DALLAS -- Texas Attorney General Greg Abbott on Friday announced
The settlement will provide $990,000 in restitution to 63 MUDs and prohibits RBC Capital Markets from future anti-competitive practices, Abbott's office said.
Abbott alleged that RBC Capital Markets and a former employee, R. Craig Rathmann entered into an agreement in 2003 to not compete for financial advisory clients among MUDs in the Houston area when Rathmann left RBC to start his own firm.
In exchange for RBC agreeing not to solicit Rathmann's financial advisory clients, Rathmann agreed to use RBC as lead underwriter for his clients, and secure a fee of 1.25% of the bond sale proceeds, said Abbott, who is the Republican candidate for Texas governor in November.
"Because of this decade-long agreement, the municipal utility districts - and ultimately taxpayers - were denied the benefits of competition," Abbott said.
"We are pleased that the Texas Attorney General has agreed to settle this case," an RBC spokesman said. "We continue to believe that we did not violate any antitrust laws. This involves an 11-year-old employee separation agreement and will not impact our business."
Rathmann was not immediately available for comment as the news broke Friday.
According to a document outlining the case, the deal between RBC and Rathmann was created in March 2003 as Rathmann left to start his own company, Rathmann and Associates. The agreement was terminated on July 26, 2012, according to the attorney general.
During that time RBC was appointed lead underwriter in 112 of 115 negotiated deals involving Rathmann's company, according to the settlement.
Rathmann worked for RBC from 1992 to April 2003, according to the AG's outline. As co-manager of RBC's Texas Public Finance Group in Houston, Rathmann was financial advisor for 98 MUD clients in Harris, Fort Bend, Brazoria, Chambers and Montgomery counties, the document says.
A separation agreement with RBC listed which clients would remain with RBC and which would go to Rathmann & Associates, according to the document. RBC and Rathmann agreed not to compete for FA clients, according to the AG.
The separation agreement included a clause reading: "Subject to its fiduciary or other duties to its Clients [Rathman & Assoc.] shall use its reasonable efforts to secure an underwriter's discount . . . of 1.25% of the gross proceeds from the sale of the bonds in the Negotiated Issue."
More than 70% of the state's 1,212 MUDs are in the Houston area, where most were developed in anticipation of annexation by Houston or a suburb. Statewide, more than 2 million Texans live in MUDs.
