Related topics

Ex-Goldman Sachs Economist Is Indicted

September 4, 2003

NEW YORK (AP) _ A former top economist at Goldman Sachs & Co. was indicted Thursday on seven counts charging him with illegally trading on confidential information about the Treasury Department’s plan to end sales of 30-year bonds.

John Youngdahl, 44, was charged with conspiracy, wire fraud and securities fraud, among other charges.

Federal prosecutors in Manhattan also charged a Wall Street consultant, Peter Davis, 53, with illegally providing the information to Youngdahl so he could pass it on to Goldman traders. Davis pleaded guilty to conspiracy and wire fraud on Wednesday, prosecutors said.

``A scheme to steal confidential information from the Treasury Department and tip off others shakes the confidence of the investing public,″ Manhattan U.S. Attorney James Comey said in a statement. ``It is not to be tolerated.″

Youngdahl was to appear in court Thursday afternoon. Attorneys for the two men could not immediately be reached.

The indictment centers on an Oct. 31, 2001, announcement that the department was suspending issuance of its 30-year bond _ a development that triggered one of the biggest single-day rallies ever in the U.S. bond market.

Davis allegedly attended the department’s press conference and illegally called in embargoed information to Youngdahl. Goldman traders made $1.5 million in illegal profits by snapping up the bonds before the information went public, prosecutors say.

Davis attended quarterly Treasury Department press conferences in 2001 and illegally provided Youngdahl with non-public information. Conference attendees must agree not to publicize the information before an embargo time set by the Treasury Department, the indictment said.

As the criminal charges were filed, the Securities and Exchange Commission filed a civil suit against Youngdahl, Davis and Steven Nothern, who the SEC said bought $25 million in bonds on the illegal information.

At the time of the 2001 press conference, Nothern was a senior vice president at MFS Investment Management, a Boston-based investment consulting firm.

The SEC said Davis had settled the SEC charges against him, agreeing to pay at least $149,000 and never to commit fraud again. He neither admits nor denies the charges under the settlement.

Goldman itself agreed to pay more than $9.3 million to settle charges by the SEC that it failed to stop traders from buying on the news, the agency said Thursday.

MFS has agreed to pay about $900,000 to settle its charges, the SEC said.

``Acting quickly on market-moving news after it becomes fully public is one thing,″ SEC enforcement chief Stephen Cutler said. ``Tipping by a recipient of embargoed news, and trading based on such a tip, is quite another.″


On the Net:

Goldman Sachs & Co.: http://www.gs.com

Securities and Exchange Commission: http://www.sec.gov