted in Cooper, „“reasonableness is a range, 

not a point.”‟ United States v. Cooper, 437 F.3d 324, 332 n.11 

(3d Cir. 2006) (citation omitted), abrogated on other grounds by

Kimbrough v. United States, 552 U.S. 85, 128 S.Ct. 558 (2007).

Kluger argues that the District Court focused on “the 

seriousness of the offense” (§ 3553(a)(2)(A)) and on 

“afford[ing] adequate deterrence” (§ 3553(a)(2)(B)) to the 

exclusion of other factors, such as the “nature and circumstances 
40

of the offense and the history and characteristics of the 

defendant” (§ 3553(a)(1)). According to Kluger, “the judge 

essentially did no more than mechanically recite the statutory 

words, rather than applying them to the defendant at hand.” 

Appellant‟s br. at 41-42 (internal citation omitted). The Court, 

however, engaged in a thorough discussion of the 

“circumstances of the offense,” such as the 17-year duration of 

the conspiracy and the fact that the conspirators continued the 

scheme even after learning of investigations by regulators on 

two separate occasions.25 The Court, which has the discretion to 

determine the extent to which each factor merits discussion, also 

addressed “the history and characteristics of the defendant,” 

such as Kluger‟s loving and supportive family, privileged 

childhood, and the ability of the Bureau of Prisons to manage 

his poor health during his incarceration.26 See United States v. 

King, 604 F.3d 125, 144 (3d Cir. 2010) (citation omitted). 

 Kluger focuses his appeal on what he perceives was the 

vast disparity between his sentence and that of his coconspirator Bauer as well as the sentences of other defendants 

convicted of insider trading throughout the country, particularly 

in the Southern District of New York, quite naturally the venue 

 

25 Although the District Court did not directly discuss the need 

to protect the public from Kluger, it addressed the harmful 

impact of insider trading on the broader public.

26 Kluger also presented to the District Court that he is gay but 

separated from his former partner and that he and his former 

partner care for their three children including one with an autism 

spectrum disorder.
41

for numerous insider-trader prosecutions. Under § 3553(a)(6), a 

sentencing judge considers “the need to avoid unwarranted 

sentence disparities among defendants with similar records who 

have been found guilty of similar conduct.” Courts apply § 

3553(a)(6) to compare sentences between co-defendants or 

among defendants in separate cases, as long as the “defendants 

are similarly situated.” King, 604 F.3d at 145 (citations 

omitted). Section 3553(a) “does not require district courts to 

consider sentencing disparity among co-defendants,” but “it also 

does not prohibit them from doing so.” United States v. Parker, 

462 F.3d 273, 277 (3d Cir. 2006). Bauer, Kluger‟s coconspirator, netted gains many times larger than those that 

Kluger obtained from the conspiracy but the Court nevertheless 

sentenced Bauer to a nine-year custodial term at the bottom of 

his guidelines range. The Court, on the other hand, sentenced 

Kluger to a 144-month custodial sentence, a term in the middle 

of his guidelines range. 

Though there is an obvious disparity between Kluger‟s 

and Bauer‟s sentences there was a good reason for the District 

Court to have imposed a longer sentence on Kluger than on 

Bauer. In this regard, we cannot overlook the circumstance that 

Kluger served as the source of the information that permitted the 

scheme to function. Furthermore, Kluger was an attorney who 

took an oath to uphold the law. Moreover, it is really quite 

remarkable that Kluger could not even wait to graduate from 

law school before using his employment at a law firm to initiate 

his illegal activities and it is equally remarkable that during most 

of his legal career he was involved in criminal activity, so that in 

an actual though perhaps not in a legal technical sense as the 

term is used in the sentencing guidelines, he truly was a career 
42

criminal. Furthermore, the presentence report makes clear that 

Kluger had a legitimate income well into six figures from his 

employment at various law firms, an income that should have 

made it seem less urgent to him to enhance by criminal activity. 

On the other hand, it is significant that Bauer had engaged in 

extensive community service work pre- and post-arrest that 

helped justify the within-guidelines sentence at the lower end of 

his range. In any event, Bauer and Kluger both received withinguidelines sentences, and such sentences generally do not lead to

disparities requiring that a defendant be granted relief because 

“avoidance of unwarranted disparities was clearly considered by 

the Sentencing Commission when setting the Guidelines 

ranges.” Gall v. United States, 552 U.S. 38, 54, 128 S.Ct. 586, 

599 (2007). 

The District Court informed the parties at sentencing that 

it had examined a number of other insider-trading cases and 

recognized “that right now sentencing judges have expressed 

some dismay over the guidelines sentences applicable to some 

defendants.”27 App. at 87. The Court specifically mentioned 

the case of Winifred Jiau, who worked for a Silicon Valley 

expert network and was convicted of leaking secret information 

about tech companies to traders at hedge funds. See United 

States v. Jiau, 794 F. Supp. 2d 484, 485 n.2 (S.D.N.Y. 2011). 

