Former NASDAQ executive Donald Johnson has been sentenced to three-and-a-half years in prison plus one year of probation after pleading guilty to insider trading.
Johnson will also be required to turn over $755,066.20 in illegal trading profits based on information he learned in his role as company liaison at NASDAQ’s Market Intelligence Desk.
The federal prosecution team had alleged that between August 2006 and July 2009, Johnson traded on nine separate occasions using inside information involving six companies, including five short sales and four purchases.
He traded in his wife’s name and account, sometimes using his computer at work to make the trades.
Prior to sentencing, Johnson had written to Judge Anthony Trenga of the Fourth District Court in Alexandria, Virginia to ‘personally express my deepest and sincere regret for violating… federal securities laws and regulations’.
Johnson disputed a pre-sentencing report that said his actions were motivated by greed, saying ‘stupidity rather than greed’ was the only explanation he could offer.
Johnson’s attorney had argued for an 18 month sentence but prosecutors pushed for a stiffer punishment of up to four years, in line with sentencing guidelines and due to the seriousness of the offence.
Calling the scheme ‘a serious betrayal of the public trust,’ the prosecution noted that Johnson acted ‘seemingly without concern’ for the potential harm his scheme could do to the securities markets.
Prosecutors also argued that Johnson’s actions ‘were particularly insidious because the companies whose information he misused and the investors whose markets he compromised had virtually no hope of detecting fraud on their own, thanks to the defendant’s position within NASDAQ’.
In the August issue of IR magazine, Keith Mabee, vice chairman of communications consultancy Dix & Eaton, said he hadn’t noticed public company clients behaving differently following the scandal, but did say the incident raises a cautionary flag about how much you say.
Article by Brad Allen, Inside Investor Relations