Bid-Rigger Zwerner: Probation, Fine, No Jail

Brian Zwerner, the former manager of Bank of America Corp.'s municipal derivatives trading desk, was sentenced to three years of probation and a $10,000 fine for municipal bond bid-rigging on Friday.

Judge Victor Marrero of the U.S. District Court for the Southern District of New York in Manhattan cited Zwerner's actions as a cooperating witness in handing down a relatively light sentence.

Zwerner pleaded guilty on March 30, 2011, to one count of to one count of conspiracy to falsify bank documents in connection with a conspiracy to fix bids between 1999 and 2002 for investment contracts that his bank won.

"I feel deeply sorry and truly remorseful," Zwerner said. "I'm truly ashamed."

Zwerner has paid Bank of America full restitution of about $890,000 under the Mandatory Victims Restitution Act, according to his lawyer, Kayta Jestin of Jenner & Block LLP.

"He squandered his career with his conduct and will have to deal with it for years to come," said Jestin.

Marrero, whom President Clinton appointed to the federal court in 1999, added that his sentence matches the leniency judges Kimba Wood and the late Harold Baer imposed on other recent cooperating witnesses, Mark Zaino, Douglas Goldberg and Daniel Naeh.

"Mr. Zwerner has provided substantial assistance to the government, which has held up as truthful and valuable," Marrero said during the brief session in Room 11B of the Daniel Patrick Moynihan Courthouse in Foley Square.

Zwerner's case evolved from a federal investigation of bid-rigging in the $3.8 trillion municipal bond market that stretched for more than a decade. Zwerner, who lives in Atlanta, cooperated with federal investigators over the last six years. The Securities and Exchange Commission has banned him from working again in the securities industry.

He admitted to maintaining a spreadsheet that accounted for over- and under-reporting of marketing profits on trade tickets for certain municipal bond deals as part of a scheme to facilitate kickback payments to brokers including Chambers, Dunhill, & Rubin Co., later known as CDR Financial Products Inc.

Zwerner, according to court records, admitted that he "along with other people in the marketing group ... misstated the profit on municipal client transactions using an off-the-record account ... with the intent of facilitating the marketers in making kickback payments to brokers by disguising the losses associated with these payments."

Bank of America, General Electric Co., JPMorgan Chase & Co., Wells Fargo & Co. and UBS AG have paid roughly $750 million in restitution and fines related to charges of defrauding municipal issuers, the U.S. Treasury, and the Internal Revenue Service by corrupting the competitive bid process for guaranteed investment contracts and other municipal products.

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