The CIO of the $US6.5 billion Wyoming Retirement Sydney has been placed on “administrative review leave” after pleading guilty to four counts of insider trading, which took place prior to him joining the public sector fund. John Johnson, who became CIO of the fund in 2010, faces up to 20 years in prison.
A report last Friday in Asset International newsletter ‘aiCIO’ quoted the fund’s executive director, Thomas Williams, as saying: “We didn’t want to engage in any hasty decision making… This has happened so incredibly quickly. We want to make sure we have all of the available information before proceeding. All options for John’s future at the fund are really on the table – except, the one thing that is not an option is for John to continue in his capacity as CIO.”
The US Securities and Exchange Commission (SEC) and the Southern District of New York have separately charged Johnson with illegal trading activities that occurred in 2008. The district court’s charge of conspiracy to commit securities fraud carries a maximum of five years jail with the three SEC charges of fraud carry 20 years maximum sentences.
Johns was tipped off about a takeover by a friend, Matthew Tipple, who had been in turn tipped off by the former chief information officer at technology company Foundry Networks, David Riley, that it was about to be taken over by another tech company, Brocade. Riley has also been charged.
Putting his experience to use, Johnson used six family broking accounts to buy Foundry shares and at the same time shorted Brocade – a tactic often used by event-driven fund managers. The SEC believes he made about $US136,000 on the trades.
Johnson had been through several years of unemployment or under-employment prior to being hired by the Wyoming fund, at which he apparently performed very well.