A former Bank of America financial services executive was indicted last week for his participation in a far-reaching conspiracy and scheme to defraud related to bidding for contracts for the investment of municipal bond proceeds and other municipal finance contracts.
The indictment was filed last week in federal court in Charlotte, North Carolina.
The indictment charges Phillip D. Murphy, a former executive Bank of America executive.
The case involves sale of an investment agreement to public entities, such as state, county and local governments and agencies throughout the United States.
Major financial institutions, including banks, investment banks, insurance companies and financial services companies, are among the providers of investment agreements and other related municipal finance contracts.
Public entities seek to invest money from a variety of sources, primarily the proceeds of municipal bonds that they issue to raise money for, among other things, public projects.
Public entities typically hire a broker to conduct a competitive bidding process among various providers for the award of an investment agreement to invest such money.
Competitive bidding for these agreements is the subject of regulations issued by the U.S. Department of the Treasury and is related to the tax-exempt status of the bonds.
Bank of America marketed financial products and services, including services as a provider of investment agreements.
“The individual charged yesterday allegedly participated in a complex fraud scheme and conspiracies to manipulate what was supposed to be a competitive process,” said Scott D. Hammond, Deputy Assistant Attorney General of the Antitrust Division’s Criminal Enforcement Program. “The division recently convicted at trial several individuals in this investigation, which is ongoing. We will continue to prosecute those who engage in such illegal and anticompetitive behavior.
The indictment charges that Murphy conspired with Rubin/Chambers, Dunhill Insurance Services Inc., also known as CDR Financial Products (CDR), a broker of municipal finance contracts, and others to increase the number and profitability of investment agreements and other municipal finance contracts awarded to the provider company where Murphy was employed.
Murphy won investment agreements through CDR’s manipulation of the bidding process in obtaining losing bids from other providers, which is explicitly prohibited by U.S. Treasury regulations.
As a result of the information, various providers won investment agreements and other municipal finance contracts at artificially determined prices.
In exchange for this information, Murphy submitted intentionally losing bids for certain investment agreements and other contracts when requested, and, on occasion, agreed to pay or arranged for kickbacks to be paid to CDR and other co-conspirator brokers.