Showing posts with label MUNI BOND BID RIGGER. Show all posts
Showing posts with label MUNI BOND BID RIGGER. Show all posts
Monday, December 26, 2011
GE FUNDING CAPITAL MARKET SERVICES INC. AGREES TO PAY $70 TO SETTLE DEPARTMENT OF JUSTICES CHARGES
The following excerpt is from the Department of Justice website:
“Friday, December 23, 2011GE Funding Capital Market Services Inc. Admits to Anticompetitive Conduct by Former Traders in the Municipal Bond Investments Market and Agrees to Pay $70 Million to Federal and State Agencies
WASHINGTON – GE Funding Capital Market Services Inc. entered into an agreement with the Department of Justice to resolve the company’s role in anticompetitive activity in the municipal bond investments market and agreed to pay a total of $70 million in restitution, penalties and disgorgement to federal and state agencies, the Department of Justice announced today.
As part of its agreement with the department, GE Funding admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former traders. According to the non-prosecution agreement, from 1999 through 2004, certain former GE Funding traders entered into unlawful agreements to manipulate the bidding process on municipal investment and related contracts, and caused GE Funding to make payments and engage in other related activities in connection with those agreements through at least 2006. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.
“GE Funding’s former traders entered into illegal agreements to manipulate the bidding process on municipal investment contracts,” said Sharis A. Pozen, Acting Assistant Attorney General in charge of the Justice Department’s Antitrust Division. “This anticompetitive conduct harmed municipalities, as well as taxpayers. Today’s resolution requires GE Funding to pay penalties, disgorgement and restitution to the victims of its illegal activity. We will continue to use all the tools at our disposal to uphold our nation’s antitrust laws and ensure competition in the financial markets.”
Under the terms of the agreement, GE Funding agreed to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry. To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation. Nine of the 18 executives charged have pleaded guilty.
The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS) and 25 state attorneys general also entered into agreements with GE Funding requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the bid manipulation by GE Funding employees, as well as other remedial measures.
As a result of GE Funding’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute GE Funding for the manipulation of bidding for municipal investment and related contracts, provided that GE Funding satisfies its ongoing obligations under the agreement.
JPMorgan Chase & Co., UBS AG and Wachovia Bank N.A. also reached agreements with the Department of Justice and other federal and state agencies to resolve anticompetitive conduct in the municipal bond derivatives market. On May 4, 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct. On July 7, 2011, JPMorgan agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies for its role in the conduct. On Dec. 8, 2011, Wachovia Bank agreed to pay a total of $148 million in restitution, penalties and disgorgement to federal and state agencies for its participation in the anticompetitive conduct.
The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation. The department is coordinating its investigation with the SEC, the Office of the Comptroller of the Currency and the Federal Reserve Bank of New York. The department thanks the SEC, IRS and state attorneys general for their cooperation and assistance in this matter.”
Thursday, July 7, 2011
J.P. MORGAN PAYS $228 MILLION TO SETTLE SEC CHARGES
The following is an excerpt from the SEC website:
"Washington, D.C., July 7, 2011 – The Securities and Exchange Commission today charged J.P. Morgan Securities LLC (JPMS) with fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains.
To settle the SEC’s fraud charges, JPMS agreed to pay approximately $51.2 million that will be returned to the affected municipalities or conduit borrowers. JPMS and its affiliates also agreed to pay $177 million to settle parallel charges brought by other federal and state authorities.
“JPMS improperly won bids by entering into secret arrangements with bidding agents to get an illegal 'last look' at competitors’ bids,” said Robert Khuzami, Director of the SEC's Division of Enforcement. “Municipal issuers and investors didn't stand a chance against the fraudulent strategies JPMS and others used to guarantee profits."
Elaine C. Greenberg, Chief of the SEC's Municipal Securities and Public Pensions Unit, added, “When powerful financial institutions like JPMS conspire with each other to intentionally violate regulations designed to ensure fair investment prices, the integrity of the municipal marketplace becomes corrupted. Rather than playing by the rules, the rules got played.”
Typically, when investors purchase municipal securities, the municipalities temporarily invest the proceeds of the sales in municipal reinvestment products until the money is used for the intended purposes. Under relevant Internal Revenue Service (IRS) regulations, the proceeds of tax-exempt municipal securities generally must be invested at fair market value. The most common way of establishing fair market value is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.
The SEC alleges that from 1997 through 2005, JPMS’s fraudulent practices, misrepresentations and omissions undermined the competitive bidding process, affected the prices that municipalities paid for reinvestment products, and deprived certain municipalities of a conclusive presumption that the reinvestment instruments had been purchased at fair market value. JPMS’s fraudulent conduct also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted. The employees involved in the alleged misconduct are no longer with the company.
According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, JPMS, acting as the agent for its affiliated commercial bank, JPMorgan Chase Bank, N.A., at times won bids because it obtained information from the bidding agents about competing bids, a practice known as “last looks.” In other instances, it won bids set up in advance for JPMS to win (“set-ups”) because the bidding agent deliberately obtained non-winning bids from other providers, and it facilitated bids rigged for others to win by deliberately submitting non-winning bids.
Without admitting or denying the allegations in the SEC’s complaint, JPMS has consented to the entry of a final judgment enjoining it from future violations of Section 15(c)(1)(A) of the Securities Exchange Act of 1934 and has agreed to pay a penalty of $32.5 million and disgorgement of $11,065,969 with prejudgment interest of $7,620,380. The settlement is subject to court approval.
In a related enforcement action, the SEC barred former JPMS vice president and marketer James L. Hertz from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any penny stock offering. This sanction is based on Hertz’s December 6, 2010 guilty plea to two counts of conspiracy and one count of wire fraud for engaging in misconduct in connection with the competitive bidding process involving the investment of proceeds of tax-exempt municipal bonds. The Commission recognizes Hertz’s cooperation in the SEC’s investigation and investigations conducted by other law enforcement agencies.
