WASHINGTON - Convicted bid-rigger David Rubin should pay more than $11.5 million in restitution to 99 municipal victims who have not been compensated for losses they incurred due to "kickbacks" and depressed interest rates resulting from criminal activity, according to U.S. Justice Department filings with a federal court this week.
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 sentencing memorandum filed by DOJ attorneys includes a list of victims harmed by the scheme and calculations of how much they lost.
The DOJ memorandum also argues that Rubin engaged a range of conduct that should stiffen his punishment.
Rubin's plea agreement states that he understood that his sentence would be at the sole discretion of the court, and that he could potentially face maximum penalties amounting to 35 years in jail as well as supervised release and restitution. But the government argued in its sentencing memorandum that Rubin deserves a harsher sentence because he abused the trust of municipalities, was a leader of criminal activity, and used sophisticated means to carry out and conceal the crime.
A harsher sentence "for abuse of trust is warranted here because the defendants had considerable discretion in brokering transactions on behalf of municipal clients and the extent of this discretion allowed them to commit wrongs that were very difficult, if not impossible, for municipalities to detect," the DOJ said in its memorandum.
Rubin was a leader of criminal activity because of his role "as founder and owner of CDR as well as his actions in recruiting and corrupting CDR employees and cultivating relationships with providers that became the foundation of his crimes," DOJ said. A stiffer sentence "is warranted because Rubin and CDR engaged in particularly sophisticated conduct in the execution and the concealment of the offenses at issue," the memorandum noted. "Rubin and CDR engaged in a number of sophisticated tactics to advance and conceal their crimes," DOJ said, explaining the firm used complex transaction structures to disguise broker fees characterized as kickbacks by prosecutors.
"On nine transactions subject to the bid-rigging conspiracy, Rubin arranged for CDR's control of the bidding process to be concealed by arranging for a firm named Paragon, rather than CDR, to be the broker of record," according to one example DOJ provided.
The government's sentencing memo concludes with an argument that the many municipal victims should be made whole as quickly as possible through an order that Rubin pay a lump sum to the best of his ability, followed by monthly payments as a percentage of income.
Rubin's sentencing submission, filed late last week, asks the court not to impose jail time and instead consider being put under 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. Some appeals are still pending, but the DOJ is arguing that a longer statute of limitations applies in those cases.
"Notwithstanding the offenses to which he has pleaded guilty, David Rubin's life has been marked by extraordinary achievement coupled with daunting challenges," Rubin's lawyer, Bradley Simon, said in a filing. Rubin had previously sought delays of his court proceedings because his wife had terminal cancer. Some details of Rubin's life were redacted in the publicly-available version of the memo. It does mention his charitable work helping cancer patients and the homeless in Los Angeles, as well as details about his family's experiences during the holocaust.
While Rubin's memo admits he could face years in prison, it attacks the validity of the government's loss calculations and argues for leniency.
