SEC v. John M. Youngdahl; Peter J. Davis, Jr.; and Steven E. Nothern, No. LR-18453, Southern District of New York — Press Release
raw: Peter J. Davis, Jr., John M. Youngdahl and Steven E. Nothern
Peter J. Davis, Jr., John M. Youngdahl and Steven E. Nothern, No. LR-18453
John M. Youngdahl, Jr., a former Goldman Sachs Vice President and Senior Economist, settled SEC insider trading charges by using confidential Treasury Department information leaked by consultant Peter J. Davis, Jr., to direct $84 million in illegal bond trades before a public announcement, generating $1.5 million in profits, and subsequently pled guilty to criminal securities fraud while agreeing to a $240,000 penalty and joint disgorgement liability.
John M. Youngdahl, Jr., a former Goldman Sachs Vice President and Senior Economist, agreed to settle SEC insider trading charges for tipping Goldman Sachs traders with nonpublic information about the Treasury Department’s decision to cease issuing 30-year bonds, obtained from consultant Peter J. Davis, Jr. Minutes before the Oct. 31, 2001, public announcement, Goldman Sachs purchased $84 million in 30-year bonds, yielding over $1.5 million in illegal profits, for which Youngdahl is jointly liable for disgorgement. He also pled guilty to criminal securities fraud and agreed to a permanent injunction against future securities violations and a $240,000 civil penalty, while Goldman Sachs and Davis had already settled their respective civil and criminal liabilities.
John M. Youngdahl, Jr., a former Goldman Sachs Vice President and Senior Economist, settled SEC insider trading charges after using confidential information leaked by consultant Peter J. Davis, Jr., to direct Goldman Sachs traders to purchase $84 million in 30-year U.S. Treasury bonds minutes before the Treasury Department’s Oct. 31, 2001, public announcement that it would cease issuing such bonds, triggering the largest one-day price movement in the instrument since 1987 and generating over $1.5 million in illegal profits. Davis, who attended embargoed Treasury refunding conferences and violated press embargoes by calling Youngdahl at 9:28 a.m. on the morning of the announcement, had previously settled with the SEC and faced criminal charges. Youngdahl, aware that Davis was tipping him in violation of their July 2001 email agreement, passed the information to Goldman Sachs traders, who executed the trades while the information was still nonpublic. Youngdahl consented to a permanent injunction against future securities fraud, agreed to pay a $240,000 civil penalty, and accepted joint and several liability for disgorgement of the $1.5 million in profits, though Goldman Sachs had already made full disgorgement in a separate administrative proceeding. In parallel criminal proceedings, Youngdahl pled guilty to securities fraud charges brought by the U.S. Attorney’s Office for the Southern District of New York. The SEC’s investigation, conducted in coordination with multiple federal agencies including the Department of the Treasury and the Federal Reserve Bank of New York, continues, and defendant Stephen E. Nothern was dismissed without prejudice, preserving the SEC’s right to refile charges against him.
Extracted insights
- $84.00M $84 million $10M–$100M
- $1.50M $1.5 million $1M–$10M
- $240K $240,000 $100K–$1M
- $240K $240,000 $100K–$1M
- person goldman sachs
- organization Goldman Sachs
- organization Treasury Department
- John M. Youngdahl, Jr. agreed to settle the Commission's pending insider trading charges
- Goldman Sachs purchased U.S. Treasury 30-year bonds
- Treasury Department announced it would no longer issue U.S. Treasury 30-year bonds
The Securities and Exchange Commission announced today that John M. Youngdahl, Jr., a former Goldman, Sachs & Co. Vice President and Senior Economist, has agreed to settle the Commission's pending insider trading charges against him. The charges relate to Goldman Sachs' purchases of U.S. Treasury 30-year bonds minutes before the Treasury Department's Oct. 31, 2001, announcement that it would no longer issue such bonds. The Treasury Department's announcement had a dramatic market impact, causing the largest one-day price movement in the 30-year bond since October 1987. Youngdahl is a resident of Summit, N.J. If the federal district court in Manhattan hearing the SEC's civil action approves the settlement, Youngdahl will be permanently enjoined from committing securities fraud, and will pay a civil penalty of $240,000. In separate proceedings regarding the same conduct, Youngdahl today pled guilty to criminal securities fraud charges brought by the United States Attorney's Office for the Southern District of New York. The Commission's complaint, filed on Sept. 4, 2003, alleges that beginning in 1994 Peter J. Davis, Jr., a Washington, D.C.-based consultant and sole proprietor of Davis Capital Investment Ideas, attended the Treasury Department's quarterly refunding press conferences. At these press conferences, the Treasury Department announced the Federal Government's financing requirements for the coming quarter. This information was market-sensitive and thus subject to a press embargo; that is, it could not be disseminated by those attending the conference until a specified time. The complaint alleges that Youngdahl, who advised Treasury Desk traders on economic and political developments, was Davis' primary contact at Goldman Sachs, and that Davis conveyed confidential refunding information to Youngdahl in May 2001. In July 2001, Davis and Youngdahl agreed in a series of e-mails that Davis would provide Youngdahl with embargoed information from the refunding press conferences. Pursuant to this agreement, Davis again provided Youngdahl with embargoed information in August 2001. The complaint further alleges that, at the Oct. 31, 2001, refunding press conference, Treasury Department officials announced three times that the information being made available was embargoed until 10:00 a.m. The press conference ended at approximately 9:25 a.m. Despite the officials' warnings, beginning at 9:28 a.m., Davis placed a series of cell phone calls to his clients, including Youngdahl, and told them that the Treasury Department was suspending future long bond issuances. The complaint alleges that Youngdahl knew that Davis, pursuant to their July agreement, was tipping him with confidential Treasury Department information before the information was released to the public. The complaint further alleges that, after receiving Davis' call