A Look at the 9 Counts Against CDR Financial Products

A very good break down of the the 9 counts from nmpolitics and Dennis Kintigh:

The CDR indictment

The actual indictment is 39 pages long. The beginning has a very useful background section that explains the role of “brokers” in the issuance of municipal bonds.Towns, school districts, housing authorities and other government agencies, referred to as “issuers,” raise money for specific projects by selling bonds. These bonds are loans the agency will pay off over time. The money raised by selling these bonds is spent over time. The “issuers” will routinely invest the unneeded proceeds to earn money.

Think of it like getting a home improvement loan to cover numerous repairs, and you put the money in a savings account until you need to move it to your checking account. These “savings account” investments are done with financial institutions like banks and insurance companies, who are called “providers.” The individuals who represent these “providers” are called “marketers.”

“Brokers” like CDR are supposed to get the best deal for the “issuers” by getting multiple offers from numerous “providers” as bids submitted by “marketers.” In a perfect world, a number of “marketers” send in sealed bids promising specific returns on investments to the “broker.” The “broker” then opens the bids and picks the “provider” offering the best deal.

The federal grand jury indictment charges that CDR (the “broker”) rigged the bids with corrupt “providers” through crooked “marketers.” “Issuers” were cheated out of a fair return on the taxpayer’s money, while CDR and their cronies got kickbacks, the indictment alleges.

It is claimed in the indictment that this scheme started back in 1998 and was ongoing until at least November 2006. The first count listed in the indictment is “restraint of interstate trade and commerce,” which addresses the bid-rigging allegation.

Counts 2 and 3 are conspiracy. “Conspiracy” is an agreement to commit an illegal act. Such an agreement is a crime in itself if some action occurred to fulfill the agreement, an “overt act.” Because it is an ongoing criminal enterprise, events that occur outside the statute of limitations can be presented at trial. The government must prove the agreement existed and that an “overt act” was committed (unless it’s a drug crime).

Count 2 alleges an agreement between CDR and a company only identified as “Provider A.” The overt acts allegedly involve CDR executives and “Marketer A,” the indictment says. Phone calls and events that occurred in late October 2003 are listed in the indictment.

Count 3 alleges a similar scheme involving “Provider B,” Marketers B-1 and B-2 and a “state housing agency.” This count identifies a phone call from New Mexico on May 20, 2004, as an overt act. Although reference is made to a “state housing agency” together with a call from New Mexico, there is nothing in the indictment that links this call to the ongoing Region III Housing Authority investigation and the indictment of former State Rep. Vincent “Smiley” Gallegos.

Marketer A, B-1 and B-2 are not identified, and this is usual because they are probably cooperators who have cut a deal. The identity of Marketer A, B-1, B-2 and Provider A and B will be known prior to trial. The identities of the victim “issuers” also are not revealed because that could lead to figuring out who is cooperating.

Counts 4, 5 and 6 are “Wire Fraud,” which means money allegedly was transferred electronically across state lines to further this criminal plan.Count 7 alleges “false statements” by Zarefsky to the FBI in November 2006.

Two points here are:

• Never lie to the FBI. It’s a crime, even if you’re not under oath.

• This alleged criminal act was committed in late November 2006, which places the conspiracy well within the five-year statute of limitations and allows the prosecutors to bring in all of the alleged criminal acts that occurred six, seven or more years ago.

Count 8 alleges interfering with administration of internal revenue laws. One of the acts presented in this count refers to a “state housing agency” and a phone call on May 19, 2004.Finally, Count 9 alleges “Fraudulent Bank Transactions” in which the kickbacks to the CDR executives were concealed.

For the record CDR may be a key player, but the big fish in the financial houses as well as many of the politicians involved (with the exception of Langford) have managed to dodge the bullet so far. For a Look at the actual indictment from the US district Court, check here.