WASHINGTON - Two employees of Wachovia Bank NA in Charlotte, N.C., have been notified by the U.S. Justice Department that they are targets of a grand jury investigation regarding antitrust and other violations involving contracts related to municipal bonds, according to regulatory information obtained by The Bond Buyer.
The two employees - Jay Saunders and Martin McConnell - worked in the derivatives marketing department at the bank, but were put on administrative leave after receiving written notifications that they were targets of the grand jury investigation.
Saunders was listed as director of marketing in the derivatives department in The Bond Buyer's Municipal Marketplace "Red Book" last fall. McConnell was listed as having been managing director of marketing during the spring of last year. Neither could be reached for comment yesterday and Wachovia officials refused to provide the titles of, or any information about, the two employees.
The Bond Buyer obtained information about the two after Wachovia Corp. filed a 10-K containing financial information with the Securities and Exchange Commission yesterday that disclosed the bank had received subpoenas from both the Justice Department and SEC for documents and information. Wachovia said the bank also had been informed by the Justice Department that at least two of its employees may have "engaged in improper conduct in conjunction with certain competitively bid transactions" and were targets of an investigation.
Neither the 10-K nor Wachovia identified the two employees. Wachovia said in its 10-K that two employees had been put on administrative leave.
But regulatory information obtained by The Bond Buyer states that the two employees were each notified Nov. 20 that they were targets of the grand jury investigation, which is being conducted in the Justice Department's Southern District of New York.
The information shows that the grand jury has been meeting and taking action during the past year even as there was no visible public sign that the Justice Department was moving forward with its antitrust investigation of anti-competitive practices in the investment and derivatives areas of the municipal market.
Justice officials first acknowledged the investigation in November 2006 after the Federal Bureau of Investigation raided three investment and derivatives providers - CDR Financial Products Inc., in Beverly Hills, Calif., Investment Advisory Management Group Inc., in Pottstown, Pa., and Sound Capital Management Inc., in Eden Prairie, Minn. - taking documents and information from them.
Since that time, dozens of broker-dealers, banks, and other firms are believed to have been subpoenaed for information regarding the investigation by both Justice, under its criminal investigation, and the SEC, which is conducting a parallel civil probe of bid-rigging and other anti-competitive practices in the muni market.
Last February Bank of America Corp. announced that it had entered into an amnesty agreement with the Justice Department in conjunction with the investigation. In exchange for amnesty from criminal charges, Bank of America agreed to provide information and cooperate fully with the Justice Department. Bank of America also announced that it had paid $14.7 million to settle tax law charges with the Internal Revenue Service regarding the bank's "role in providing guaranteed investment contracts and other agreements in connection with certain blind pool bond transactions." The bank neither admitted nor denied any wrongdoing under the settlement with the IRS.