Fox in Nasdaq henhouse pleads guilty

During his tenure at the market,Johnson was responsible for monitoring the stock of companies traded on Nasdaq as well as providing them information and analyses about trading in their own stock.

He received advance information about upcoming companies’ earnings,news releases and key personnel changes which he used to buy and sell stocks eight times between August 2006 and July 2009 to earn the illicit profits,according to court papers.

“Mr Johnson was a fox in a hen-house,” Lanny Breuer,assistant attorney general for the justice department’s criminal division,told reporters during a conference call on Thursday.

“He cheated the system to line his own pockets. He violated his duty to companies and the investing public alike,” said Breuer.

The case is the latest in a major crackdown on insider trading by the Obama administration. Earlier this month a jury in New York convicted hedge fund founder Raj Rajaratnam on 14 counts of securities fraud and conspiracy for insider trading.

In March,prosecutors in Maryland charged a Food and Drug Administration chemist with using non-public information to trade stocks before drug approvals were publicly released and allegedly earned millions of dollars.

“I think what you’re seeing is the results really of our re-doubled enforcement efforts in this administration,” Breuer said.

In the Johnson case,prosecutors said he made small trades only a handful times each year to try to avoid detection. His activities were discovered first by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

Trading by individuals who work in the securities industry is typically closely watched for insider trading.

Johnson’s biggest gain,about $175,000,came in November 2007 when he used confidential information about the successful trial results for the United Therapeutics drug Viveta,now also known as Tyvaso,according to the court documents.

In the case of Pharmaceutical Product Development,Johnson bet the stock would rise when the public learned it would be included in the Nasdaq-100,he admitted in his plea.

The Securities and Exchange Commission,which filed parallel charges against Johnson,said that Johnson periodically used his wife’s online brokerage account. The SEC accused him of reaping more than $755,000 in illegal trading profits and included a ninth trade involving an energy company. “Today Mr Johnson chose to accept responsibility for his actions in the past,” said his attorney Jonathan Simms. “Those who know Mr Johnson will agree that these charges in no way are indicative of his overall character.”

However,Johnson did not settle with the SEC over its civil charges on Thursday.

He faces a maximum of 20 years in prison,a $5-million fine and forfeiture of ill-gotten gains. His lawyer said that sentencing guidelines suggest a sentence of around two-and-a-half years to three years.

However,he could face more time in prison if the government seeks an enhanced sentence because of the nature of his sensitive position at Nasdaq. Sentencing is set for August 12.

Nasdaq spokesman Joe Christinat said the exchange operator is cooperating fully with authorities on the case.

Nasdaq,the second-largest US exchange operator,is one of only two venues in the country for public companies to list their shares. Those companies often supply the exchange with confidential financial information,such as earnings reports,which Johnson handled.

Nasdaq,based in New York,opened its market intelligence desk in 2002,offering companies analysis of their stocks’ trading and market statistics and information. Nasdaq got about 19% of its first-quarter revenue from its global listing services unit,which includes annual fees charged to companies it lists.