Reverse Spin: Goldman Sachs gets burned on tip

Perhaps someone should make it clear to the folks at The Goldman Sachs Group Inc. that they’re not supposed to work for tips.

The New York-based firm Friday agreed to pay more than $9.3 million to settle charges that in October 2001, one of its former economists, John Youngdahl, had used illegal inside information to help the firm pocket $3.8 million.

Mr. Youngdahl, who has since left Goldman, was indicted Thursday on seven federal charges, including perjury and securities fraud. He pleaded innocent and is set to go to trial in February.

The charges stem from the Department of the Treasury’s decision Oct. 31, 2001, to end sales of its 30-year bonds – a decision that apparently sparked a rally in the long-term-bond market.

A financial consultant allegedly informed Mr. Youngdahl of that decision before the news was released to the rest of the market.

“This matter is extremely embarrassing to us,” Goldman spokesman Lucas Van Praag reportedly said.

The consultant is also believed to have shared the tip with Steven Nothern, who was senior vice president at MFS Investment Management in Boston.

The SEC also sued Mr. Nothern, claiming that his firm had bought bonds and profited from the tip. MFS will pay $900,000 to settle the charges.

On the bandwagon

Did you think New York was going to get the spotlight all to itself with its investigation into alleged market timing in mutual funds?

The Massachusetts Securities Division on Thursday issued subpoenas to the Boston office of New York-based Prudential Securities Inc. seeking information related to mutual fund market timing.

The subpoena arrived one day after New York Attorney General Eliot L. Spitzer unveiled his own far-reaching investigation into a similar matter involving a hedge fund and several prominent fund companies (see story, Page 1).

Pretty in pink (not!)

It looks as if summer is going out in a sea of pink.

A Department of Labor report released Friday shows that employers cut jobs in August at the fastest pace since March.

The report, which shocked economists, concludes that the number of workers on payrolls outside the farm sector slid 93,000 last month, the seventh consecutive month of declines. Economists had been predicting a 12,000 increase in the number of workers on payroll.

Slapped down

Call it a case of growth, interrupted.

A U.S. federal court Wednesday blocked controversial new Federal Communications Commission media ownership rules pending a full judicial review, a setback to large media companies hoping to get even bigger.

The three-judge panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia granted a stay, which prevented the rules from taking effect Thursday as scheduled.

The new FCC rules would allow a single media company to own local television stations that collectively reach up to 45% of the national television audience – up from 35%.

On Thursday, the Senate Appropriations Committee voted to block the rule from taking effect, setting the stage for a veto face-off with the White House. “The position has not changed on the White House’s veto threat,” White House spokeswoman Claire Buchan said.

Like our spin? E-mail comments or suggestions to Frederick P. Gabriel Jr. at [email protected].

Closing Quote

“If your clientele looks like Osama bin Laden types, I think you should probably be investigating it sooner rather than later.”

– David Tittsworth, executive director of the Investment Counsel Association of America in Washington, on when investment advisers might want to begin complying with the USA Patriot Act. Page 6