John Youngdahl and Peter Davis used information to gain an edge on their competition.

NEW YORK (AP) – Goldman Sachs & Co. made millions in illegal profits with the help of a Wall Street consultant who attended Treasury Department news conferences and then rushed to pass on sensitive, advance information about the bond market to the firm, the government charged Thursday.

Those who attend Treasury Department news conferences on the bond market must agree to abide by an embargo – meaning they cannot release the information ahead of a set time.

The embargoes are designed to make sure all investors get critical market news at the same time, so that no one can gain an edge.

But the consultant, Peter Davis, frantically worked his cell phone to get the information to Goldman senior economist John Youngdahl minutes ahead of its public release on Oct. 31, 2001, according to the federal indictment.

The call gave Goldman Sachs an eight-minute edge on the rest of the market – enough time to turn a $3.8 million profit, the indictment said.

“A scheme to steal confidential information from the Treasury Department and tip off others shakes the confidence of the investing public,” U.S. Attorney James Comey said. “It is not to be tolerated.”

Davis, 53, of Washington, D.C., has pleaded guilty to fraud and conspiracy and is awaiting sentencing. He also agreed to pay nearly $150,000 to settle charges brought by the Securities Exchange Commission.

Youngdahl, 44, of Summit, N.J., was indicted on charges of fraud, perjury and conspiracy. He pleaded innocent Thursday and was released on $800,000 bail. Youngdahl also faces a lawsuit by the SEC.

Goldman agreed to pay more than $9.3 million to settle SEC charges involving the scheme, the agency said.

“This matter is extremely embarrassing to us,” Goldman spokesman Lucas Van Praag said. “It serves to underscore the fact that a single act has the potential to undermine the best efforts of everybody working at Goldman Sachs.”

Government court papers say Davis attended the news conferences as far back as 1994 and was illegally violating the Treasury embargo as early as 1999.

The indictment centers on an Oct. 31, 2001, announcement that the department was suspending issuance of its 30-year bond – a development that triggered one of the biggest single-day rallies ever in the U.S. bond market.

Moments later, Davis allegedly made a series of cell phone calls. One of them was to Youngdahl, who passed the news on to traders on Goldman’s bond desk, prosecutors say.

Within minutes, Goldman had purchased $317 million in bonds and bond futures. The purchases resulted in $3.8 million in profits for the firm, the government says.

“Goldman traders began trading like there was no tomorrow,” Comey said. “And in the case of the 30-year treasury bond, there was no tomorrow.”

The Treasury Department declined comment.

Also Thursday, the SEC filed civil charges against Youngdahl, Davis and Steven Nothern, who allegedly bought $25 million in bonds on the illegal information.

At the time of the 2001 news conference, Nothern was a senior vice president a Boston-based investment consulting firm. The firm has agreed to pay about $900,000 to settle the charges, the SEC said.

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On the Net:

Goldman Sachs & Co.: http://www.gs.com

Securities and Exchange Commission: http://www.sec.gov

AP-ES-09-04-03 1636EDT