Antitrust Law Daily Wrap Up, TOP STORY: Former Bank of America executive sentenced in muni bond investigation, (May 19, 2015)

By Jeffrey May, J.D.

Phillip D. Murphy, a former managing director of Bank of America’s municipal derivatives products desk, was sentenced yesterday to serve 26 months in prison for his role in a wide-ranging conspiracy involving municipal bonds or “munis” and other municipal finance contracts. Yesterday, the Department of Justice announced the sentence, which was handed down by Judge Max O. Cogburn, Jr. of the federal district court in Asheville, North Carolina (U.S. v. Murphy, Criminal No. 3:12 CR 235).

Murphy was indicted in 2012 for his role in a fraud scheme related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts. In 2014, as trial in the case was approaching, he pleaded guilty to the charges. Including Murphy, 17 individuals and one corporation have been convicted or pleaded guilty as a result of the Department of Justice Antitrust Division’s municipal bonds investigation, according to the Justice Department.

Murphy admitted to participating in a wire fraud scheme and separate fraud conspiracies that began as early as 1998 and continued until 2006. The scheme involved employees of Rubin/Chambers; Dunhill Insurance Services Inc., also known as CDR Financial Products, a broker of municipal finance contracts; and others. CDR agreed to a guilty plea on related charges in 2011.

According to the charges against Murphy, the former executive conspired with CDR and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to Bank of America. Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations. As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices. In exchange for this information, Murphy submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers, the government contended.

Brent Snyder, Deputy Assistant Attorney General in charge of the Antitrust Division’s Criminal Enforcement Program, said in a statement that the sentence demonstrated the government’s “continued resolve to vigorously prosecute bank executives whose greed and illegal schemes undermine our free and fair financial markets.”

Attorneys: Donald Conklin (Hafetz Necheles & Rocco) and Edward Theodore Hinson, Jr. (James, McElroy & Diehl) for Phillip Dennis Murphy.

Companies: Bank of America; Rubin/Chambers; Dunhill Insurance Services Inc.

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