A former managing director of the Nasdaq Stock Market was sentenced today to 42 months in prison by a federal judge in Virginia.

Donald Johnson, 57, was sentenced for engaging in insider trading on multiple occasions based on material, non-public information he obtained in his capacity as a Nasdaq executive. Johnson also was ordered to forfeit $755,066.

Johnson was sentenced by U.S. District Judge Anthony J. Trenga in the Eastern District of Virginia. Johnson pleaded guilty on May 26 to one count of securities fraud.

“Armed with this insider information, Mr. Johnson made investing look easy. He pocketed hundreds of thousands of dollars. But he did it by exploiting his trusted position to gain an unfair – and illegal – advantage in the mark,” said Assistant Attorney General Lanny A. Breuer of the U.S. Justice Department.

In a letter to Judge Trenga, Johnson said, “the shame, embarrassment and disappointment I’ve inflicted on my family, friends and colleagues have caused me significant guilt and I’ll shoulder the remorse for the remainder of my life.”

According to court documents, Johnson monitored the stock of companies traded on Nasdaq and offered Nasdaq-listed companies information and analyses concerning trading in their own stock.

According to the Justice Department, those companies routinely entrusted Johnson with material, non-public information about their company, including advance notice of announcements concerning earnings, regulatory approvals and personnel changes.

Johnson admitted that he repeatedly used this information to purchase or sell short stock in various Nasdaq-listed companies shortly before the information was made public. He would then generate substantial gains by reversing those positions soon after the announcement.

According to court documents, in order to conceal his illegal trading, Johnson executed these trades in a brokerage account in his wife’s name. Johnson failed to disclose this account to Nasdaq in violation of Nasdaq rules.

The companies whose securities he traded were Central Garden and Pet Co.; Digene Corporation; Energy Conversion Devices, Inc.; Idexx Laboratories Inc.; Pharmaceutical Product Development Inc.; and United Therapeutics Corporation.

According to court documents, Johnson traded ahead of important announcements by these companies. For example, in November 2007, Johnson used inside information related to successful trial results for United Therapeutics’ drug Viveta (now called Tyvaso) to purchase shares of United Therapeutics before the trial results were announced.

Soon after the announcement, Johnson sold the shares and gained more than $175,000 in profits, according to the proceedings.

According to court documents, in July 2009, Johnson again improperly used inside information he obtained from United Therapeutics about the approval of its drug Tyvaso to purchase the company’s shares before the approval was announced.

He sold the shares after the announcement and gained more than $110,000 in profits.

The Securities and Exchange Commission has filed a civil enforcement action against Johnson in the Southern District of New York.