WASHINGTON — Justice Department lawyers have filed new documents to support their argument that convicted bid-rigger David Rubin should face a stiff penalty for his crimes because the kickbacks he received as part of the scheme caused real loss to municipal issuers.
The government's supplemental sentencing memorandum, filed earlier this week in U.S. District Court for the Southern District of New York, augments its earlier filings and attempts to refute Rubin's claims that many issuers whose municipal bond contracts were subject to the bid-rigging scheme did not really suffer any loss as a result. Rubin, who founded investment agreement broker CDR Financial Products, Inc., is scheduled to be sentenced March 6, following a January 2012 plea agreement in which he pleaded guilty to three criminal counts for his role in bid-rigging schemes dating back to the start of the new millennium. The counts were conspiracy to allocate and rig bids for investment agreements and other municipal finance contracts, defrauding muni issuers and the Internal Revenue Service, and wire fraud.
The DOJ filing notes the decision of the court in the sentencing of ex-UBS AG bankers not to count kickbacks as actual loss to victims unless there was evidence that victims actually suffered loss. The latest government argument focuses in on $10.4 million, not including normal broker fees, that CDR received as part of the conspiracy. About $2 million connected to four bond issuances by the Tennessee Municipal Bond Fund, $4.8 million related to 14 various bond issues between 1999 and 2003, and about $3.5 million in connection with five multi-family housing bonds. The prosecution's filing argues that although it is virtually impossible to know how much higher an interest rate issuers paid because of the conduct, it still represents loss.
"Although there are no easily ascertainable 'but for' prices, what is clear is that the defendants received a portion of the profits on the transactions as a direct result of the artificial rates at which the investment agreements were awarded," the memo states.
The memo also cites cases from other jurisdictions where courts recognized kickbacks as indicators of actual loss to the victims. None of those cases was related to muni bond business. The government has estimated that CDR's role in the fraud caused losses in excess of $18 million, and that Rubin should pay more than $11.5 million in restitution to 99 municipal victims. Rubin's defense team disputed those estimates in their own sentencing submission a month ago, and asked the court not to impose jail time and instead consider house arrest as punishment. Most of the other brokers convicted in connection with the same investigation have received jail time, though former General Electric bankers Dominick Carollo, Steven Goldberg, and Peter Grimm were all freed when the U.S. Court of Appeals for the Second Circuit decided that the statute of limitations should have prevented them from being prosecuted.
