Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Former Broker Sentenced to 18 Months in Prison for Role in Municipal Bond Conspiracies, (Jan 4, 2013)

By Jeffrey May, J.D.

A former financial services broker for the North American division of foreign financial services company Compagnie Financière Tradition was sentenced yesterday to serve 18 months in prison for his role in conspiracies with executives of General Electric Co. (GE) affiliates related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. The former broker, Adrian Scott-Jones, also was fined $12,500. He pleaded guilty in September 2010 to the charges filed in the federal district court in New York City. Under the plea deal, he agreed to cooperate with the government's ongoing investigation (U.S. v. Scott-Jones, Criminal No.: 10-cr-794).

According to the Justice Department, Scott-Jones participated in two separate fraud conspiracies with companies that provide a type of contract known as an “investment agreement” to public entities throughout the United States, such as state, county, and local governments and agencies. These public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issued to raise money for, among other things, public projects. Scott-Jones also pleaded guilty to one count of wire fraud. The challenged conduct occurred between 1999 and 2006. The original charges did not identify Tradition or the co-conspirators.

Scott-Jones purportedly gave co-conspirators information about the prices, price levels, or conditions in competitors’ bids, a practice known as a “last look,” which is explicitly prohibited by U.S. Treasury regulations, according to the Justice Department. Scott-Jones also solicited and received intentionally losing bids for certain investment agreements and other municipal finance contracts. As a result of Scott-Jones’ role in corrupting the bidding process for investment agreements, he and his co-conspirators deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds used by municipalities for various public works projects, such as water pollution abatement projects and low-cost housing, the government alleged.

“From soliciting intentionally losing bids for investment agreements to paying out kickbacks to manipulate the competitive bidding process, the conspirators went to great lengths to defraud municipalities across the country,” said Scott D. Hammond, Deputy Assistant Attorney General in charge of the Department of Justice Antitrust Division's criminal enforcement program. “Today's sentence sends a clear message that the division will continue to hold executives accountable for their anticompetitive conduct.”

Nineteen of the 20 individuals who have been charged as a result of the Justice Department's ongoing municipal bonds investigation have been convicted at trial or pleaded guilty. In addition, one company, Rubin/Chambers, Dunhill Insurance Services, also known as CDR Financial Products, has pleaded guilty.

News: Antitrust AntitrustDivisionNews