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Connecticut AG Announces National Settlement with Bank of America for Anticompetitive Scheme

Connecticut Attorney General Richard Blumentha...

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CONNECTICUT ATTORNEY GENERAL (LoanSafe.org) – Attorney General Richard Blumenthal announced today that Bank of America will pay restitution under separate federal and multistate settlements totaling $137 million for its part in a nationwide scheme, including bid rigging and other anticompetitive conduct that defrauded state agencies, municipalities, school districts and nonprofits in their purchase of municipal bond derivatives.

The settlements with Bank of America involve 20 states, the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Internal Revenue Service (IRS) and the Federal Reserve Bank.

The settlements will provide full restitution to state agencies, municipalities and nonprofits throughout Connecticut and nationwide who were harmed by this scheme.

“This settlement is only a first step in an ongoing investigation aimed at recovering restitution from the nation’s biggest financial institutions for relentlessly shortchanging taxpayers and nonprofits,” Blumenthal said. “The conspiracy admitted by Bank of America deceived and defrauded municipalities and nonprofits in a web of bid rigging and deceptive conduct, costing millions and involving several of the country’s major financial institutions.
“Today’s settlements are the result of a broad and ongoing criminal and civil investigation that has involved the Department of Justice’s Antitrust Division (DOJ), the SEC, OCC, IRS and the states that focuses on individuals at Bank of America, other financial institutions and brokers in connection with the marketing and sale of municipal derivative investments.

Municipal derivatives are typically investment contracts that government issuers and nonprofits use to reinvest the proceeds of tax-exempt bond offerings until the funds are needed or hedge against interest rate risk. The transactions are often awarded after a competitive bidding process or negotiated directly between the financial institution and the issuer.

“Financial institutions and brokers allegedly rigged bids, received and provided “last looks” on bids and submitted non-competitive “courtesy” bids on these investments. The alleged schemes enriched financial institutions or brokers at the expense of towns, cities, school districts and nonprofits.

“Bank of America and co-conspirators allegedly lured towns and cities by falsely promising competitive bids and fair dealing. In reality, bids were choreographed schemes — designed to enrich financial institutions and brokers on the backs of taxpayers and nonprofits.”

“Our investigation is active and ongoing — propelled by powerful evidence of wrongdoing that Bank of America provided against its co-conspirators. Our goal is to use that information to provide additional financial recoveries.”

Other states joining Connecticut in the Bank of America settlement include Alabama, California, Florida, Illinois, Kansas, Maryland, Massachusetts, Michigan, Missouri, Montana, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina and Texas.

Blumenthal thanked those in his office who participated in the investigation:  Assistant Attorney General Christopher Haddad, and Paralegal Lorriane Measer, under the direction of Assistant Attorney General Michael E. Cole, Chief of the Attorney General’s Antitrust Department.


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