Her sentencing guideline range amounted to six-and-a-half to 

 

27 The District Court even mentioned Morrison & Foerster‟s 

2011 Insider Trading Annual Review cited by defense counsel 

as evidence of the widespread use of downward variances in 

such sentences. 
43

eight years, but the district court nevertheless sentenced her to 

four years in prison. The sentencing court in the Jiau case 

explained: “There‟s no way that I‟m going to impose a guideline 

sentence in this case [because] the guidelines give a mirage of 

something that can be obtained with arithmetic certainty.” App. 

at 87 (internal quotation marks omitted).28 But at Kluger‟s 

sentencing, the District Court distinguished between the Jiau

case and Kluger‟s case. The overall profit attributed to Jiau‟s 

information was only $2.5 million, and the Jiau court exercised 

its discretion to sentence her based strictly on what she obtained 

from her offense.29 On the other hand, in Kluger‟s case, the 

District Court found that “unlike the sentenc[es] where judges 

have seen no real connection between the guidelines driven by 

the amount of gain and the conduct of the individual defendant 

before [them],” there was no such disconnect in Kluger‟s case. 

Id. at 96. 

Moving beyond Jiau, the District Court explained that 

many of the other below-guidelines sentences stemmed from 

 

28 See Walter Pavlo, Winifred Jiau Gets 4 Years in Prison, And 

What a Journey, Forbes (Sept. 21, 2011, 6:48 PM), 

http://www.forbes.com/sites/walterpavlo/2011/09/21/winifredjiau-gets-4-years-in-prison-and-what-a-journey/.

29 Though we use the term “only” in describing a profit of $2.5 

million we do so because we are comparing $2.5 million to the 

sometimes far greater illegal gains involved in other so-called 

white collar criminal cases. Ordinarily, we, like most people, 

would not refer to $2.5 million as a small sum as to us, like most 

people, it is a lot of money. 
44

agreements between the government and the defendant. For 

example, the Court discussed the case of Joseph “Chip” 

Skowron, who faced a guidelines range of 87-108 months but 

struck an agreement with the government pursuant to which the 

government recommended that the court impose a 60-month 

custodial sentence on him. The Court also discussed what it 

characterized as “the very notorious case” of Raj Rajaratnam 

that we addressed above in our discussion of Kluger‟s 

sentencing range. Rajaratnam, 2012 WL 362031. On May 11, 

2011, a jury in the Southern District of New York convicted 

Rajaratnam on 14 counts of conspiracy and securities fraud, in a 

scheme that netted in excess of $60 million. Though 

Rajaratnam faced an applicable guidelines range of 235-293 

months, the court sentenced him to a custodial term of 132 

months in spite of the government‟s portrayal of him as the 

modern face of insider trading. The District Court here 

differentiated between Rajaratnam and Kluger on the grounds 

that in the latter‟s case, the “conduct [was] not just a trade, not 

just a series of trades over one company . . . [b]ut 17 years of 

trades and money laundering and obstruction of justice.” App. 

at 90. By drawing the distinction, the Court not only 

demonstrated why Kluger was not similarly situated to 

Rajaratnam but also demonstrated that it took Kluger‟s 18 

U.S.C. § 3553(a)(6) arguments into consideration.30 

 

30 We do not mean to suggest that defendants must have 

identical backgrounds to merit comparison under § 3553(a)(6). 

Yet we reiterate the explanation that we gave in United States v. 

Jimenez, 513 F.3d 62, 91 (3d Cir. 2008), in which we rejected 

the defendant‟s § 3553(a)(6) argument: “That [defendant] can 
45

Unfortunately for Kluger, the District Court found that 

his actions constituted “a more thuggish, more direct example of 

taking other people‟s stuff. And at [the] same time for all its 

acridity, a highly successful scheme because of the money 

laundering. Because of the simplicity, because of the limited 

number of people involved in it. Because of the discipline.” 

App. at 90. The Court added: “I don‟t know any of the other 

defendants who are accused of individual trades. . . . Not a 

pattern of how one runs a hedge fund but individual trades. I 

haven‟t seen any of them with this number of trades. And this 

consistency of engaging in insider information.” Id. at 97. 

Moreover, the Court differentiated between Kluger and other 

lawyers who have been convicted of insider trading: “[T]he 

lawyers who have otherwise been prosecuted did not perform[] 

the kind of [wholesale] purloining of information on a regular 

and steady basis . . . .” Id.

In the end, “[t]he touchstone of „reasonableness‟ is 

whether the record as a whole reflects rational and meaningful 

consideration of the factors enumerated in 18 U.S.C. § 3553(a).” 

