A federal jury in New York City today convicted three former financial services executives for their participation in frauds related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts.
Peter Ghavami, Gary Heinz and Michael Welty, all former UBS AG executives, were found guilty on conspiracy and fraud charges in the U.S. District Court in New York City. Ghavami was found guilty on two counts of conspiracy to commit wire fraud and one count of substantive wire fraud. Heinz was found guilty on three counts of conspiracy to commit wire fraud and two counts of substantive wire fraud. Welty was found guilty on three counts of conspiracy to commit wire fraud. Heinz was found not guilty on one count of witness tampering and Welty was found not guilty on one count of substantive wire fraud.
The trial began on July 30, 2012. Ghavami, Heinz and Welty were initially indicted on Dec. 9, 2010, and the convictions demonstrate a clear disregard for the public trust and the financial well-being of municipalities across the country.
According to evidence presented at trial, while employed at UBS, Ghavami, Heinz and Welty participated in separate fraud conspiracies and schemes with various financial institutions and with a broker, at various time periods from as early as March 2001 until at least 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, throughout the United States.
According to evidence presented at trial, while acting as providers, Ghavami, Heinz and Welty, with their provider and broker co-conspirators, corrupted the bidding process for more than a dozen investment agreements to increase the number and profitability of the agreements awarded to UBS. At other times, while acting as brokers, Ghavami, Heinz, Welty and their co-conspirators arranged for UBS to receive kickbacks in exchange for manipulating the bidding process and steering investment agreements to certain providers.
It’s estimated that the schemes cost municipalities around the country and the U.S. Treasury millions of dollars. 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 public projects. Public entities typically hire a broker to assist them in investing their money and to conduct a competitive bidding process to determine the winning provider.
The U.S. Department of Justice’s Antitrust Division celebrated the convictions, stating that the division is committed to holding accountable those who seek to unfairly and illegally undermine competitive markets.
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