Tape Recordings Still Dominate Trial as Bid-Rig Closing Arguments Begin

Tapes, tapes and more tapes.

To no one’s surprise, tape recordings featured prominently in closing arguments Monday in the municipal bond bid-rigging trial in New York.

After three weeks of listening to audio transcripts that ranged from titillating to tedious, jurors heard more taped conversations in Judge Harold Baer’s courtroom in the U.S. District Court for the Southern District of New York in Manhattan.

The federal government has charged Steven Goldberg, Peter Grimm and Dominick Carollo — former executives of General Electric Co. affiliates — with manipulating muni bond auctions and defrauding counties, cities, towns, conduit issuers and the Internal Revenue Service of millions of dollars from 1999 to 2006, by providing so-called last looks at competitors’ bids and providing kickbacks through swap agreements.

Prosecutors say the three worked in conjunction with brokerage firms CDR Financial Products Inc., Investment Management Advisory Group Inc., or Image, and UBS Financial Services.

Summations continued through the afternoon Monday, with Baer hoping to give his charge to jurors as soon as mid-morning Tuesday.

U.S. Justice Department antitrust attorney Kevin Hart opened for the government Monday. He likened the audio tapes to DNA. “We have a paper trail and an audio trail,” he said. “The tapes are fingerprints of the crime, like crime-scene photos and bank documents."

Accusing the three of trying to conceal their actions, Hart played recordings of a conversation between Goldberg and Grimm about the need for secrecy.

According to the tape, Goldberg told Grimm that a broker is “yakking around to a lot of people. So you can’t tell her anything.”

Grimm: “What the [bleep] is she? I wonder who got her so hot and heavy. ... We should probably have a talk about that offline.”

Five ex-CDR employees — Douglas Goldberg, Dani Naeh, Stewart Wolmark, Evan Zarefsky and Matthew Rothman — testfied for the government. Only two issuers did so, conduit issuers from Utah and New Mexico, and none from Image. The defense made a point of that.

“Where are the victims?” John Siffert, Goldberg’s lead defense attorney, asked the jury. Siffert, also going to the tapes, played one in which Goldberg and an issuer were equally happy.

“The issuers won every time Steve won a bid. The best evidence that he never intended to defraud is that among the 17 featured deals in this trial, Steve Goldberg believed he was paying $2.2 million more than the next highest bidder,” Siffert added.

Siffert portrayed his client as a competitive banker who made money for issuers. He also said neither General Electric nor Financial Security Assurance, Goldberg’s other employer during the period in question, briefed Goldberg about U.S. Treasury regulations, which the prosecution said the trio violated. Siffert urged jurors to focus on intent. “The issue is not whether Treasury regulations were violated,” he said. “The issue is whether Steve Goldberg tried to deceive. He did not.”

Continuing his accusation that the government is “cherry-picking” tapes out of context, Siffert warned: “You can’t read just Chapter 13 of a 15-chapter book.”

The three executives were indicted in July 2010 on 12 counts — five for Goldberg, four for Grimm and three for Carollo — including wire fraud and conspiracy. The government dropped one count for each after Baer struck testimony from cooperative witness Adrian Scott-Jones.

Scott-Jones, a broker who disappeared after lunch following a morning cross-examination on April 26, appeared to contradict his earlier interview with prosecutors while on the witness stand about a supposed lunch meeting with Goldberg.


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