NEW YORK -- A former Goldman Sachs economist was sentenced yesterday to nearly three years in prison for relaying an insider bond tip that allowed the firm to make millions of dollars in tainted profits.
John Youngdahl, 44, was sentenced to two years and nine months in prison -- the lightest term possible under federal guidelines. He pleaded guilty last year to wire fraud, securities fraud, and other charges.
Before he was sentenced, Youngdahl said he was "deeply sorry" for hurting his family, friends, and colleagues.
"Let this be a reminder: We will be relentless in the investigation and prosecution of financial wrongdoing, whether in the boardroom, the back office, or on the trading floor," US Attorney David Kelley said.
The government announced Oct. 31, 2001, that it was ending sales of its benchmark 30-year Treasury bond. Officials set a strict 10 a.m. embargo, meaning no one could publicize the information until then.
But at 9:35 a.m., a consultant hired by Goldman who had attended the Treasury news conference passed the information to Youngdahl, who relayed it to a Goldman trader.
A Treasury Department employee inadvertently posted the announcement online at 9:43 a.m., eight minutes later. The news triggered the largest single-day rally in the long-term bond since the stock market crash of October 1987.
During the eight-minute gap, Goldman bought $84 million in 30-year bonds and $233 million in bond futures contracts, leading to $3.8 million in profits when the bonds and futures were sold later.
Goldman Sachs & Co. has since agreed to pay $9.3 million to settle Securities and Exchange Commission charges related to the illegal bond trading.
Youngdahl's lawyer, Steve Cohen, said his client's crimes contrasted with his exemplary character in the rest of his life.
After initially denying wrongdoing to prosecutors, Youngdahl found "it had spun hopelessly, recklessly out of control," Cohen told the judge.
The consultant accused of passing the tip to Youngdahl, Peter Davis, has pleaded guilty to fraud and conspiracy and is awaiting sentencing.