The government’s year-long investigation of price-fixing in the municipal derivatives industry is finally starting to bear fruit. A federal grand jury in Manhattan recently indicted CDR Financial Products Inc., and its founder David Rubin, as well as two company employees, for rigging bids and accepting kickbacks from financial firms who reaped supracompetitive profits from investment products sold to local governments. The indictment alleges that CDR and its employees, who were routinely hired by local governments to solicit competitive bids for investments, guided contracts towards certain firms---all at the expense of U.S. taxpayers. According to the allegations, CDR would determine who would win investment contracts in advance and then solicit sham bids from other actors in an effort to hide the conspiracy.
"This case is fundamentally about collusion, the illegal rigging of a purportedly competitive bidding process," explained Joseph M. Demarest, Jr., Assistant Director in Charge of the FBI's New York Division. "The result was lower rates of return on the investment of bond proceeds for the state and local governments that hired CDR. In this climate of economic austerity, the conduct of the defendants and co-conspirators seems particularly predatory."
Fifteen months ago, Hausfeld LLP - along with other co-lead counsel Boies, Schiller & Flexner LLP and Susman Godfrey LLP - filed a nationwide class action lawsuit on behalf of several state, local and municipal governments against thirty-seven leading banks, insurance companies, and brokers alleging widespread price-fixing and bid-rigging in the trillion-dollar municipal derivatives industry, dating back to 1992. Michael D. Hausfeld, Chairman of Hausfeld LLP, hailed the recent indictment, explaining that "the collusion orchestrated by CDR Financial and major financial institutions extends back several years in what has become a trillion-dollar-a-year industry victimizing dozens of states, counties and cities. We fully support yesterday's action by the DOJ as it reaffirms allegations we have made against these defendants in the civil antitrust complaint, and further undermines claims made by CDR Financial that there is no basis for the case against them."
Read the indictment here.
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