SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
LITIGATION RELEASE NO. 18322 / SEPTEMBER 4, 2003
SEC BRINGS ENFORCEMENT ACTIONS AGAINST THREE INDIVIDUALS, GOLDMAN
SACHS, AND MASSACHUSETTS FINANCIAL SERVICES COMPANY RELATED TO TRADING
BASED ON NON-PUBLIC INFORMATION ABOUT THE TREASURY'S DECISION TO CEASE
ISSUANCE OF THE 30-YEAR BOND
(United States District Court for the Southern District of New York,
Civil Action No. 03-CV6672(NRB))
The Securities and Exchange Commission ("Commission") today announced
three related enforcement actions arising from trading in U.S.
Treasury 30-year bonds minutes before the Treasury Department
announced, on October 31, 2001, that it would no longer issue such
bonds. The Treasury Department's announcement had a dramatic market
impact, causing the largest one-day price movement in the 30-year bond
since October 1987. Goldman Sachs & Company ("Goldman Sachs"),
Massachusetts Financial Services Company ("MFS"), and Peter J. Davis,
Jr., the individual who misappropriated the Treasury Department
information that was subject to a news embargo, will pay a total of
over $10.3 million to settle the Commission's actions.
In a civil suit in federal court in New York, the Commission filed
securities fraud charges against
* Peter J. Davis, Jr., a Washington, D.C.-based consultant and sole
proprietor of Davis Capital Investment Ideas. The Commission's
complaint alleges that Davis attended the Treasury Department's
quarterly refunding press conference on the morning of October 31,
2001, where he learned of the Treasury's decision to cease
issuance of the 30-year bond, known colloquially as "the long
bond." In violation of an explicit agreement with the Treasury
Department, Davis called numerous clients and tipped them to news
about the cancellation of the long bond before the Treasury
Department's news embargo was lifted and the news was made
generally available to the public.
* John M. Youngdahl, a resident of Summit, New Jersey, and formerly
a Vice President and Senior Economist at Goldman, Sachs & Co. The
Commission's complaint alleges that, in July 2001, Youngdahl and
Davis agreed that Davis would provide Youngdahl with confidential
information he learned at Treasury Department refunding press
conferences. The complaint further alleges that, after receiving
Davis' call on the morning of October 31, 2001, Youngdahl tipped
traders on Goldman Sachs' U.S. Treasury Desk to the news about
Treasury's decision to cease issuance of the long bond. While the
news was still nonpublic, the traders purchased $84 million in par
SNIPPETS:
SEC BRINGS ENFORCEMENT ACTIONS AGAINST THREE INDIVIDUALS, GOLDMAN SACHS, AND MASSACHUSETTS
The Securities and Exchange Commission today announced three related enforcement actions
Goldman Sachs & Company, Massachusetts Financial Services Company, and Peter J. Davis, Jr.,
In violation of an explicit agreement with the Treasury Department, Davis called numerous
The Commission's complaint alleges that, in July 2001, Youngdahl and Davis agreed that Davis
The complaint further alleges that, after receiving Davis' call on the morning of October 31,
* Steven E. Nothern, a resident of Scituate, Massachusetts, and formerly a Senior Vice
The Commission's order also finds that Goldman Sachs lacked adequate safeguards to prevent
MFS will pay a penalty of $200,000 and will reimburse another firm for over $700,000 in
The Commission's complaint against Davis, Youngdahl and Nothern alleges that Davis marketed
The Commission's complaint charges Davis, Youngdahl, and Nothern with violations of Section
The order also finds that Goldman Sachs willfully violated Section 15of the Exchange Act
The order censures Goldman Sachs, orders the firm to cease and desist from committing or
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