Friday, August 31, 2012

Three Former Industry Executives Convicted in U.S. Municipal Bond Investigation

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A federal jury in New York City on August 31 convicted three former UBS AG executives for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts, the Department of Justice has announced.

In May 2011, the Department of Justice announced that UBS had entered into an agreement to resolve anticompetitive activity in the municipal bond investments market (CCH Trade Regulation Reporter ¶50,273).

The defendants are Peter Ghavami, Gary Heinz and Michael Welty. While employed at UBS, the three participated in separate fraud conspiracies and schemes with a number of financial institutions and with a broker, between March 2001 and November 2006, according to evidence presented at trial. These financial institutions, or providers, offered a type of contract—known as an investment agreement—to state, county and local governments and agencies, and not-for-profit entities, which were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds issued to raise money for public projects.

During the trial, which began on July 30, the government presented specific evidence relating to approximately 26 corrupted bids and approximately 76 recorded conversations made by co-conspirator financial institutions, according to the Department of Justice.

Ghavami was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud. Heinz was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud. Welty was found guilty on three counts of conspiracy to commit wire fraud. Heinz was found not guilty on one count of witness tampering and Welty was found not guilty
on one count of substantive wire fraud.

“For years, these executives corrupted the competitive bidding process and defrauded municipalities across the country out of money for important public works projects, said Scott D. Hammond, Deputy Assistant Attorney General in charge of criminal enforcement at the Antitrust Division.

“Today’s convictions demonstrate that the division is committed to holding accountable those who seek to unfairly and illegally undermine competitive markets.”

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