Bank of America fined $137 million for bid-rigging municipal contracts

  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
  • Comment on this story

Attorney generals from 20 states and federal officials have reached a settlement agreement with Bank of America, requiring it to pay $137.3 million for its role in a nationwide scheme to rig bids for the purchase of municipal bond derivatives and other municipal finance contracts.

The settlement acknowledges that Bank of America and its marketers illegally profited by rigging bids and receiving “last looks” for municipal bond derivatives, a practice which is prohibited under U.S. Treasury regulations.

The settlement is part of a broad investigation of widespread price-fixing and bid-rigging conspiracies among competitors in the municipal derivatives market. A number of other bankers and professionals have already pleaded guilty in the probe, and the investigation is ongoing.

“Bank of America’s disclosure of wrongdoing and cooperation has led to an aggressive, ongoing investigation by the Department of Justice into anticompetitive activity in the municipal bond derivatives industry,” said Christine Varney, the department’s antitrust chief. “The Division’s investigation of this matter continues, and the prosecution of anticompetitive conduct in the financial markets remains our highest priority.”

Authorities said that the bank defrauded hospitals, schools and scores of state and local government entities during the period from 1998 to 2003. Secret arrangements with derivative brokers and providers gave Bank of America a competitive advantage by getting a “look back” at final bids, some of which were non-competitive courtesy bids.

Without the fraudulent arrangements, the business would have gone to other providers, or caused Bank of America to agree to better terms with issuers.

Bank of America was granted leniency under the Federal Department of Justice’s Corporate Leniency Program, because it self-reported the wrongdoing and agreed to pay restitution to those harmed by the bank.

Most of the fine, about $107 million, will be paid to various organizations as restitution. Another $25 million will be paid to the IRS for abuses relative to the tax-free status of municipal bonds, and state attorneys general will get $4.5 million to cover their costs of investigations.

  • expose this
  • Share
  • Bookmark to Delicious
  • Bookmark to StumbleUpon
Comment on this Article:

Notify me of followup comments via e-mail. You can also subscribe without commenting.