A former managing director of the NASDAQ stock market who used his wife's brokerage account to trade securities based on non-public information pleaded guilty today in Alexandria federal district court to insider trading.
Justice Department officials said Donald Johnson, 56, acknowledged illegal securities trades executed between 2006 and 2009, earning more than $640,000 in the scheme. He admitted to at least eight unlawful trades, according to DOJ.
Assistant Attorney General Lanny Breuer of the Criminal Division called Johnson, in a phone call with reporters this afternoon, a “fox in a hen-house.” Sentencing is scheduled for Aug. 12 in U.S. District Court for the Eastern District of Virginia. Johnson faces a maximum penalty of 20 years in prison and a fine of $5 million.
NASDAQ-listed companies, Breuer said in prepared remarks, “entrusted him with their sensitive, non-public information so that he could provide them with analyses about their stock. He then used that very information to cheat the system and make an illegal profit.”
DOJ officials said Johnson, a managing director on NASDAQ’s market intelligence desk in New York, used his wife’s brokerage account to make small trades several times a year. “But he learned what every other trader on Wall Street must now realize: We’re watching,” U.S. Attorney Neil MacBride said in a statement.
A lawyer for Johnson, Jonathan Simms of Fairfax, Va.’s Simms & Harris, said Johnson "chose to accept responsibility for actions that happened in the past. This charge is in no way indicative of his overall character."
Johnson regularly received non-public information—including advance notice of earnings, regulatory approval and personnel moves, according to DOJ—about NASDAQ-listed companies. DOJ officials said Johnson generated “substantial gains” by reversing positions he took shortly after the companies made public announcements.
The Justice Department said Johnson traded securities in the following companies: Central Garden and Pet Co.; Digene Corporation; Idexx Laboratories Inc.; Pharmaceutical Product Development Inc.; and United Therapeutics Corporation.
The Securities and Exchange Commission today filed a civil action against Johnson in the U.S. District Court for the Southern District of New York.