Tradition (North America) Inc., a unit of Paris-based broker Viel & Cie., agreed to settle allegations that it rigged bids for municipal bond reinvestment deals, according to officials in Massachusetts.
In a civil settlement, the broker agreed to pay $250,000 as well as submit to a probe of whether the firm owes any additional money, according to the state attorney general’s office.
The state alleged that Tradition, which conducted bidding processes among financial institutions for reinvestment deals, allowed certain companies to win the business at below-market rates. Tradition worked for the state between 2000 and 2004 and was supposed to get the highest interest rates from banks on investments of municipal bond proceeds, according to the attorney general’s office.
“State entities deserve restitution for any harm suffered, and we intend to make sure they get it,” Massachusetts Attorney General Martha Coakley said today in a statement. “We will work hard to prevent this kind of activity from happening again.”
Representatives for Tradition in New York and Paris didn’t immediately respond to requests for comment.
Massachusetts’s lawsuit, filed in Suffolk Superior Court in Boston in 2010, alleged that Tradition told favored firms what other banks were bidding and also told banks what to bid to win the business. After the bidding, Tradition signed false statements certifying that the bids were competitive and that the winning bid offered the highest interest rate, according to the state.
The case involved guaranteed investment contracts, known as GICs, which municipalities buy with money raised by selling bonds. The investments let them earn a return on the cash until the funds are needed for schools, roads and other public works.
The case is Commonwealth of Massachusetts v. Tradition Inc., 2010-04378, Massachusetts Superior Court (Suffolk County).