Bloomberg Anywhere Remote Login Bloomberg Terminal Demo Request


Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.


Financial Products

Enterprise Products


Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000


Industry Products

Media Services

Follow Us

Bloomberg Customers

Ghavami’s Rigged Bids Betrayed Muni Issuers, U.S. Says

Updated on

Ex-UBS AG managing director Peter Ghavami and two former colleagues lied and cheated to rig bids for city and state finance deals, a federal prosecutor said in closing arguments at their criminal trial.

Ghavami and former co-workers Gary Heinz and Michael Welty defrauded municipal-bond issuers by manipulating the competitive bidding process for investment transactions, the prosecutor, John Van Lonkhuyzen, told jurors today in federal court in Manhattan.

States, cities and other issuers of tax-exempt municipal bonds must use competitive bidding to select firms that will invest proceeds of the securities, according to a six-count indictment in the case. Ghavami and his co-defendants are accused of circumventing that process.

“They lied, they cheated, they stole,” Van Lonkhuyzen said. The three defendants “were greedy, were deceitful and betrayed dozens of municipalities.”

From August 2001 to at least July 2002, the defendants colluded with conspirators at banks and at least one brokerage firm to learn about other bids before submission deadlines, according to an indictment. They also conspired to commit wire fraud from March 2001 to November 2004, prosecutors said.

$700 Million

UBS, Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and GE Funding Capital Market Services, a former General Electric Co. unit, have paid more than $700 million to settle U.S. claims over the scheme. As many as 13 individuals have pleaded guilty to criminal charges.

Ghavami, a Belgian citizen, was co-head of the municipal bond reinvestment and derivatives group at Zurich-based UBS from about January 2001 to March 2004, with Heinz and Welty reporting to him, according to prosecutors.

Ghavami’s attorney, Charles Stillman, argued during his closing argument that the government had “not come close” to proving its case. Ghavami was a “diligent, successful employee who carried out his work in good faith,” he said. Cooperating witnesses who testified in the trial should be disregarded as untrustworthy, Stillman told jurors.

“The tapes offer a picture of Peter Ghavami acting within the rules entirely in good faith to do his job,” he said about recordings used by the government.

Closing arguments are scheduled to continue tomorrow.

During the trial, which began July 30 before U.S. District Judge Kimba Wood, prosecutors sought to show that the defendants rigged auctions by talking to competitors and by paying kickbacks to brokerage firm CDR Financial Products Inc.

Ghavami and co-conspirators often attempted to deliberately lose auctions rather than win them, according to the indictment. Mark Zaino, a former UBS employee, testified for the prosecution that the group sometimes excluded aggressive bidders, solicited intentional losing bids and gave information to favored bidders to rig outcomes.

Took Payments

A former CDR employee, Douglas Goldberg, told the jury that the brokerage firm took payments from UBS’s municipal derivatives group 10 to 15 times in return for helping to rig municipal finance bids.

Goldberg and Zaino both pleaded guilty to three criminal counts in 2010. Each faces a possible sentence of 35 years in prison. They testified under cooperation agreements with the government.

Defense lawyers called Zaino a “snake” in opening statements. Marc Mukasey, a lawyer for Heinz, told jurors that there were “plenty of sound, legitimate, honest business reasons,” for firms to bid on deals they didn’t want to win.

The case is U.S. v. Ghavami, 10-cr-1217, U.S. District Court, Southern District of New York (Manhattan).

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.