Defense lawyers for three ex-UBS AG (UBSN) municipal bond traders questioned prosecutors’ claims that the transactions their clients made amounted to breaking the law.
Attorneys for Peter Ghavami, the former head of UBS’s municipal derivatives group, and Gary Heinz and Michael Welty, former vice presidents and marketers in the group, today pressed an admitted bid-rigger cooperating with the government in the trial in federal court in New York.
The witness, Douglas Goldberg, pleaded guilty to bid- rigging in 2010. He testified yesterday that Ghavami and Heinz rigged bids with him when they were at JPMorgan Chase (JPM), and later during their time at UBS, by submitting intentionally losing bids on some deals and sometimes being told what all the other bids were before submitting their own.
Marc Mukasey, a lawyer for Heinz, asked Goldberg whether any U.S. Treasury regulation required bond bidders to “try their hardest every time to win” or “be aggressive every time.”
Goldberg said there were no such requirements, but said the defendants had not simply submitted low bids by accident or decided not to put in the effort.
Charles Stillman, a lawyer for Ghavami, asked Goldberg whether regulations in effect while Ghavami and Heinz were at JPMorgan prohibited “last looks.”
“I still don’t know if that’s true or not,” Goldberg told jurors. “Word for word I don’t think it’s in there” before 1999 he said, adding, “I won’t remember without reading every single page.”
Goldberg, a former senior vice president at CDR Financial Products Inc., is testifying as part of a cooperation agreement with the government. He faces as long as 35 years in prison when he is sentenced for one count of bid-rigging and two of fraud.
Ghavami, Heinz and Welty are charged with conspiracy to defraud municipal issuers and U.S. tax authorities, and with wire and mail fraud.
The case is U.S. v. Ghavami, 10-cr-1217, U.S. District Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Emily Grannis in New York at email@example.com.