SEC refiles charges in Treasury bond probe
Thu May 12, 2005 03:45 PM ET
By John Poirier
WASHINGTON, May 12 (Reuters) - Authorities said on Thursday that they have refiled charges that were dropped previously by regulators against one of three men accused of insider trading related to the historic 2001 halt in U.S. government issuance of 30-year bonds.
In November 2003, the U.S. Securities and Exchange Commission dismissed a civil complaint filed against Steven Nothern, a former bond fund manager for Massachusetts Financial Services Co., after having settled with other defendants.
The SEC had accused Nothern -- and Washington consultant Peter Davis and former Goldman Sachs (GS.N: Quote, Profile, Research) economist John Youngdahl -- of acting on information gained in advance of the Oct. 31, 2001, news that the U.S. Treasury would stop issuing 30-year bonds and ignited a powerful bond rally.
Davis, Goldman Sachs, and MFS, a unit of Sun Life Financial Services of Canada Inc., agreed to pay a total of $10.3 million to settle charges that they used nonpublic information.
Youngdahl, a former Goldman vice president and senior economist, later agreed to a civil fraud injunction and to pay a $240,000 civil penalty to settle the case. He also pleaded guilty to criminal securities fraud charges.
The SEC provided no details as to why it refiled the lawsuit against Nothern in federal court in Boston instead of in New York where it was previously filed. But it said in a November 2003 statement that it "retains the right to file charges again against Nothern."
Nothern's attorney, Nicholas Theodorou, said: "The allegations in the SEC's complaint are without merit and Mr. Nothern intends to vigorously defend himself."
Authorities said Davis regularly attended quarterly press conferences where Treasury officials announced future debt financing plans. The information was embargoed for later release to ensure news outlets attending would all be able to release the information at the same time.
At the press conference, participants including Davis were told the Treasury would no longer issue 30-year bonds. He then called Youngdahl ahead of the embargo time and told him about it. Davis made a similar call after a Treasury Department meeting on Aug. 1, 2001, prosecutors said.
After taking Davis' call, Youngdahl gave the information to Goldman traders, enabling them to make at least $3.5 million in illegal profits when bond prices soared, authorities said. |
