If you've held out hope that there's not conflict and corruption on Wall Street, let it go. It's been a busy week for states attorneys and a bruising week for the Wise. Perhaps the best we can say is that it's almost over -- the week, that is.
On Thursday, federal prosecutors hit former Goldman Sachs (NYSE:GS) senior economist John Youngdahl with insider trading charges relating to his alleged "tipping" of traders in U.S. government bonds.
Here's what happened: On Oct. 31, 2001, the U.S. Treasury Department held a 9 a.m. press conference to announce its decision to no longer issue 30-year government bonds. That information was to be embargoed until 10 a.m., at which point reporters could report the news to the public. It didn't quite work out that way.
At approximately 9:35 a.m., under an apparent pre-arrangement to, according to the indictment, "misappropriate, convert, and steal confidential, material, non-public information at quarterly refunding press conferences," consultant Peter Davis phoned Youngdahl with the news. Youngdahl then relayed the information to Goldman traders, who, according to U.S. attorney James Comey, "began trading like there was no tomorrow."
At 9:43 a.m., the Treasury Department mistakenly leaked the information on its own website, igniting the biggest bond rally since 1987. Within the prior eight minutes, Goldman traders had purchased $84 million in 30-year bonds and $233.6 million in bond futures, stealing $4.3 million in profits.
Youngdahl faces between 57 and 71 months in prison if convicted on all seven counts of his indictment. Goldman Sachs paid $9.3 million -- the $4.3 million profit and a $5 million fine -- to the SEC to settle civil charges.
