A former Nasdaq OMX Group Inc (NASDAQ:NDAQ) executive on Friday was sentenced to 3-1/2 years in prison after pleading guilty for making hundreds of thousands of dollars by trading on confidential information.
Donald Johnson, 57, was director and then managing director of Nasdaq's market intelligence desk before retiring in September 2009. In May he pleaded guilty to one count of securities fraud for his scheme, which ran from 2006 until 2009.
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He was responsible for monitoring the stocks of companies traded on the Nasdaq as well as giving the companies information and analyses about trading in their stocks. As a result, Johnson received advance information about upcoming companies' earnings, news releases and personnel changes.
Federal prosecutors accused him of using that inside information on at least eight occasions, reaping $641,000. Securities regulators said there was a ninth illegal trade that brings the total ill-gotten gains to just over $755,000.
Johnson's biggest gain was in late 2007 when he made more than $175,000 from buying United Therapeutics Corp (NASDAQ:UTHR) shares after learning early that a trial for its hypertension drug Tyvaso was successful.
Judge Anthony Trenga sentenced Johnson to serve 42 months in prison followed by one year of supervised release. The judge also signed a forfeiture order for the $755,000 amount.
Prosecutors had sought as much as 46 months in prison. Johnson's legal team urged 18 months of incarceration followed by a year of home confinement.
"What I did was stupid," the tall, soft-spoken Johnson told the judge, noting that his "guilt and remorse had taken a toll." His lawyer said that other trades wiped out much of the money he received from the insider trading.
Johnson also wrote a four-page letter expressing regret for his actions and at the same time highlighting his charitable work. Before joining Nasdaq, he served as a nurse in the U.S. Army and more recently did relief work in Haiti.
Johnson is the latest high-profile prosecution in a string of cases brought by the Obama administration in a bid to crack down on insider trading.
"Insider trading is an insidious and dangerous crime," said federal prosecutor Justin Goodyear, adding that Johnson abused a position of special trust and that Nasdaq was a major component of the U.S. financial system and economy.