CDR Financial Products and the Pennsylvania Connections

It comes back to Pennsylvania which oddly enough is when I first began to appreciate the national web that CDR had built around the Democratic party (While researching the issue I discovered Rubin had been on Ed Rendel's transition team and had given him over 40,000 dollars in donations) In reality CDR had a controversial relationship with Pennsylvania politicans and became embroiled in a massive scandal that ended up damaging the finances of Philadelphia . (For the record it was CDR's philly connections that were used so the company could land deals in New Jersey. )As for the current charges, they go back to the Allegheny Airport deal:

"The government's central allegation — that our firm acted as a hub through which bids for investment products purchased by municipalities were illegally rigged to eliminate competition — is completely baseless," the statement says. "Since our founding in 1986, we have been innovators in helping municipal issuers manage risk and save millions of dollars in managing their portfolios. The government's portrayal of our firm as conspirators trying to restrain trade and competition is wholly false and we intend to fight these charges to our fullest extent."

The company's founder, David Rubin, and two company employees were indicted by a grand jury in New York Thursday for allegedly taking kickbacks that allowed firms to make excessive profits on investments sold to local governments.

Jeffrey W. Letwin, a member of the Port Authority Board of Directors and a managing partner with the Downtown law firm Schnader Harrison Segal & Lewis, said Saturday he was surprised when federal investigators began asking questions.

"I didn't think there were any problems, but once the (Department of Justice's Antitrust Division) started asking for documents and such, it was kind of obvious," Letwin said.

In June, Port Authority officials said the Department of Justice's Antitrust Division demanded documents related to contracts with CDR Financial Products. At the time, Port Authority officials, citing possible litigation, declined to reveal the number or nature of the documents federal authorities subpoenaed.

According to the nine-count indictment, Rubin and his partners arranged to fix bids on the Port Authority bonds and other deals for unnamed government agencies.

The indictment states that a CDR official arranged in September of 2002 for a $25,000 kickback from a third-party that submitted a proposal for the Port Authority bonds. Subsequently, the indictment states, CDR falsely certified that competitive bids had been sought for the bonds.

As a result, according to the indictment, the Port Authority paid artificially inflated rates on the bonds.In May, Justice subpoenaed records from the Allegheny County Airport Authority related to the 2002 sale of $114.5 million in adjustable-rate bonds. At the time, a lawyer representing the Airport Authority said the contract with CDR had been for guidance in investing the proceeds of the refinancing.

The charges are the first to result from a more than three-year investigation into the municipal bond market and are the latest legal challenge to CDR, whose political contributions to New Mexico Gov. Bill Richardson were the subject of a separate inquiry. The federal investigation into bid-rigging is continuing and has drawn in about two-dozen banks, insurers and local government advisers.

Next week Rubin and associates will be making a court appearance in New York. All this and their are also reports that various banks are in settlement talks with the SEC over the muni-bond scandal.