This is the SEC’s third settlement with a financial institution stemming from its ongoing investigation into corruption in the municipal reinvestment industry. On December 7, 2010, the SEC charged Banc of America Securities LLC (BAS) with securities fraud for similar conduct. BAS agreed to pay more than $36 million in disgorgement and interest to settle the SEC’s charges, and paid an additional $101 million to other federal and state authorities for its misconduct. On May 4, 2011, the SEC charged UBS Financial Services Inc. (UBS) with securities fraud for fraudulently rigging bids as both a provider and a bidding agent. UBS agreed to pay $47.2 million in disgorgement, interest and civil penalties to settle the SEC’s charges and to pay $113 million to other federal and state authorities in connection with their parallel cases.
Deputy Chief Mark R. Zehner and Assistant Municipal Securities Counsel Denise D. Colliers, who are members of the Municipal Securities and Public Pensions Unit in the Philadelphia Regional Office, conducted the SEC’s investigation into this matter.
The SEC thanks the Antitrust Division of the Department of Justice and the Federal Bureau of Investigation for their cooperation and assistance in this matter. The SEC is bringing this enforcement action in coordination with the Department of Justice, the IRS, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and 25 State Attorneys General.
The SEC’s investigation is continuing. "
"Washington, D.C., July 7, 2011 – The Securities and Exchange Commission today charged J.P. Morgan Securities LLC (JPMS) with fraudulently rigging at least 93 municipal bond reinvestment transactions in 31 states, generating millions of dollars in ill-gotten gains.
To settle the SEC’s fraud charges, JPMS agreed to pay approximately $51.2 million that will be returned to the affected municipalities or conduit borrowers. JPMS and its affiliates also agreed to pay $177 million to settle parallel charges brought by other federal and state authorities.
Elaine C. Greenberg, Chief of the SEC's Municipal Securities and Public Pensions Unit, added, “When powerful financial institutions like JPMS conspire with each other to intentionally violate regulations designed to ensure fair investment prices, the integrity of the municipal marketplace becomes corrupted. Rather than playing by the rules, the rules got played.”
Typically, when investors purchase municipal securities, the municipalities temporarily invest the proceeds of the sales in municipal reinvestment products until the money is used for the intended purposes. Under relevant Internal Revenue Service (IRS) regulations, the proceeds of tax-exempt municipal securities generally must be invested at fair market value. The most common way of establishing fair market value is through a competitive bidding process in which bidding agents search for the appropriate investment vehicle for a municipality.
The SEC alleges that from 1997 through 2005, JPMS’s fraudulent practices, misrepresentations and omissions undermined the competitive bidding process, affected the prices that municipalities paid for reinvestment products, and deprived certain municipalities of a conclusive presumption that the reinvestment instruments had been purchased at fair market value. JPMS’s fraudulent conduct also jeopardized the tax-exempt status of billions of dollars in municipal securities because the supposed competitive bidding process that establishes the fair market value of the investment was corrupted. The employees involved in the alleged misconduct are no longer with the company.
According to the SEC’s complaint filed in U.S. District Court for the District of New Jersey, JPMS, acting as the agent for its affiliated commercial bank, JPMorgan Chase Bank, N.A., at times won bids because it obtained information from the bidding agents about competing bids, a practice known as “last looks.” In other instances, it won bids set up in advance for JPMS to win (“set-ups”) because the bidding agent deliberately obtained non-winning bids from other providers, and it facilitated bids rigged for others to win by deliberately submitting non-winning bids.
Without admitting or denying the allegations in the SEC’s complaint, JPMS has consented to the entry of a final judgment enjoining it from future violations of Section 15(c)(1)(A) of the Securities Exchange Act of 1934 and has agreed to pay a penalty of $32.5 million and disgorgement of $11,065,969 with prejudgment interest of $7,620,380. The settlement is subject to court approval.
In a related enforcement action, the SEC barred former JPMS vice president and marketer James L. Hertz from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization, and from participating in any penny stock offering. This sanction is based on Hertz’s December 6, 2010 guilty plea to two counts of conspiracy and one count of wire fraud for engaging in misconduct in connection with the competitive bidding process involving the investment of proceeds of tax-exempt municipal bonds. The Commission recognizes Hertz’s cooperation in the SEC’s investigation and investigations conducted by other law enforcement agencies.
This is the SEC’s third settlement with a financial institution stemming from its ongoing investigation into corruption in the municipal reinvestment industry. On December 7, 2010, the SEC charged Banc of America Securities LLC (BAS) with securities fraud for similar conduct. BAS agreed to pay more than $36 million in disgorgement and interest to settle the SEC’s charges, and paid an additional $101 million to other federal and state authorities for its misconduct. On May 4, 2011, the SEC charged UBS Financial Services Inc. (UBS) with securities fraud for fraudulently rigging bids as both a provider and a bidding agent. UBS agreed to pay $47.2 million in disgorgement, interest and civil penalties to settle the SEC’s charges and to pay $113 million to other federal and state authorities in connection with their parallel cases.
Deputy Chief Mark R. Zehner and Assistant Municipal Securities Counsel Denise D. Colliers, who are members of the Municipal Securities and Public Pensions Unit in the Philadelphia Regional Office, conducted the SEC’s investigation into this matter.
The SEC thanks the Antitrust Division of the Department of Justice and the Federal Bureau of Investigation for their cooperation and assistance in this matter. The SEC is bringing this enforcement action in coordination with the Department of Justice, the IRS, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System and 25 State Attorneys General.
The SEC’s investigation is continuing. "
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