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Tag: material nonpublic information

  • URGENT >> BULLETIN >> MOVING: Former NASDAQ Managing Director Charged Criminally, Sued Civilly In Insider-Trading Case; Donald L. Johnson Pleads Guilty To Criminal Securities Fraud Amid Allegations He Cherry-Picked Information While Serving As Stock-Exchange Gatekeeper

    URGENT >> BULLETIN >> MOVING: A former managing director of the NASDAQ stock exchange has been charged by both the SEC and federal prosecutors in an insider-trading case.

    Donald L. Johnson, 56, of Ashburn, Va., already has pleaded guilty on the criminal side of things, the Justice Department said.

    For its part, the SEC said Johnson abused his position, made trades from his work computer and racked up $755,000 dollars in illegal profits over three years.

    Johnson, the SEC said, cherry-picked information on corporate leadership changes, earnings reports, earnings forecasts and regulatory approvals of new pharmaceutical products.

    “This case is the insider trading version of the fox guarding the henhouse,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Instead of protecting NASDAQ client confidences, Johnson secretly traded on client information for personal gain, even using his NASDAQ office computer to make the trades.”

    Federal prosecutors also used the fox-and-henhouse analogy.

    “Insider trading by a gatekeeper on a securities exchange is a shocking abuse of trust, and must be punished,” said Assistant Attorney General Lanny Breuer, head of the Justice Department’s Criminal Division.

    Meanwhile, U.S. Attorney Neil H. MacBride of the Eastern District of Virginia said Johnson padded his retirement by cheating.

    “He thought he could get away with it by using his wife’s account and inside information to make relatively small trades just a few times a year,” MacBride said.  “But he learned what every other trader on Wall Street must now realize: We’re watching.”

    Prosecutors gave the U.S. Postal Inspection Service credit for the criminal bust.

    Johnson was a managing director on NASDAQ’s market intelligence desk in New York between 2006 and September 2009, prosecutors said.

    “Johnson brazenly stole nonpublic information from NASDAQ and its listed companies in breach of his duties of confidentiality to his employer and clients,” said Antonia Chion, associate director of the SEC’s Division of Enforcement.

    Criminal securities fraud carries a maximum penalty of 20 years in federal prison and a maximum fine of $5 million.

  • SEC Charges Rajat K. Gupta, One Of World’s Top Business Consultants, In Insider Trading Case Involving Raj Rajaratnam, One Of America’s Richest Men

    In a case apt to plague Wall Street with questions about whether people on Main Street should trust it,  the SEC has accused one of the world’s foremost business consultants with providing illegal “insider trading” tips that lined the corporate pockets of one of the richest men in the world.

    Rajat K. Gupta is accused of providing confidential information about the earnings reports of Goldman Sachs and Procter & Gamble to Raj Rajaratnam and also disclosing to Rajaratnam a plan by Warren Buffett’s Berkshire Hathaway to invest $5 billion in Goldman.

    Gupta allegedly gleaned the information while serving on the boards of Goldman Sachs and Procter & Gamble. Rajaratnam, the head of Galleon Management, used it virtually immediately either to generate illegal trading profits of millions of dollars or to avoid losing millions of dollars, the SEC charged.

    Rajaratnam, who is facing a criminal trial in the Galleon insider-trading case, was listed as No. 236 on the 2009 Forbes magazine list of the 400 richest Americans. Forbes reported that Rajaratnam had assets of $7 billion in 2009.

    Gupta, meanwhile, is the chairman of the International Chamber of Commerce, a special adviser to the United Nations, an adviser to the Bill & Melinda Gates Foundation, an adviser to prominent academic institutions in the United States and India  — and a board member or former board member of some of the most famous companies in the world. By virtually all accounts, he built a stunningly successful international business career after starting out at McKinsey & Co. in 1973.

    Today, though, the SEC accused him of betraying the trust he had built up over decades.

    “Gupta was honored with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “Directors who violate the sanctity of board room confidences for private gain will be held to account for their illegal actions.”

    Gupta “voluntarily resigned” from P&G’s board today, the company said in a statement. He left the board of Goldman Sachs last year.

    One of the problems with illegal insider trading is that it undermines the public’s confidence in the fairness and integrity of securities markets, the SEC says. It is illegal to trade on material, nonpublic information about a security and to breach a fiduciary duty.

    Read the stunning allegations against Gupta, who denies them.