Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Former UBS executives sentenced to prison time in Justice Department's municipal bond case, (Jul 24, 2013)

By Jeffrey May, J.D.

The Department of Justice announced this afternoon that three former UBS AG executives were sentenced today in the federal district court in New York City for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. The three were convicted on August 31, 2012, after a five-week trial (U.S. v. Ghavami, Criminal No. 10 CR 1217).

The charges against Peter Ghavami, Gary Heinz, and Michael Welty were originally filed against the three individuals in 2010. In May 2011, the Department of Justice announced that UBS had entered into an agreement to resolve concerns about its role in the anticompetitive activity in the municipal bond investments market. UBS agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies.

According to the Justice Department, evidence presented at trial showed that the three individuals, while employed at UBS, participated in separate fraud conspiracies and schemes with a number of financial institutions and with a broker, between March 2001 and November 2006. 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.

The Justice Department states that, during the trial, the government presented specific evidence relating to 26 corrupted bids, including 76 recorded conversations made by the co-conspirator financial institutions.

Ghavami, who was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud, was sentenced to serve 18 months in prison and to pay a $1 million criminal fine. Heinz, who was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud (but not guilty on one count of witness tampering), was sentenced to serve 27 months in prison and to pay a $400,000 criminal fine. Welty, who was found guilty on three counts of conspiracy to commit wire fraud (but not guilty on one count of substantive wire fraud) was sentenced to serve 16 months in prison and to pay a $300,000 criminal fine.

Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s criminal enforcement program, warned in a statement that: “The division will continue to prosecute those who subvert and corrupt competitive markets for personal profit.”

According to the Justice Department, a total of 20 individuals have been charged as a result of the department’s ongoing municipal bonds investigation, and 19 have been convicted or pleaded guilty. Another individual awaits trial. Additionally, one company, Rubin/Chambers, Dunhill Insurance Services Inc. has pleaded guilty. Companies: UBS AG

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