Craig Ryan Spradling was in a hurry. By the time he was 23 years old, he had sped through college and law school and he had landed a job at a high-powered Manhattan law firm. But maybe he went a little too fast for his own good. On June 11, his swift ride to a kind of success came to a halt, when he found himself in a holding cell downtown.
In his first weeks at the brainy firm of Cleary, Gottlieb, Steen & Hamilton, Mr. Spradling had to endure the usual loathsome chores that are an inevitable part of the hazing ritual for corporate law novices: rewriting the outskirts section of a regulatory filing and drafting a Schedule 13-D amendment for good measure. But soon enough, in October 1996, he was handed his first big assignment. This was a snazzy deal, a $1.3 billion acquisition. Cleary’s client, a German company named Henkel K.G.a.A., was looking to take over an American counterpart, Loctite Corporation. Mr. Spradling’s way of nosing further into the trans-Atlantic excitement, according to Federal prosecutors, was to call his broker. He ordered $6,000 worth of options on Loctite five days before news of the deal broke. A week later, after Henkel announced its bid, Mr. Spradling sold his shares for a profit of $49,000. In making the quick killing, Mr. Spradling had allegedly committed an undisguised act of insider trading.
For over a year after the suspicious trade, it looked like he had gotten away with it. Cleary considered him a model associate and awarded him with a plum transfer to its London office. But a month ago, the firm called him back from his post without telling him why. On his June 11 return to New York, Mr. Spradling was arrested and arraigned in a Pearl Street courtroom. If convicted, the young lawyer faces as many as 10 years in prison, a fine of $1 million and likely disbarment. The Securities and Exchange Commission is looking to fine him as much as an additional $147,000.
Mr. Spradling’s day in court remains months in the future, and for the time being he has kept himself unavailable for comment. But he already has one strike against him: Cleary has dismissed him.
Mr. Spradling graduated Phi Beta Kappa from Wesleyan University in 1993, at the age of 20. He then studied law at his home state campus, the University of Texas. At Cleary, his work was exemplary, said the firm’s managing partner Ned Stiles. He zipped along this path despite suffering from cerebral palsy. He is “visibly disabled,” according to Mr. Stiles, with muscle control difficulties in both his legs and arms.
Despite his many talents, Mr. Spradling seemed to be inept at dirty dealing. He allegedly traded in a matter he was working on with his regular broker, using neither an alias nor an offshore bank. A hundred back-office shlubs have done it with more cunning, at least until their streaks ran out.
Mr. Spradling may well have recognized that he wasn’t very good at the greed game. The Government has not accused him of attempting other illegal trades.
However he pleads, it’s likely that his attorney will cast this as the act of a baby reaching for the stove. At last word, he doesn’t have counsel, according to Marjorie Peerce, a lawyer with whom he discussed his case.
“There’s no way he couldn’t have known this was wrong conduct,” said Barry Rashkover, an assistant regional director of the S.E.C. “He has a good deal of education, he worked directly on the deal, and Cleary had clear internal policies against this.” Mr. Spradling would have heard about those policies during his orientation as a summer associate in 1995, on his first day as full-time associate in September 1996, and then during training while working on the Henkel deal.
Cleary lawyers thought him personable and motivated. He was “very eager to get involved with our computer committee,” said Mr. Stiles. “I haven’t talked to anybody who doesn’t think it utterly inexplicable.” Evan Davis, a Cleary partner now running for State Attorney General, was also surprised by the arrest. “He was pleasant, approachable, he’d say hello in the halls,” Mr. Davis said.
But he apparently lied to the firm from the very start. His résumé on file at Cleary lists a 1993 Master of Science degree in computer science from Yale University. At first, Mr. Stiles said Mr. Spradling earned the M.S. while working simultaneously toward his B.A. at Wesleyan. But Yale’s alumni association, registrar and computer science department have no record of a Craig Spradling. Told of the apparently inflated résumé, Mr. Stiles said, “I don’t know what to tell you-Yale has no record of this?” He added that Cleary usually requests only law school transcripts.
The law world has seen numerous insider trading crimes more profitable than the one attributed to Mr. Spradling. In November 1997, Marisa Baridis, a lawyer at Morgan Stanley, Dean Witter, Discover & Company and Smith Barney Inc., was nabbed for unsavory trading. In 1995, an associate at Cravath, Swaine & Moore, Richard Woodward, pled guilty to blabbing about his deals to his Mormon brother and his friends, which yielded for them $450,000 in trading booty. Mr. Woodward managed to elude disbarment, but unlike Mr. Spradling, he also did not personally trade or profit. Mr. Spradling’s initial profit is the same amount rogue investment banker Dennis Levine scored on his first deal, but Mr. Levine involved a web of people over many months of illegal trades.
To the Lockup
Magnitude aside, Mr. Spradling’s lawyer must contend with the fact that he did not come clean earlier.
On June 10, less than a month after packing up his Jersey City, N.J., apartment and moving to London, Mr. Spradling took a call in London from Cleary partner Alan Beller. Mr. Beller asked him to come back to New York, and Mr. Spradling agreed without asking why, according to Mr. Stiles. The firm had been cooperating with the investigation since the middle of May and suspended him upon learning that he would be charged. Mr. Spradling arrived in New York on June 11 and got a room in a Manhattan hotel. F.B.I. agents arrested him there and took him to the lockup at the Pearl Street courthouse.
After the arraignment, Lawrence Friedman, the firm’s head of associates, and David Brodsky, a partner who specializes in white-collar defense, grabbed a few minutes with him at the courthouse. After a discussion, they dismissed him from the firm. Mr. Spradling apologized for bringing injury to the firm and expressed gratitude for the chance to work at Cleary. He asked Mr. Brodsky if he could recommend a lawyer, and the partner offered two or three names. And then Mr. Spradling was released on his own recognizance.
At Cleary, Mr. Spradling was pulling in close to $110,000 a year. Now he’ll have to use his legal smarts to come up with a credible defense.