James L. Hertz, Bid-rigging and Municipal Bond Fraud, New York 2024

In a shocking turn of events, James L. Hertz, a former employee of a financial institution’s subsidiary, pleaded guilty to bid-rigging and fraud conspiracies involving municipal bonds in a U.S. District Court in New York City.

According to the plea proceeding held on [undisclosed], Hertz, a resident of Cranford, N.J., engaged in separate bid-rigging and fraud conspiracies related to the provision of investment agreements and other municipal finance contracts to public entities throughout the United States.

Hertz, who worked in the municipal derivatives group of the financial institution’s subsidiary as a vice president and a marketer of investment agreements and other municipal finance contracts from approximately 1994 through approximately December 2007, was authorized to act as an agent of the financial institution in marketing investment agreements and other municipal finance contracts.

The Manhattan, N.Y.-based financial institution was a provider of investment agreements and other municipal finance contracts, such as swaps, to public entities. Public entities seek 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.

Hertz and co-conspirators engaged in a bid-rigging conspiracy from at least as early as October 2001 until at least November 2006. As a part of the bid-rigging conspiracy, Hertz and co-conspirators designated in advance which co-conspirator provider, either his employer or another financial institution, would be the winning bidder for certain investment agreements or other municipal finance contracts.

Hertz also pleaded guilty to one count of wire fraud and has agreed to cooperate with the ongoing investigation. The court documents also charge that Hertz and co-conspirators misrepresented to municipal issuers or their bond counsel that the bidding process was in compliance with U.S. Treasury regulations.

The exact date of the crime was not specified, but the investigation spanned over 15 years, from 1998 to 2007. The financial institution involved in the scandal was not named. Hertz’s sentence was not disclosed. The case highlights the need for stricter regulations and oversight in the financial industry to prevent such crimes from occurring.

The charges against Hertz include bid-rigging and fraud conspiracies related to the provision of investment agreements and other municipal finance contracts to public entities throughout the United States. He pleaded guilty to one count of wire fraud.

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