Ex-UBS AG managing director Peter Ghavami and his former colleagues were found guilty in Manhattan federal court today of rigging bids for contracts to invest the proceeds of municipal bond sales.

Jurors found Ghavami and former UBS employees Gary Heinz and Michael Welty guilty of conspiring to rig bids. The three were accused of defrauding municipal-bond issuers by manipulating the competitive bidding process for investment transactions. Zurich-based UBS and other banks have paid more than $700 million to settle U.S. claims over the scheme.

Issuers of tax-exempt municipal bonds must use competitive bidding when selecting firms to handle deals to invest the proceeds, according to the indictment filed in the case. Prosecutors alleged that the defendants skirted that requirement by colluding with competitors to set bid prices, often to deliberately lose the auctions.

Former UBS employee Mark Zaino, a key witness who testified for the government under a cooperation agreement, told jurors that defendants sometimes solicited intentional losing bids and gave information to favored bidders to rig outcomes.

The case is U.S. v. Ghavami, 10-cr-1217, U.S. District Court, Southern District of New York (Manhattan).

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