Phillip D. Murphy, an ex-Bank of America Corp. (BAC) executive that used to run the municipal derivatives desk there, has pleaded guilty to wire fraud and conspiracy charges in a muni bond rigging case accusing him of conspiring to bilk the US government and bond investors. In federal court, he admitted to manipulating the bidding process involving investment agreements having to do with municipal bond proceeds.
The illegal activity was self-reported by his former employer. Bank of America has been cooperating with prosecutors that have accused bankers of paying kickbacks to CDR Financial Products to fix bids on investment contracts purchased by local governments. The contracts were bought using money from bond sales.
According to the indictments, from 1998 to 2006, Murphy and CDR officials conspired to up the amount and profitability of investment deals and municipal finance contracts that went to Bank of America. Murphy purportedly won actions for certain contracts after other banks consented to purposely turn in losing bids.
Prosecutors say that brokers that took care of the bidding gave insider information to bankers who were favored. “Fees” for derivative transactions, which were actually kickbacks, were paid.
For example, in 2001, CDR set it up for another bank to turn in a bid that was certain to lose so that “financial institution A,” which is how the company was referred to in the indictment, won an investment contract for J. David Gladstone Institutes. Murphy, in return, paid CDR a $70K kickback that was supposedly a fee connected to a swap that was not related to the deal for a contract with J. David Gladstone Institutes.
David Rubin, the founder of CDR, has also pleaded guilty in connection to the bid rigging scam.
Please contact our securities lawyers at The SSEK Partners Group if you suspect that you were the victim of municipal bond fraud.
Ex-BofA Executive Pleads Guilty in Muni Bond Rigging Case, Bloomberg, February 10, 2013
David Rubin Pleads Guilty in Muni-Bond Trial, The Wall Street Journal, December 30, 2011
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