West Virginia Launches Investigation into Financial Houses and CDR Financial Products

The fact that numerous states have piled on with the investigations and lawsuits considering the widespread accusations of bid rigging along with the significant financial damage these deals have inflicted.

(Insurancenewsnet) Attorney General Darrell McGraw named an additional 21 banks and insurance companies Monday in federal court in the State's lawsuit claiming bid rigging among the companies and others cheated the State out of untold amounts of money. McGraw previously sued Bank of America claiming financial instruments sold to the State carried artificially low interest rates due to the rigged bids. The lawsuit is now pending in the Southern District of New York. In addition, Attorney General McGraw sued three brokers involved in the antitrust conspiracy to defraud the State..........

The banks being sued include the usual suspects

(Legal Newsline) Financial institutions added are UBS AG and subsidiaries UBS Financial Services and UBS Securities; JP Morgan Chase and subsidiary JP Morgan Securities; MBIA; Morgan Stanley; Rabobank Group; Bayerische Landesbank Girozentrale; Transamerica Occidental Life Insurance; AIG Financial Products; AIG Matched Funding; Financial Security Assurance; Assured Guaranty US Holdings; Dexia; GE Funding Capital Market Services; Natixis Funding; Royal Bank of Canada; and Financial Guarantee Insurance.

Of course CDR was hit as well:

(Insurancenewsnet) The brokers sued by the State include CDR Financial Products, Inc., headquartered in Beverly Hills, California; George K. Baum & Co., headquartered in Kansas City, Missouri and Investment Management Advisory Group, Inc., headquartered in Pottstown, Pennsylvania.The State had previously sued Bank of America for its role in the bid rigging conspiracy. Bank of America has been cooperating with federal prosecutors with regard to how the conspiracy worked. The conspiracy affected the sale of financial contracts by state agencies and local municipalities paid for with the proceeds of bond sales.

To finance construction projects, state agencies and municipalities sell bonds. When state agencies or municipalities issue bonds, all of the money raised is not needed immediately for the capital project such as building roads, hospitals or schools. Therefore, the state agencies and municipalities use the bond proceeds to buy short term investment contracts until the money is needed. Companies selling the financial products guarantee a certain rate of interest paid to the bond issuer along with part of the principal to pay for the projects as they are completed in stages. In his lawsuit Attorney General McGraw alleges that the State was shorted substantial interest payments because the bid rigging allowed the companies to sell the financial products to the state agencies at lower rates of interest than normally would have been obtained.

"Whether it involves the sale of two-by-fours or sophisticated financial products, bid rigging will not be tolerated in West Virginia," said Attorney General McGraw. "The State lost scarce dollars which could have been used for building new schools or hospitals."

Bank of America of course has cut the deal and is the location for the informant who has played a key role in aiding and assiting the Federal government.