CDR Indicted for Rigging Municipal Investment Deals

CDR Indicted for Rigging Municipal Investment Deals

Oct. 29 (Bloomberg) -- CDR Financial Products Inc., founder David Rubin and two other employees of the advisory firm were indicted by a federal grand jury for conspiring to rig bidding on investment contracts sold to local governments.

The indictment in U.S. District Court in New York alleges that CDR and its employees conspired to fix prices on investment contracts that local governments buy with the proceeds of municipal bonds. CDR managed the bidding process for the investments on behalf of local governments.

The indictment is the first to result from a more than three-year investigation of the U.S. municipal bond market. A conspiracy to fix prices on the investments would have cost taxpayers by giving them lower returns than they would receive in a competitive auction. More than a dozen banks, brokers and insurers have been subpoenaed under the investigation.

“The Justice Department is committed to protecting the competitive process and will hold accountable individuals and companies who participate in illegal and anticompetitive conduct,” Christine Varney, assistant U.S. Attorney General who heads the antitrust division, said in a statement.

Allan Ripp, a spokesman for CDR, said the firm hasn’t had a chance to fully review the complaint. He dismissed allegations that the firm participated in a conspiracy.

“The government is alleging a certain kind of conspiracy that is just baseless,” Ripp said. “CDR sternly asserts these charges are wholly without merit.”

A bid-rigging count against Rubin and the other employees carries a maximum 10-year prison term, prosecutors said. Other charges include conspiracy, wire fraud, making of false statements and a fraudulent bank transaction count. Not every defendant is accused of each crime. CDR faces a maximum fine of $100 million for bid rigging.

bloomberg