Peter Ghavami, former co-head of UBS AG's municipal-derivatives group, and two former co-workers were accused by prosecutors of lying and stealing from U.S. cities and towns by conspiring to rig bids for investing proceeds of municipal bond sales.

Ghavami and former colleagues Gary Heinz and Michael Welty went on trial yesterday in federal court, charged in a six-count indictment with "long-running conspiracies and schemes to defraud" municipal-bond issuers and U.S. tax authorities by fixing the prices on the investing agreements. Banks already have paid more than $700 million to settle U.S. claims.

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