David Rubin Gets his First Day in Court

With 9 charges over his head and some of the banks already settling with the SEC, its the beginning of a long and in all likelihood tough trial for Rubin:

David Rubin, founder of CDR Financial Products Inc., and two colleagues on Friday pleaded not guilty to securities fraud and other charges stemming from an alleged conspiracy to rig bids for municipal investment agreements and derivatives contracts for kickbacks.A federal magistrate judge in Manhattan set bail for Rubin at far less than U.S. attorneys ­requested.

In remarks that likely foreshadow the arguments that will be made against the charges, Michael McGovern, a partner at Ropes & Gray LLP representing Stewart Wolmark, CDR’s former chief financial officer and managing director, claimed that the government’s portrayal of CDR as an entity at the center of a massive bid-rigging conspiracy is far-fetched.

The case is the first to be brought in the Justice Department’s widespread probe of anticompetitive practices in the muni market, under which 30 to 40 firms and a number of individuals were subpoenaed for information.But McGovern asked, if there’s a widespread conspiracy, why did the government not name individuals from any other firms? He also suggested that a five-year statute of limitations will lead to the removal of some of the charges.

He said the limitation was never meant to run after the interest on bonds expires, which could be 30 years after issuance.Saying she did not want to try the case at arraignment, Rebecca Meiklejohn, the lead Justice Department attorney on the case, nevertheless warned the government has “a very strong case” based on multiple witnesses who agreed to plead guilty and testify against CDR, including former employees who worked with the defendants. She also said the government has hundreds of documents and recorded conversations that support its arguments.

Meiklejohn sought bail of about $25 million for Rubin, arguing that the government believes he owns far more than the $15 million to $20 million in assets his attorneys have reported, and that he is a flight risk.Meiklejohn told the judge that the government is “ignorant” of the full scope of Rubin’s assets. She warned that he may have multiple passports because he is a naturalized American citizen and noted that he often flies to Israel, as recently as last month, where he appears to own a house and visit a son.

After all was said and done, Rubin will be releases on 5 million bail with 250,000 posted up front with more tied to his holdings in California, and his associates received even more lenient arrangements.