Grier, 475 F.3d at 571 (footnote and citations omitted). We 

find that the record more than meets that requirement, especially 

 

find another case where a defendant charged with a somewhat 

similar crime and facing the same advisory sentencing range 

received a sentence outside of the applicable sentencing range 

does not make [defendant‟s] within-Guidelines sentence 

unreasonable. If that were the law, any sentence outside of the 

Guidelines range would set precedent for all future similarly 

convicted defendants. This is not, and cannot be, the law.” 
46

because we “„give due deference to the district court‟s 

determination that the § 3553(a) factors, on a whole,‟ justify the 

sentence.”31 Tomko, 562 F.3d at 568 (citations omitted). As 

long as “the district court‟s sentence is procedurally sound, we 

will affirm it unless no reasonable sentencing court would have 

imposed the same sentence on that particular defendant for the 

reasons the district court provided.” Id. Here, we do not find 

that no other reasonable sentencing court would have imposed 

the sentence.

b. Substantive Reasonableness

Once we are satisfied, as we are here, that a district court 

did not commit procedural error, we review the sentence for 

substantive reasonableness. See United States v. Negroni, 638 

F.3d 434, 443 (3d Cir. 2011). As noted above, the District Court

imposed a within the guidelines custodial sentence of 144 

months, and therefore we take into account our recognition that 

“[a] sentence that falls within the recommended Guidelines 

range, while not presumptively reasonable, is less likely to be 

unreasonable than a sentence outside the range.” United States 

v. Lessner, 498 F.3d 185, 204 (3d Cir. 2007) (citation omitted).

Kluger‟s focus on the procedural aspects of the sentence 

offers little in the way of substantive argument regarding what 

 

31 “[T]he district court‟s superior vantage point compels us to 

give due deference to [its] determination that the § 3553(a) 

factors, on a whole, justify the sentence.” United States v. 

Merced, 603 F.3d 203, 214 (3d Cir. 2010) (alteration in original) 

(internal quotation marks and citations omitted).
47

he believes was the District Court‟s “draconian sentence.” 

Appellant‟s br. at 46. He provides an overview of mitigating 

factors that echoes the arguments under § 3553(a)(1) that we 

already have discussed regarding his history and characteristics. 

Kluger reiterates his argument that the sentence is particularly 

unreasonable as compared to that imposed on Bauer, who 

reaped millions more in profits and yet received a custodial 

sentence of 108 months at the bottom of his guidelines range 

which was shorter than that imposed on Kluger. Yet Kluger‟s 

argument does not give adequate attention to the circumstance 

that he received a two-level sentencing enhancement for abusing 

his position of trust as an attorney and did not perform a 

commensurate level of community service pre- and post-arrest 

as did Bauer, thereby qualifying Kluger for a higher guideline 

range and justifying his mid-range sentence. 

After reiterating the § 3553(a) factors, Kluger summarily 

concludes that his sentence fails the test of substantive 

reasonableness and then quotes from Judge Fisher‟s dissent in 

Tomko to support his position that: “[I]f substantive 

reasonableness review is to mean anything, courts of appeals 

must attempt to give content to this component of our review 

until the Supreme Court provides further guidance.” Tomko, 

562 F.3d at 591 (Fisher, J., dissenting). But the concern that 

Judge Fisher expressed in his Tomko dissent is certainly not a 

concern here. We do not doubt that Kluger received a fairly 

severe sentence as compared to Bauer and to other defendants in 

insider-trading cases who were convicted in the Southern 

District of New York. Yet we do not exercise plenary review 

when examining the substantive reasonableness of a sentence, 

and the District Court set forth adequate reasons “to satisfy [us] 
48

that [it] considered the parties‟ arguments and [had] a reasoned 

basis for exercising [its] own legal decisionmaking authority.” 

Merced, 603 F.3d at 215-16 (citing Rita v. United States, 551 

U.S. 338, 356, 127 S.Ct. 2456, 2468 (2007)). Furthermore, 

„“[t]he fact that [we] might reasonably have concluded that a 

different sentence was appropriate is insufficient to justify 

reversal of the district court.”‟ Tomko, 562 F.3d at 560 (citation 

omitted).32 The District Court was in a superior position than 

we are to make the sentencing determination in this case, and we 

afford great deference to its decision. Kluger, as the challenging 

party, fails to meet his burden to overcome the deference that we 

owe the District Court‟s determinations and we cannot say that 

“no reasonable sentencing court” would have imposed the same 

sentence that it imposed. Consequently, we will not disturb the 

sentence on the grounds that it was substantially unreasonable. 

See id. at 568. 

V. CONCLUSION

For the foregoing reasons, we will affirm the judgment of 

conviction and sentence entered June 4, 2012. 

 

32 We are not implying that if we had imposed the sentence in 

the first instance that we might have imposed a shorter sentence. 

We simply are making it clear that even if we would have done 

so that circumstance would not require that we reverse here.