Ex-UBS Executives Deserve More Than 11 Years, U.S. Says
Three former UBS AG (UBSN) executives convicted of bid-rigging should get prison terms ranging from more than 11 years to almost 20, U.S. prosecutors argued.
A New York jury in August found former UBS managing director Peter Ghavami and two co-workers, Gary Heinz and Michael Welty, guilty of rigging auctions for contracts to invest the proceeds of municipal bond sales. They are to be sentenced by U.S. District Judge Kimba Wood May 22 and 23.
Prosecutors from the Justice Department’s Antitrust Division asked in court papers to sentence Ghavami to at least 17 1/2 years, Heinz to at least 19 years and seven months, and Welty to at least 11 years and three months.
“Almost from the inception of their business, defendants embraced a culture of corruption,” prosecutors said in a sentencing memorandum filed with the court last night. “They willingly and systematically manipulated the market for municipal investment agreements through a series of separate schemes with their competitors, with a broker, and with providers of municipal investment agreements.”
The three men were found guilty of wire fraud conspiracy for rigging bids and arranging to pay kickbacks to the brokerage firm CDR Financial Products Inc. in exchange for helping manipulate the auctions. Ghavami and Heinz were also found guilty of wire fraud in connection with making payments. Welty was found not guilty of wire fraud, and Heinz was found not guilty of one count of witness tampering.
“We think the government’s recommendation is just over the top,” Charles Stillman, who represents Ghavami, said in a telephone interview today. Stillman said he will present Wood with arguments for “a far more appropriate” sentence.
Prosecutors said the requested prison terms are within federal sentencing guidelines, which aren’t binding on Judge Wood. They’re based in part on government calculations that Ghavami’s and Welty’s conduct each caused a total loss of $7.7 million. Heinz was responsible for $9.7 million in losses, according to the government.
The convictions followed a five-year antitrust investigation into the $3.7 trillion municipal bond market. At least 19 people and one company have been convicted at trial or pleaded guilty to criminal charges in the probe.
Issuers of tax-exempt municipal bonds are required to use competitive bidding when selecting firms to handle deals to invest the money before it’s used to build roads, schools, bridges and other public projects. Prosecutors claimed the three defendants colluded with competitors to set bid prices, sometimes deliberately losing auctions.
Evidence in the trial included e-mails and 76 recordings of telephone conversations in which the defendants discussed bids, including contacts with people at competing firms just before deadlines for bid submissions.
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