on the morning of Oct. 31, 2001, Youngdahl tipped traders on Goldman Sachs' U.S. Treasury Desk to the news about the Treasury's decision to cease issuance of the long bond. While the news was still nonpublic, the traders purchased $84 million worth of 30-year bonds for Goldman Sachs' own accounts, generating illegal profits of over $1.5 million. Youngdahl has consented, without admitting or denying the allegations of the complaint, to the entry of a permanent injunction against future violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and a court order that he pay a fine of $240,000 and be jointly and severally liable for disgorgement of Goldman Sachs' trading profits. Goldman Sachs has previously settled a Commission administrative proceeding related to this matter and made full disgorgement of its trading profits. Davis, originally a defendant in the civil action, has also previously settled with the Commission. The Commission's investigation into these events is continuing. Pending the completion of that investigation, the Commission has filed a notice of dismissal as to defendant Stephen E. Nothern. Nothern was the only remaining defendant in this action other than Youngdahl. Under Federal Rule of Civil Procedure 41(a)(1), the Commission retains the right to file charges again against Nothern based on or including the original claim. The Commission has investigated this matter in coordination with, and acknowledges the cooperation and assistance of, the United States Attorney's Office for the Southern District of New York. The Commission also acknowledges the cooperation and assistance of the Commodity Futures Trading Commission, the United States Department of the Treasury, the Federal Reserve Bank of New York, and the United States Postal Inspection Service throughout this investigation.
The Securities and Exchange Commission announced today that John M. Youngdahl, Jr., a former Goldman, Sachs & Co. Vice President and Senior Economist, has agreed to settle the Commission's pending insider trading charges against him. The charges relate to Goldman Sachs' purchases of U.S. Treasury 30-year bonds minutes before the Treasury Department's Oct. 31, 2001, announcement that it would no longer issue such bonds. The Treasury Department's announcement had a dramatic market impact, causing the largest one-day price movement in the 30-year bond since October 1987. Youngdahl is a resident of Summit, N.J. If the federal district court in Manhattan hearing the SEC's civil action approves the settlement, Youngdahl will be permanently enjoined from committing securities fraud, and will pay a civil penalty of $240,000. In separate proceedings regarding the same conduct, Youngdahl today pled guilty to criminal securities fraud charges brought by the United States Attorney's Office for the Southern District of New York. The Commission's complaint, filed on Sept. 4, 2003, alleges that beginning in 1994 Peter J. Davis, Jr., a Washington, D.C.-based consultant and sole proprietor of Davis Capital Investment Ideas, attended the Treasury Department's quarterly refunding press conferences. At these press conferences, the Treasury Department announced the Federal Government's financing requirements for the coming quarter. This information was market-sensitive and thus subject to a press embargo; that is, it could not be disseminated by those attending the conference until a specified time. The complaint alleges that Youngdahl, who advised Treasury Desk traders on economic and political developments, was Davis' primary contact at Goldman Sachs, and that Davis conveyed confidential refunding information to Youngdahl in May 2001. In July 2001, Davis and Youngdahl agreed in a series of e-mails that Davis would provide Youngdahl with embargoed information from the refunding press conferences. Pursuant to this agreement, Davis again provided Youngdahl with embargoed information in August 2001. The complaint further alleges that, at the Oct. 31, 2001, refunding press conference, Treasury Department officials announced three times that the information being made available was embargoed until 10:00 a.m. The press conference ended at approximately 9:25 a.m. Despite the officials' warnings, beginning at 9:28 a.m., Davis placed a series of cell phone calls to his clients, including Youngdahl, and told them that the Treasury Department was suspending future long bond issuances. The complaint alleges that Youngdahl knew that Davis, pursuant to their July agreement, was tipping him with confidential Treasury Department information before the information was released to the public. The complaint further alleges that, after receiving Davis' call on the morning of Oct. 31, 2001, Youngdahl tipped traders on Goldman Sachs' U.S. Treasury Desk to the news about the Treasury's decision to cease issuance of the long bond. While the news was still nonpublic, the traders purchased $84 million worth of 30-year bonds for Goldman Sachs' own accounts, generating illegal profits of over $1.5 million. Youngdahl has consented, without admitting or denying the allegations of the complaint, to the entry of a permanent injunction against future violations of Sections 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and a court order that he pay a fine of $240,000 and be jointly and severally liable for disgorgement of Goldman Sachs' trading profits. Goldman Sachs has previously settled a Commission administrative proceeding related to this matter and made full disgorgement of its trading profits. Davis, originally a defendant in the civil action, has also previously settled with the Commission. The Commission's investigation into these events is continuing. Pending the completion of that investigation, the Commission has filed a notice of dismissal as to defendant Stephen E. Nothern. Nothern was the only remaining defendant in this action other than Youngdahl. Under Federal Rule of Civil Procedure 41(a)(1), the Commission retains the right to file charges again against Nothern based on or including the original claim. The Commission has investigated this matter in coordination with, and acknowledges the cooperation and assistance of, the United States Attorney's Office for the Southern District of New York. The Commission also acknowledges the cooperation and assistance of the Commodity Futures Trading Commission, the United States Department of the Treasury, the Federal Reserve Bank of New York, and the United States Postal Inspection Service throughout this investigation.