A former Nasdaq executive, Donald Johnson, has pleaded guilty to one count of securities fraud for insider trading to reap more than $640,000 over three years, the U.S. Justice Department said.
Johnson, 56, worked as a director and then managing director of Nasdaq's market intelligence desk before retiring in October 2009, according to the U.S. Attorney's office for the Eastern District of Virginia.
During his tenure at the market, Johnson was responsible for monitoring the stock of companies traded on the Nasdaq as well as providing them information and analyses about trading in their own stock.
He received advance information about upcoming companies' earnings, news releases and key personnel changes which he used to buy and sell stocks eight times between August 2006 and July 2009 to earn the illicit profits, according to court papers.
"Mr. Johnson was a fox in a hen-house," Lanny Breuer, assistant attorney general for the Justice Department's criminal division, told reporters during a conference call. "He cheated the system to line his own pockets. He violated his duty to companies and the investing public alike."
The case is the latest in a major crackdown on insider trading by the Obama administration. Earlier this month a jury in New York convicted hedge fund founder Raj Rajaratnam on 14 counts of securities fraud and conspiracy for insider trading.
In March, prosecutors in Maryland charged a Food and Drug Administration chemist with using non-public information to trade stocks before drug approvals were publicly released and allegedly earned millions of dollars.
"I think what you're seeing is the results really of our re-doubled enforcement efforts in this administration," Breuer said.
In the Johnson case, prosecutors said he made small trades only a handful times each year to try to avoid detection. His activities were discovered first by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
Trading by individuals who work in the securities industry is typically closely watched for insider trading.
Johnson's biggest gain, about $175,000, came in November 2007 when he used confidential information about the successful trial results for the United Therapeutics drug Viveta, now also known as Tyvaso, according to the court documents.
The Securities and Exchange Commission, which filed parallel charges against Johnson, said that he periodically used his wife's online brokerage account. The SEC accused him of reaping more than $755,000 in illegal trading profits and included a ninth trade involving an energy company.
"Today Mr. Johnson chose to accept responsibility for his actions in the past," said his attorney Jonathan Simms. "Those who know Mr. Johnson will agree that these charges in no way are indicative of his overall character."
However, Johnson did not settle with the SEC over its civil charges Thursday.
He faces a maximum of 20 years in prison, a $5 million fine and forfeiture of ill-gotten gains. His lawyer said that sentencing guidelines suggest a sentence of around two-and-a-half years to three years.
However, he could face more time in prison if the government seeks an enhanced sentence because of the nature of his sensitive position at Nasdaq. Sentencing is set for Aug. 12.
Nasdaq spokesman Joe Christinat said the exchange operator is cooperating fully with authorities on the case.
The case is USA v Donald Johnson, No. 11-cr-00254, in U.S. District Court for the Eastern District of Virginia.
© 2024 Thomson/Reuters. All rights reserved.