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TRENTON
– The Attorney General’s Office
announced today that Bank of America will
pay $67 million under a multi-state settlement
for its involvement in a nationwide scheme
to rig bids and engage in other anti-competitive
conduct that defrauded state agencies, municipalities,
school districts and not-for-profit entities
in their purchase of municipal bond derivatives.
The
multi-state settlement is one component
of an overall, $137 million settlement Bank
of America is entering into simultaneously
with the U.S. Securities and Exchange Commission,
the federal Office of the Comptroller of
the Currency, the Internal Revenue Service,
the Federal Reserve and 20 states, including
New Jersey.
The combined settlements will provide restitution
to state agencies, municipalities and non-profits
-- both within New Jersey and throughout
the United States -- who entered into municipal
bond derivative investments with Bank of
America and were injured by the scheme.
Eligible New Jersey entities will receive
a total of approximately $1.4 million under
the settlement.
Today’s global settlements are the
result of a broad and on-going criminal
and civil investigation. The investigation
involves the Department of Justice’s
Antitrust Division, the SEC, OCC and IRS,
and is focused on individuals at Bank of
America and other major financial institutions,
as well as certain brokers. The investigation
is focused on the marketing and sale of
municipal derivative investments. These
instruments are typically investment contracts
that government issuers and not-for-profit
entities use to reinvest the proceeds of
tax-exempt bond offerings until the funds
are needed, or to hedge against interest
rate risk.
The transactions are often awarded after
a competitive bidding process or negotiated
directly between the financial institution
and the issuer.
Bank
of America was the first and only entity
in the scheme that voluntarily self-reported
the wrongdoing to the Department of Justice.
Under DOJ’s Corporate Leniency Program,
Bank of America was granted conditional
leniency based on its acknowledgement of
wrongdoing, significant cooperation and
making restitution.
To date, DOJ has brought criminal actions
against seven individuals and one company,
and has obtained guilty pleas against eight
others involved in the scheme.
As
alleged in the states’ settlement
agreement, during the period 1998 through
2003, Bank of America and other financial
institutions and brokers allegedly rigged
bids, received and provided “last
looks” on bids and submitted non-competitive
“courtesy” bids on these investments.
The
alleged scheme enriched financial institutions
or brokers at the expense of state agencies,
towns, cities, school districts and nonprofits.
As a result of this misconduct, state, local
and not-for-profit entities entered into
contracts at suppressed rates of return
on investments or paid higher rates on interest-rate
hedging instruments than they would have
in a competitive marketplace.
Other states joining New Jersey in the Bank
of America settlement include Alabama, California,
Connecticut, Florida, Illinois, Kansas,
Maryland, Massachusetts, Michigan, Missouri,
Montana, Nevada, New York, North Carolina,
Ohio, Oregon, Pennsylvania, South Carolina
and Texas.
Deputy Attorney Toral M. Joshi, Deputy Attorney
General Isabella T. Stempler, Assistant
Attorney General James J. Savage, Assistant
Attorney General Carol Jacobson and Section
Chief Anna M. Lascurain handled the Bank
of America matter on behalf of the state.
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