Risk Management

Ex-Goldman Economist Gets 33 Months

Relayed an insider tip on the demise of the 30-year Treasury bond.
Dave CookApril 13, 2004

John Youngdahl, formerly an economist for Goldman Sachs & Co., was sentenced Friday to 33 months in prison for relaying an insider tip that gave Goldman an eight-minute head start worth $3.8 million.

On October 31, 2001, the U.S. government announced that it would no longer issue the benchmark 30-year Treasury bond. Reporters learned of the announcement at a closed news conference — with the understanding that the news could not be released until 10 a.m.

At 9:35, Peter Davis — a consultant hired by Goldman — relayed the information to Youngdahl, who then passed it on to a Goldman trader, according to the Associated Press.

An employee of the Department of the Treasury inadvertently posted the news online at 9:43, added the AP. But in the eight minutes beforehand, Goldman bought bonds and bond futures contracts that were worth $3.8 million when they were later sold, according to wire service reports.

Youngdahl, who initially denied wrongdoing to Goldman, the Securities and Exchange Commission, and U.S. Attorneys in Manhattan, pleaded guilty last year to wire fraud, securities fraud and other charges, according to the AP.

The father of three was sentenced to 33 months in prison — the lightest term possible under federal guidelines, according to the AP — by U.S. District Judge Denise Cote. The judge has said that she will recommended that Youngdahl serve his sentence in a federal prison near his Summit, New Jersey home. Youngdahl also will pay $240,000 to the SEC to settle civil charges of insider trading.

Davis, the consultant, faces sentencing after pleading guilty to fraud and conspiracy, added the AP; he has agreed to pay nearly $150,000 in settlement of SEC charges. Goldman Sachs last year settled charges that it did not oversee Youngdahl properly; the firm agreed to pay the SEC $9.3 million, according to wire service reports.