Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Three Former Financial Services Executives Receive Prison Sentences, Criminal Fines for Bid-Rigging Conspiracies, (Oct 19, 2012)

By John W. Arden, J.D., LLM.

Three former financial services executives of General Electric Co. affiliates were sentenced to serve prison terms and to pay criminal fines yesterday for their participation in bid-rigging conspiracies related to contracts for the investment of municipal bond proceeds and other municipal finance contracts (U.S. v. Carollo, October 18, Baer, H.) The three former executives were convicted in the federal district court in New York City on May 11, 2012, after a three-week trial.

Dominick P. Carollo was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine. Steven E. Goldberg was sentenced to serve 48 months in prison and to pay a $90,000 criminal fine. Peter S. Grimm was sentenced to serve 36 months in prison and to pay a $50,000 criminal fine.

While employed at GE affiliates, Carollo, Goldberg, and Grimm participated in separate fraud conspiracies with various financial institutions and insurance firms (“provider companies”) and their representatives from 1999 until 2006, according to the Department of Justice. These institutions and companies offered investment agreements to state, county, and local governments and agencies that were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had used to raise money for public projects and other things. Goldberg also participated in the conspiracies while employed at Financial Security Assurance Capital Management Services LLC.

The Department of Justice asserted at trial that the three defendants and their co-conspirators corrupted the bidding process for dozens of investment agreements to increase the number and profitability of investment agreements awarded to provider companies where they were employed. The three deprived the municipalities of competitive interest rates for the investment of tax-exempt bond proceeds that were to be used by municipalities for public works projects at schools, hospitals, and roads. Evidence established that they cost municipalities around the country millions of dollars, the Department of Justice said.

Carollo was found guilty on two counts of conspiracy to commit wire fraud and defraud the United States. Goldberg was found guilty on four counts of conspiracy to commit wire fraud and defraud the United States. Grimm was found guilty on three counts of conspiracy to commit wire fraud and defraud the United States.

Twenty individuals have been charged as a result of the Department of Justice’s ongoing municipal bonds investigation. Nineteen individuals have been convicted or have pled guilty. One individual awaits trial. In addition, one company has pled guilty, according to the Department of Justice.

The Department had recommended even stricter sentences for the three defendants. The Government’s Sentencing Memorandum, filed October 15, 2012, requested (1) that Carollo receive a sentence of 120 months’ imprisonment, the maximum sentence permitted, and a fine between $17,500 and $175,000; (2) that Goldberg receive a sentence of between 168 and 210 months’ imprisonment and a fine between $20,000 and $200,000; and (3) that Grimm receive a sentence of between 121 and 151 months’ imprisonment and a fine between $17,500 and $175,000.

The memorandum argued that the defendants’ due process claim should be rejected, since they received sufficient notice concerning loss calculations by the government; that the defendants’ conduct warranted a two-level adjustment of offense enhancements; that the government properly calculated the number of victims; and that the nature and circumstances of the offenses mitigated against leniency.

News: Antitrust