Bid-rigging and Fraud Plague Municipal Bond Industry
A second former employee of Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products (CDR), pleaded guilty today for his participation in bid-rigging and fraud conspiracies related to contracts for the investment of municipal bond proceeds and other related municipal finance contracts.
CDR is a Beverly Hills, Calif.-based financial products and services firm.
According to the charges filed today in the U.S. District Court in Manhattan, Matthew Adam Rothman of Los Angeles engaged in separate bid-rigging and fraud conspiracies with companies that provide a type of contract, known as an investment agreement, to state, county and local governments and agencies throughout the United States.
The public entities were seeking to invest money from a variety of sources, primarily the proceeds of municipal bonds that they had issued to raise money for, among other things, public projects.
Rothman also pleaded guilty to one count of wire fraud. According to the plea agreement, Rothman has agreed to cooperate with the ongoing investigation.
The bid-rigging conspiracy with which Rothman is charged carries a maximum penalty of 10 years in prison and a $1 million fine. The fraud conspiracy with which Rothman is charged carries a maximum penalty of five years in prison and a $250,000 fine. The wire fraud charge carries a maximum penalty of 20 years in prison and a $250,000 fine.
This is the second guilty plea to arise from an ongoing investigation into the municipal bonds industry, which is being conducted by the Antitrust Division’s New York Field Office, the FBI and IRS Criminal Investigation.
Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products, is based in Beverly Hills, California.
Rothman admitted that, as a part of the bid-rigging conspiracy, from at least as early 2001 until at least November 2006, he and other co-conspirators designated in advance which co-conspirator providers would be the winning bidder for certain investment agreements and submitted or caused to be submitted to CDR intentionally losing bids.
According to the court documents, kickbacks in the form of fees that were inflated or unearned were paid to CDR in exchange for assistance from Rothman and other CDR co-conspirators in controlling the bidding process and ensuring that certain co-conspirator providers won the bids they were allocated.
As a part of the fraud conspiracy, from as early as August 2001 until at least November 2006, Rothman and others gave a co-conspirator provider 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.
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Key Facts
- State: Federal
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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