Bank of America Pays $137 Million in Restitution for Fraudulent Bid-Rigging in the Muni Markets
Bank of America has agreed to pay restitution in the amount of $137 million for its part in a vast bid-rigging conspiracy in the municipal-investment contracts market, according to a Bloomberg article by Martin Z. Braun and Jeff Bliss called “Bank of America Deal in Muni Case May be ‘Tip of the Iceberg.’” See also “BofA settles muni bond probe for $137M,” by Adam O’Daniel of the Atlanta Business Chronicle. The settlement arose out of an anti-trust investigation by the U.S. Department of Justice. As the Bloomberg article suggests, many other co-conspirators could be poised to fall.
“Stay tuned to this channel -- I think you will see a lot more activity in the coming weeks and months,” Christine Varney, head of the DOJ’s antitrust division, was quoted as saying, adding: “We are committed to getting restitution, full restitution, to all the municipalities that were victims of this scheme.”
Howard University law professor Andrew Gavil was quoted as saying that the Bank of America settlement is “likely the tip of the iceberg.”
The article said the DOJ had identified more than twelve firms, including JP Morgan Chase, UBS AG, and Societe Generale, as unindicted co-conspirators in another criminal case.
Bank conspirators circumvented the normal bidding process by allegedly bribing government officials, paying illegal kickbacks to brokers, and obtaining inside information, which enabled their them to carve up the market, fix prices, and decide who would and would not sell guaranteed investment contracts to municipal governments.
“I had conversations prior to the bid with the broker about who the bidders were going to be and who was going to win or lose,” Douglas Lee Campbell, a former executive in Bank of America’s municipal derivatives group, reportedly told a federal judge when he pleaded guilty on September 9.
Bank of America supposedly turned itself in to the Department of Justice and is receiving leniency for cooperating with the investigation. Bank of America’s settlement, which reportedly covers activities from 1997 through 2002, calls for it pay $67 million directly to affected states and $70 million to the Securities and Exchange Commission.
“Bank of America is pleased to put this matter behind it and has already voluntarily undertaken numerous remediation efforts,” the company announced proudly.
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