The tale of the tape continued Wednesday in the municipal bond bid-rigging trial in Manhattan, as prosecutors, interspersing audio tapes and transcripts with bid documents, called to the stand another former employee of brokerage CDR Financial Services, seeking to establish a pattern of fraud by three former executives of General Electric Co. subsidiaries.

Continuing direct testimony under U.S. Department of Justice prosecutor Kevin Hart that began Tuesday afternoon, Daniel Naeh, who acted as a bidding agent for CDR, explained how he helped rig bids for municipal bond contracts in New Jersey, Missouri and Colorado, among other states.

Earlier in the week, former CDR vice president Douglas Goldberg testified.

Prosecutors charge Steven Goldberg, Dominick Carollo and Peter Grimm — all three former executives of GE subsidiaries — with wire fraud and conspiracy. They allege the three conspired with brokerages, including CDR, to fix contracts between August 1999 and September 2006.

In cross-examination, which straddled the afternoon break in the U.S. District Court for the Southern District of New York, Goldberg’s defense attorney, Daniel Gitner of Lankler, Siffert & Wohl LLP, sought to puncture Naeh’s credibility. Gitner said Naeh switched $4 million from U.S. bank accounts to secret Swiss accounts within seven months after the Federal Bureau of Investigation raided CDR’s Beverly Hills headquarters in November 2006.

Naeh, responding to audio tapes that Hart played, said the firm and Steven Goldberg, then with Financial Security Assurance Holdings Ltd., conspired for Goldberg to win bids, with CDR receiving back-end swap fees, in addition to standard broker’s fees, as a kickback. Naeh added that documents revealed the broker’s fees but not the swap fees.

Naeh pleaded guilty in 2010 to three criminal counts of bid-rigging, conspiracy and wire fraud, four months after CDR, its founder David Rubin, and others were indicted by a federal grand jury on nine criminal counts in connection with the bid-rigging. Rubin, Douglas Goldberg and others ultimately pleaded guilty before trial.

Naeh said the transactions resulted in issuers such as the New Jersey Health Care Financial Authority and the Missouri Health and Educational Facilities Authority receiving smaller yields. Several conversations, he said, included Stewart Wolmark, the former chief financial officer and managing director of CDR.

“Myself and Stewart Wolmark had extensive conversations,” Naeh said, in which he said CDR “would do our best to see that he won.” He added: “We received the bids, and called Steve and said, 'Here are the numbers; you have to do better than this.’ ”

In one recording, Naeh and Goldberg are discussing the 2001 New Jersey deal, a $17.5 million transaction on behalf of Meridian Health System Inc. Goldberg said he wanted only firms with triple-A credit, in order to limit the playing field.

“Oh, smarter than the average bear!” Naeh responded on tape, invoking a popular line from Yogi Bear cartoons.

“During the course of bidding we did provide information to Steven Goldberg that lessened the yield to Meridian,” Naeh testified. “CDR had an informal agreement that it would be paid a back-end swap fee.”

The tapes also showed that Naeh urged Goldberg to allow double-A credits to bid, because he could more easily manipulate them into submitting “courtesy,” or losing bids. “We had less control over those rated triple-A,” he said, in reference to a 2002 McAlister Public Works Authority refunding in Oklahoma.

At one point, according to the tapes, Goldberg was upset that this involved more work. “[Bleep,] you’re [bleeping] me,” he said. “I was supposed to play golf tomorrow.”

Naeh’s response: “This helps you to be able to afford the golf.”

On cross, Gitner questioned Naeh — who said he read about the office raid in The Bond Buyer — about his allegedly secret fund transfer to a Swiss bank, which Gitner said continued even after he began talking to investigators.

“It wasn’t asked of me,” Naeh said of his nondisclosure, saying he needed to transfer the money to settle tax matters with Israel. He said he had a home there and has dual citizenship.

Gitner's afternoon questioning of Naeh included passages from conversations that the government recorded but did not introduce as evidence on direct. Goldberg's defense team has accused the government of cherry-picking its taped evidence. "The government has played parts of tapes," said Gitner. "We're playing the portions that are missing to put them in context." 

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