Chambers Dunhill Rubin Subpoenaed Over Airport Deals

This isn't the first subpoena against CDR, but the first time I have seen a legal move against CDR financial products in regards to airports. Although based in California the company has often played a role in the North East, especially in Pennsylvania as well as in New Jersey. CDR and Rubin and have given ten's of thousands to Pennsylvania Democrats including over 40,000 to Ed Rendell. In general their activities were especially egregious in Philadelphia.

Federal prosecutors subpoenaed records of the Allegheny County Airport Authority as part of an investigation into possible bid-rigging by financial institutions that bilked cities and airports nationwide. The Justice Department wants documents related to the sale of $114.5 million in adjustable-rate bonds by the airport authority in 2002, according to a copy of the subpoena dated May 6 from the department's antitrust division in New York.

The subpoena seeks documents related to Chambers Dunhill Rubin & Co. and its role in the bond issue. The Los Angeles-based firm, now known as CDR Financial Products, provides advice on bonds to cities, states and other public authorities that issue such securities."We used (CDR) on more than one bond deal. I just don't know on what issues we used them," said Jeffrey Letwin, counsel to the airport authority since its formation in 1999.

CDR was one of at least three municipal financial advisers searched by federal prosecutors in November 2006 as part of an investigation into collusion among banks and brokers to overcharge public agencies in the $2.7 trillion municipal bond market, said Bloomberg News, which first reported the story."The subpoena is very broad. It's going to take some time to go through all this," said Letwin, an attorney with Schnader Harrison Segal & Lewis, Downtown.

Antitrust enforcers demanded to see any documents related to the Aug. 16, 2002, bond issue. Money raised from those adjustable-rate bonds refinanced ones the authority issued in 1993.The subpoena specifically asked for contracts or memoranda of understanding between the airport authority and CDR.

"This is now seven years old," said CDR spokesman Allan Ripp, who declined to comment about the firm's dealings with the airport authority or the subpoena, except to say, "We have cooperated extensively when the firm is asked to provide documents."The airport authority used CDR to issue fairness opinions regarding the agencies' interest-rate swap contracts, a financial agreement that helps offset the risk of changing interest rates.

Agencies often entered such contracts when they issued bonds. Widely used a few years ago, swap contracts fell out of favor by 2008, after bond and other financial markets began to freeze as the recession set in.More than 30 banks, insurance companies and brokers have been subpoenaed in the criminal investigation, as have the state of Alabama and the University of New Mexico.

It appears the investigation into the muni-bond scandal is alive and well. I myself have become increasingly convinced that the Democratic Governor's association was one of the keys to which CDR made and kept its connections to local Democrats in power.