MASSACHUSETTS IN SETTLEMENT WITH TRADITION (NORTH AMERICA) INC.

(The following is a reformatted version of a press release
issued by the Office of Massachusetts Attorney General Martha
Coakley and received via electronic mail. The release was
confirmed by the sender.) 
January 29, 2013 
INVESTMENT BROKER TO PAY $250,000 TO SETTLE BID-RIGGING
ALLEGATIONS 
Overall AG Investigation of Similar Bid-Rigging Schemes has
Recovered More Than
$15.75 Million 
BOSTON - An investment broker has agreed to pay $250,000 to
settle allegations that it engaged in an extensive pattern of
bid-rigging with respect to presenting interest rates to
municipal bond issuers in the state looking to reinvest bond
proceeds, Attorney General Martha Coakley announced today. 
The settlement with Tradition (North America) Inc. stems from a
lawsuit filed in 2010, alleging that Capital Financial Partners,
Inc. and its employees, as agents for Tradition, acted as an
investment broker charged with obtaining competitive bids on
interest rates to be paid to Massachusetts bond issuers on
Guaranteed Investment Contracts (GICs). Used for temporarily
reinvesting the proceeds of municipal bond issuances, GICs
typically pay a set interest rate for a specific period of time.
GIC buyers expected at the time that these products would
provide a relatively safe investment for public entities while
providing reasonable interest. 
Tradition conducted the bidding process among the financial
institutions that sought to sell GICs and certified that the
bidding process was competitive. According to the complaint
filed in Suffolk Superior Court, however, the investment giant
allegedly told favored providers what other banks were bidding
and exactly what to bid in order to win the business. This
resulted in bids that offered Massachusetts less interest than
it should have received if the bidding process had really been
competitive, and ensured that these favored providers would get
business from the Commonwealth. 
“This case is part of our ongoing effort to hold financial
institutions accountable for bid-rigging in the municipal bond
derivatives market,” AG Coakley said. “State entities deserve
restitution for any harm suffered, and we intend to make sure
they get it. We will work hard to prevent this kind of activity
from happening again.” 
Tradition will pay $250,000 to the Commonwealth. The settlement
also includes a provision to track an ongoing investment
obtained through the tainted bidding process to determine
whether Tradition owes additional money to the state. 
This case is part of a larger effort to investigate and remedy
harm caused by bid-rigging in the municipal bond derivatives
markets. Massachusetts, as part of a multi-state group, has
previously obtained settlements with Bank of America, UBS, J.P.
Morgan Chase Co., Wachovia, GE Capital Market Services and
broker Martin Kanefsky.  Including the settlement with
Tradition, Massachusetts has recovered more than $15.75 million
for the Commonwealth and other issuers of municipal bonds in the
state. Tradition is the second broker to settle with the
Commonwealth individually. 
Municipal bond derivatives are contracts that tax-exempt issuers
use to reinvest proceeds of bond sales until the funds are
needed, or to hedge interest-rate risk. In April 2008,
Massachusetts and other states began investigating allegations
that large financial institutions including national banks,
insurance companies, certain brokers and swap advisors, engaged
in various schemes to rig bids and commit other deceptive,
unfair and fraudulent conduct in the municipal bond derivatives
market. 
This matter was handled by the staff of Attorney General Martha
Coakley’s Public Protection and Advocacy Bureau and Insurance
and Financial Services Division, including Assistant Attorneys
General Mary Freeley, Aaron Lamb, and Melissa Swindel, with
assistance from Legal Analyst Diana Hooley, paralegals Erica
Harmon and Helen Hood and Legal Assistant Meaghan Dever. 
MEDIA CONTACT:
Jillian Fennimore
(617) 727-2543 
(bjh) NY 
#<873920.660640.3.4.0.0.76>#
 
 
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