WASHINGTON — Former Bank of America executive Phillip Murphy pleaded guilty to rigging municipal bond investment bids in a federal court in North Carolina on Monday, as sentencing for convicted bid-rigger Mark Zaino was delayed again in New York.
A federal grand jury indicted Murphy in July 2012. He originally pleaded not guilty to wire fraud and conspiracy in connection with a scheme to rig guaranteed investment contract bids, but changed his plea, the Justice Department announced. Bank of America was granted indemnity from criminal charges for cooperating with the Justice Department's antitrust division and other federal agencies, but that agreement did not extend to Murphy.
Murphy pleaded guilty to two counts of conspiracy and one count of wire fraud. The fraud conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The wire fraud charge carries a maximum penalty of 30 years in prison and a $1 million fine. The false bank records conspiracy carries a maximum penalty of five years in prison and a $250,000 fine.
Murphy was Bank of America's managing director of municipal derivatives products until he left in 2002.
He encouraged municipal issuers to hire CDR Financial Products, Inc. to broker investment agreements associated with bond issues that Bank of America had underwritten or had an interest in, according to prosecutors. Murphy also was charged with orchestrating "kickbacks" to CDR in return for that firm's submission of artificially low bids ensuring Bank of America would win a bid. These payments continued until at least 2006, according to the indictment.
"By manipulating what was intended to be a competitive bidding process, the conspirators defrauded municipalities, public entities and taxpayers across the country," said Brent Snyder, deputy assistant attorney general of the antitrust division's criminal enforcement program. "Today's guilty plea reaffirms the Antitrust Division's continued efforts to hold accountable those who corrupt and subvert the competitive process in our financial markets."
Meanwhile, Zaino, who worked at the UBS AG bond desk in New York, has had his sentencing date pushed back until March 27 From Feb. 11. He pleaded guilty in May 2010 to one count each of conspiracy to restrain trade, conspiracy and wire fraud. The government's efforts to prosecute the men involved in the alleged scheme have hit trouble recently, as Michael Welty and two other former UBS bankers, Peter Ghavami and Gary Heinz, have moved for a new trial on the grounds that the government withheld evidence. In addition, former General Electric bankers Dominick Carollo, Steven Goldberg, and Peter Grimm are out of jail after an appeals court ruled the statute of limitations on their charges had run out before the government charged them with criminal counts.
