U.S. Predicts More Indictments in Municipal Bond Bid-Rigging Investigation

More indictments are expected in a federal antitrust investigation of the $2.8 trillion municipal bond market, a prosecutor told a federal judge in New York.

Rebecca Meiklejohn, a lawyer with the Justice Department’s antitrust division, made the disclosure at a hearing in Manhattan in the criminal case of CDR Financial Products Inc. and three of its employees, charged as part of an ongoing probe of bid- and auction-rigging in the municipal market. Three ex- bankers with a General Electric Co. unit were indicted in same probe this week.

Lawyers for the CDR defendants went to court today to ask U.S. District Judge Victor Marrero to direct the government to give them early access to the prosecution’s evidence and identify any material that might help to clear their clients. Meiklejohn objected, saying the defendants weren’t entitled to early access and the government’s investigation is still moving ahead.

“This is a very expansive case,” Meikeljohn told Marrero, addressing the broader probe. “Just this week the government indicted more individuals in connection with this investigation. This is a continuing investigation and we expect there to be more indictments.”

Dozen Banks

The federal probe has already drawn in more than a dozen banks and financial services companies, including JPMorgan Chase & Co., Bank of America Corp. and UBS AG, according to court records and regulatory filings.

A grand jury in New York in October indicted David Rubin, founder of Beverly Hills, California-based CDR, the firm’s former chief financial officer and a vice president, for allegedly taking kickbacks for running sham auctions for the investments. All three men have pleaded not guilty to the charges.

The U.S. said the defendants conspired to bid rigging on contracts with local governments to invest the proceeds of bond issues. The indictment alleged that CDR and its employees, who handled the bidding, chose firms to provide the contracts in advance in exchange for kickbacks.

Three other former CDR employees and one former UBS AG employee have pleaded guilty in the criminal probe.

800,000 Tapes

U.S. prosecutors have amassed almost 800,000 tape recordings and 125 million pages of documents during an investigation of CDR that lasted more than three years, defense lawyers complained to Marrero today. The judge, who previously set a Sept. 12, 2012 trial date, today urged the government to identify documents and produce them to the defense on an expedited basis.

“This is not the typical case,” he said.

CDR faces a fine of as much as $100 million, the U.S. has said. The charges are “without merit and in fact, a total fiction based on a lack of understanding of the municipal reinvestment market,” CDR said in a statement on its Web site.

The case is U.S. v. Rubin/Chambers, Dunhill Insurance Services Inc., 09-CR-01058, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in New York at pathurtado@bloomberg.net.

• Tweet
• More
  • Business Exchange
  • Buzz up!
  • Digg
• Print
• Email