DALLAS – The University of New Mexico has provided records for a widening federal investigation of suspected price-fixing in the municipal derivatives market but is not a target, officials said yesterday.
"The University of New Mexico is not a subject of any criminal investigation,” said spokeswoman Susan McKinsey. “The University received a subpoena from the Department of Justice to produce documents relating to the university's issuance of bonds in 2002. It is our understanding that the Department of Justice's request for the documents is not directed at the university's activities in issuing the bonds.”
The $93 million bond deal is one of several under scrutiny.
Subpoenas have been issued to more than 30 banks, insurance companies and brokers involved in interest-rate swaps, and contracts to invest bond-sale proceeds.
Citing records in a civil class-action suit in U.S. District Court in New York, Bloomberg News reported that Fairfax County, Va., Baltimore, and the state of Mississippi have alleged collusion by banks on bidding for their debt.
Examples included losing bids in exchange for a future winning bid, providing so-called courtesy bids, secretly compensating losing bidders and allowing banks to see others’ bids, according to Bloomberg.
Brokers were alleged to have shared information among banks along with illegal profits, according to the story, citing court records.
In another investigation in New Mexico, a federal grand jury is reportedly looking into CDR Financial Products Inc. contributions to political action committees run by Gov. Bill Richardson in exchange for state municipal derivatives business.
The grand jury probe involving contributions to PACs of Richardson, Obama's nominee to head the Commerce Department, was first reported by Bloomberg News and comes amid a federal investigation of alleged bid-rigging, price-fixing, and other practices in the municipal market that violate antitrust laws.
The probe has been ongoing since at least the fall of 2006 and involves dozens of banks, investment banks, advisory firms, and individuals. Grand jurors are reportedly focusing on the $1.5 million in fees CDR received from the New Mexico Finance Authority in 2004 after the firm and its president, David Rubin, contributed about $100,000 to PACs run by Richardson.
A spokesman for the Justice Department in Albuquerque has declined comment.
CDR was swap adviser on derivatives issued in conjunction with a $1.6 billion bond transaction that was sold in two phases. First Southwest Co. was a financial adviser for the bond deal.
The first phase, a $1.1 billion transportation revenue bond portion sold in April 2004, was the largest offering ever sold in that state and won The Bond Buyer's honorable mention for Southwest Regional Deal of the Year. The deal, which helped finance an ambitious transportation program, was dubbed Governor Richardson's Investment Partnership, or GRIP.
The grand jury comes after the Federal Bureau of Investigation raided CDR's Beverly Hills, Calif.-headquarters in November 2006, along with the offices of two other investment advisory firms - Investment Management Advisory Group Inc. in Pottstown, Pa., and Sound Capital Management Inc. in Eden Prairie, Minn.
CDR spokesman Allan Ripp declined to comment on the news of a grand jury but said the firm went through the normal request for proposal process on the transaction, splitting advisory fees with First Southwest, which declined to comment.
