Insider Trading at NASDAQ Underscores Importance of Background Checks

Nick Fishman

A former NASDAQ employee, Donald Johnson recently pleaded guilty to defrauding investors of over $750,000.  In this day and age, that amount is child’s play compared to some of the high profile fraud cases we’ve seen over the last couple years, but that’s really here nor there.  The thing that has left one Forbes blogger scratching her head is that this crime was totally avoidable.

All NASDAQ had to do was to conduct a thorough background check and they would have known that Johnson’s past would have provided a clear snapshot of what his future tenure with the company might hold.

According to Joelle Scott, “Nasdaq hired Johnson in 1989.  Three years prior, the Virginia Board of Nursing commenced an investigation into Johnson.  He had been working at Fairfax Hospital and, as a result of the investigation, according to the records from this department, Johnson admitted he had not only consumed Schedule II drugs while on duty as a nurse but also falsified hospital records in order to steal these drugs from the hospital.  Johnson was discharged from the U.S. Army Reserves where he was a captain and served as a nurse.”

Surely, a Professional License Verification with the Virginia Board of Nursing would have revealed information that would have raised red flags about Johnson.

NASDAQ claims to have conducted a background check on Johnson at the time of his hire, to which Scott reserves comments which should be shared over and over again with the myriad politicians and government agencies who seek to limit or ban the use of these vitally important employment screening practices.

“As we have explained to clients (both potential and existing) for over 20 years, comprehensive background checks are designed to uncover this sort of information to protect investors, board members, corporations and others.  Contacting licensing departments and appropriate regulatory bodies is an essential component of background checks.  This includes not only identifying any sanctions or disciplinary actions filed by the major regulatory agencies (SEC, FINRA, etc.) but also independently reaching out to government bodies that oversee the professions in which an individual has been involved from OSHA to the Departments of Nursing. These agencies provide critical information about an individual.

Johnson is one of many.  We have seen numerous people lie about degrees received from Ivy League schools and certifications received (yes, people still lie about this stuff!) and, like Johnson, people who voluntarily do not disclose their troubled pasts hoping no one will check.”

Click here for more information about what employers in the financial services industry should consider when screening potential candidates.

Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
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