WASHINGTON, Dec 9 (Reuters) - Three former UBS (UBSN.VX) executives were indicted on Thursday for rigging bids to invest municipal bond proceeds, marking the latest accusations in a fraud crackdown that has ensnared some of the world's largest banks.
The Justice Department said Peter Ghavami, Gary Heinz and Michael Welty will face six charges of rigging bids between 2001 and 2006.The Justice Department has been investigating allegations Bank of America (BAC.N), UBS and other banks and insurance companies decided in advance which investment house would win the auctions of guaranteed investment contracts, which cities and counties buy with the proceeds from municipal bond sales.
Often, there is a delay between when bonds are floated and when the money is actually paid out, allowing some time to invest it.Ghavami, a Belgian who lives in Moscow, was arrested last week at John F. Kennedy International Airport in New York. On Wednesday, a U.S. magistrate judge refused to allow Ghavami to return to Russia and ordered he be released on $10 million bail.
At least eight people have pleaded guilty in the conspiracy, most recently former JPMorgan Chase & Co. (JPM.N) vice president James Hertz.Thursday's indictment alleges that Ghavami, Heinz and Welty manipulated the bidding process for the contracts and certified bidding was competitive and in compliance with rules laid out by the Treasuries. In some cases they allegedly submitted bids they knew would lose.
The three also allegedly agreed to pay to and accept kickbacks from another firm, CDR Financial Products, which has been a prime focus of the investigation over the last year.
On Wednesday, the Justice Department filed a "superseding indictment" against CDR Financial Products and three of its current and former officials, expanding its case against the firm. Already two employees and one former employee of CDR, also known as Rubin/Chambers, Dunhill Insurance Services Inc., have pleaded guilty.
Heinz was also indicted for witness tampering in connection with the investigation.
Witness tampering? That is a new one in the muni-bond scandal.